Severance Pay FAQ
General - Changes to Canadian Forces Severance Pay (CFSP)
- Why has the accumulation of severance benefits for resignations and retirements ceased for the military?
- What impact do the changes to severance benefits have for CF members releasing for reasons of retirement and resignation?
- What are some of the advantages to the changes to severance benefits?
- What will be the impact of the changes on departures for involuntary reasons?
Canadian Forces Severance Pay (CFSP)
- When a member is released from the CF, how is eligible service for Canadian Forces Severance Pay (CFSP) calculated?
- What is not included in the calculation of eligible service for Canadian Forces Severance Pay (CFSP)?
- (NEW) In accordance with CBI 204.40, eligible service means a member's number of years of service after the member's most recent date of enrolment. What is meant by most recent date of enrolment?
- (NEW) Does eligible service include previous service that has been bought back for pension purposes?
- (NEW) Does eligible service include the time in the Youth Training Employment Program (YTEP)?
- What rate of pay will be used to determine the severance benefit upon release?
- What happens if a member is medically released under Items 3(a) or 3(b) but had already received a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
- (NEW) How long will it take to process a Canadian Forces Severance Pay (CFSP) benefit for those who released from the CF since the implementation of the new Canadian Forces Severance Pay (CFSP) policy on 1 Mar 2012?
- Will income tax be deducted from the Canadian Forces Severance Pay (CFSP) payable upon release from the CF?
- Is there a way to reduce the income tax withheld on the severance benefit payable upon release?
- What is the maximum for this benefit?
General: Changes to Canadian Forces Severance Pay (CFSP)
1. Why has the accumulation of severance benefits for resignations and retirements ceased for the military?
Severance benefits for the purpose of resignation and retirement are infrequent amongst other employers.
In addition, the ending of the severance entitlement for retirement and resignation will provide financial predictability for the Government in these times of fiscal restraint.
In this context, the Government signed collective agreements with bargaining units representing over 95,000 public servants that included the elimination of severance for voluntary departures.
Since compensation for the CF is benchmarked to that of public servants, these changes now also apply to CF members.
2. What impact do the changes to severance benefits have for CF members releasing for reasons of retirement and resignation?
CF members will cease to accrue eligible years of service for a severance benefit paid upon retirement and resignation.
The accumulation ceases:
- effective 1 October 11, for General Officers, Colonels, 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 to Legal Officers to the substantive rank of Lieutenant-Colonel after 30 September 2011 and before 1 March 2012; and
- effective 1 March 2012, for all other CF Officers and Non-Commissioned Members (NCMs), excluding Military Judges.
CF members will have an opportunity to receive a one-time payment in lieu of their accumulated severance benefit.
The calculation of a severance benefit will be based on a CF member's years of eligible service, including prorated partial years, to a lifetime maximum of 30 years.
3. What are some of the advantages to the changes to severance benefits?
Under the new provisions, members will be able to receive a full or partial payment of their severance benefits by indicating that this is their choice during the election period mid-December 2012 to mid-March 2013, rather than waiting to receive this payment at release. This can give members greater flexibility in financial planning prior to retirement.
Under previous severance benefit provisions, all members voluntarily releasing (release Item 4(c)) with less than ten years of eligible service received no benefit. Regular Force members releasing voluntarily with ten or more years of eligible service received a benefit calculated at 3.5 days of pay per year. A Reserve Force Retirement Gratuity (RFRG) benefit for eligible Reserve Force members releasing voluntarily with ten to twenty years of eligible service was calculated at 3.5 days of pay per year; with twenty or more years of eligible service, it was calculated at 7 days of pay per year. Under the new provisions, all severance benefits will be calculated at 7 days of pay for every year of eligible service, including partial years. The requirement to have a certain number of years before being eligible for severance benefits when voluntarily releasing has been eliminated.
Under previous severance benefit provisions, benefits were calculated based on full years of service. Under new provisions, a severance benefit will include prorated partial years of eligible service to the lifetime maximum of 30 years. For example, a member with 23 years and 50 days of eligible service would have received a benefit for 23 years only under the former provisions. Under the new severance pay provisions, the member would receive a payment for the total period.
In addition, eligible Primary Reserve Force service will be calculated based on elapsed time (i.e. continuous enrolment) rather than paid service.
4. What will be the impact of the changes on departures for involuntary reasons?
The accumulation of years of eligible service continues for a member who is released for medical reasons (release Items 3(a) and 3(b)), or involuntarily (release Items 5(b), 5(d), 5(e), or 5(c) where the member has not reached retirement age under QR and O Chapter 15 but has completed the period of obligatory service because of a change in classification or trade specifications or in the establishment requirements of the CF). For these release items, and for death, the severance benefit will be calculated at seven days per year of eligible service and paid at the rate of pay for the substantive rank at release to a 30 year lifetime maximum.
Canadian Forces Severance Pay (CFSP)
5. When a member is released from the CF, how is eligible service for Canadian Forces Severance Pay (CFSP) calculated?
Under the new provisions, all severance benefits will be calculated as seven (7) days of pay for every year of eligible service, including partial years.
