The Maple Leaf
Vol. 15, Issue 07
Changes to severance benefits for CF members
On March 28, the Government of Canada announced changes to the severance benefits for some serving CF members.
The cessation of the accumulation of severance benefits for retirement and resignation is not unique to the CF.
This measure has already been applied to more than 95,000 members of the Public Service of Canada, and is intended to provide financial predictability for the Government of Canada in these times of fiscal restraint, and bring the federal public sector in-line with current fiscal realities and contemporary management practices, while giving CF members greater flexibility in financial planning prior to retirement.
Under previous severance benefit provisions, all members voluntarily releasing with less than 10 years of eligible service received no benefit. Regular Force members releasing voluntarily with 10 or more years of eligible service received a benefit calculated at 3.5 days of pay per full year of service. A Reserve Force Retirement Gratuity (RFRG) benefit for eligible Primary Reserve members releasing voluntarily with 10 to 20 years of eligible service was calculated at 3.5 days of pay per year; with 20 or more years of eligible service, it was calculated at 7 days of pay per year.
Under the new CF Severance Pay provisions, severance benefits will be calculated at 7 days of pay for every year of eligible service, including partial years. For example, a member with 8 years and 132 days of eligible service will receive a benefit for 8.5 years. In addition, eligible Primary Reserve service will be calculated based on elapsed time rather than paid service. Severance benefits are payable to a maximum of 30 years in a member’s lifetime.
All affected members will receive, in the mail by early fall 2012, an information package with an estimate of their years of eligible service. The election period will be from December 14, 2012 to March 13, 2013 and will not be extended. Members who fail to elect during this period will receive all their severance benefits at release.
The payment in lieu of a severance benefit is considered employment income. As such, the amount of the one-time payment will be reduced by income tax. If a CF member has unused RRSP room, they can request for a reduction of income tax at source. Please consult with Canada Revenue Agency, and Revenu Quebec for Quebec residents, for further details. Members are encouraged to consult with a financial advisor regarding their personal circumstances prior to making a decision.
CF personnel will continue to enjoy a robust and comprehensive support, compensation and benefits framework, have access to equitable reimbursement programs and services, and career-long professional development opportunities.
For further information, please visit www.cmp-cpm.forces.gc.ca/dgcb-dgras/.
For CF members, the accumulation of years of eligible service ended:
- Effective October 1, 2011: for General Officers, Colonel, and Legal Officers in the rank of Lieutenant-Colonel and above;
- Effective the date of promotion: for members promoted to the substantive rank of Colonel and above, and to Legal Officers promoted to the substantive rank of Lieutenant-Colonel after September 30, 2011 and before March 1, 2012;
- Effective March 1, 2012: for all other CF officers and Non-commissioned members (excluding military judges);
- Exception: the accumulation of years of eligible service continues for a member who is released for medical reasons (release Items 3(a) and 3(b)), and involuntary releases (release Items 5(b), 5(d), 5(e), or 5(c) where the member has not reached retirement age under QR&O Chapter 15 but has completed the period of obligatory service because of a change in classification, trade specifications, or in the establishment requirements of the CF), or who is released by reason of death.
CF members will have three options regarding the payment of a severance benefit under the revised policy:
- Elect, during the election period (December 14, 2012 –March 13, 2013) to be paid a full severance benefit; or
- Elect, during the election period, to be paid part of a severance benefit and to receive any remaining severance benefit upon release or transfer from Regular Force or the Primary Reserve. The remaining severance benefit will be based on the monthly rate of pay and pay increment for the member’s future substantive rank in effect on the day before the member ceases to serve in the Regular Force or the Primary Reserve; or
- Receive all severance benefits upon release or transfer from the Regular Force or the Primary Reserve. The calculation of the severance benefit will be based on the monthly rate of pay and pay increment for the member’s future substantive rank in effect on the day before the member ceases to serve in the Regular Force or the Primary Reserve.
Calculation of Severance Benefits:
- Rate of Monthly Pay x 12 months = X
- X = Approximate Weekly Pay 52
- Approximate Weekly Pay x Years of Service = Estimated Severance Benefit (pre-tax amount)