If a member releases under certain Items to the table to QR&O article 15.01, such as Item 3(a) or Item 3(b), they will continue to accrue eligible years of service until their date of release to a lifetime maximum of 30 years.
If a member received a payment in lieu (PiL) of a severance benefit prior to their release, their final benefit will be reduced by this amount.
6. What is not included in the calculation of eligible service for Canadian Forces Severance Pay (CFSP)?
Eligible service excludes years of service for the following:
- Supplementary Reserve, Cadet Organizations Administration and Training Service (COATS), and the Canadian Rangers except for years served on Class B or C;
- Exemption from Primary Reserve duty and training (other than for maternity purpose QR&O 9.09 or parental purpose QR&O 9.10);
- Primary Reserve Non-Effective Strength (determined by or under the authority of the Chief of the Defence Staff);
- Leave Without Pay (LWOP) (QR&O 16.25);
- Limitation of Payment (LOP) (QR&O 203.20);
- absence without leave or as a deserter for which a forfeiture was imposed (QR&O 208.30);
- forfeiture (QR&O 208.31); or
- any years for which a previous benefit was paid or granted to the member for a Severance Pay benefit (under QR&O 204.40, CBI 204.40, and/or QR&O Chapter 204 Financial Benefits and Pay of Military Judges), Reserve Force Retirement Gratuity (QR&O 204.54 and/or CBI 204.54) or Rehabilitation Leave (QR&O 16.19).
7. In accordance with CBI 204.40, eligible service means a member's number of years of service after the member's most recent date of enrolment. What is meant by most recent date of enrolment?
It is the most recent date of enrolment in the CF. A transfer from one CF component or sub-component to another is not considered, for the purposes of severance pay, to be a release and re-enrolment in the CF unless there was a break in service.
8. Does eligible service include previous service that has been bought back for pension purposes?
CFSP and the PiL of CFSP are based on eligible service, which is the number or years of service after the member's most recent date of enrolment in the CF. Therefore, if a CF member released and re-enrolled in the CF, regardless of whether the member bought back that period of service for pension purposes, the period would not count as eligible service.
9. Does eligible service include the time in the Youth Training Employment Program (YTEP)?
Yes. If the period of YTEP service is part of the member's continuous period of service then the time is considered to be eligible service.
10. What rate of pay will be used to determine the severance benefit upon release?
Should a CF member elect to receive a severance benefit upon release, then the monthly rate of pay and pay increment for the member's substantive rank in effect on the date of release or transfer, from the Regular Force or Primary Reserve Force, will be used to calculate the final severance benefit.
11. What happens if a member is medically released under Items 3(a) or 3(b) but had already received a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
A member who is released under Items 3(a) or 3(b) will continue to accrue eligible years of service to a lifetime maximum of 30 years. The eligible years of service used to calculate the member's payment in lieu (PiL) of a severance benefit will not be included in the final calculation of the severance benefit payable upon release.
12. How long will it take to process a Canadian Forces Severance Pay (CFSP) benefit for those who released from the CF since the implementation of the new Canadian Forces Severance Pay (CFSP) policy on 1 Mar 2012?
Current CFSP processing timelines can be requested via email to: CMP_DPSP_RBA_CPM_DPPS_ABL@Forces.gc.ca.
13. Will income tax be deducted from the Canadian Forces Severance Pay (CFSP) payable upon release from the CF?
A severance benefit paid upon release from the CF is considered a retiring allowance and the income tax rules for retiring allowances will apply when a severance benefit is paid on release or transfer from the Regular Force or Primary Reserve Force.
Members should contact their Release Pay Office, or the Canada Revenue Agency (CRA), or, for Quebec residents, the Ministère du Revenu du Quebec (MRQ) for details.
14. Is there a way to reduce the income tax withheld on the severance benefit payable upon release?
A severance benefit paid upon release from the CF is considered a retiring allowance and income tax rules in place for retiring allowances will apply.
If a CF member has unused RRSP room, they can request for a reduction of income tax at source. Members should consult the Canada Revenue Agency (CRA) for further details. Quebec residents should consult Ministère du Revenu du Quebec (MRQ). Members may also wish to contact their Release Pay Office for information.
Depending on individual financial circumstances, members may wish to increase the tax withheld at source. If so, members should notify their pay office.
15. What is the maximum for this benefit?
A member may only receive a severance benefit based on a lifetime maximum of 30 years of eligible service. All previous years of eligible service used in the calculation of a prior severance benefit will be excluded including any paid or granted benefit calculated under:
- QR&O 16.19 (Rehabilitation Leave);
- QR&O 204.40 (Severance Pay) and 205.54 (Reserve Force Retirement Gratuity);
- QR&O 204 (Financial Benefits and Pay of Military Judges); and
- CBI 204.40 (Severance Pay) and CBI 204.54 (Reserve Force Retirement Gratuity); and
- any payment in lieu (PiL) of a severance benefit or severance benefit based on the revised CBI 204.40 (Canadian Forces Severance Pay).
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