# 2015-187 - Pension Benefits, The Meaning of “Reserve Force Service” in Pension Calculations

Case Summary

F&R Date: 2016–03–14

Over a period of almost 37 years, the grievor was a member of the CAF, both in the Regular Force (Reg F) and Reserve Force (Res F), including the Supplementary Reserve (Supp Res). In 2007, changes were made to the Canadian Forces Superannuation Act (CFSA), which established a Reserve Force Pension Plan. In 2008, the grievor elected to buy back all prior pensionable service which was calculated to include his unpaid time in the Supp Res and during his annuitant breaks.

Approximately 18 months before he was released from the CAF, the grievor was deemed to have reached 35 years of pensionable service and was no longer permitted to contribute to his pension. In anticipation of his release, he was advised that despite having 35 years of pensionable service, he only had pension benefits representing 68% of his average annual pay. This was because the CAF included unpaid time spent on the Supp Res and unpaid annuitant breaks in the calculation of his 35 years of service.

The grievor argued that by buying back all prior pensionable service in 2008, which included unpaid service, he unknowingly restricted his pension earnings. He stated that he would be willing to buy back any time which he served in the last 18 months of his career, when he was prohibited from contributing to his pension, in order to reach the maximum pension benefit of 70% of his average annual pay.

The Director General Compensation and Benefits, acting as the initial authority (IA), denied the grievance. He stated that there is no option to exclude periods of unpaid pensionable service when calculating a pension. He noted that when the grievor elected to buy back his Res F service in 2008, his pensionable service included all of his full-time, part-time and unpaid periods of service. He explained that unpaid periods of service include time on the Supp Res and unpaid annuitant breaks. He found that the grievor's annuity was calculated correctly in accordance with the applicable Canadian Forces Superannuation Regulations (CFSR) and the CFSA, which adjusted his pensionable service to account for the periods of part-time and unpaid service.

The Committee reviewed the CFSA and its regulations, in addition to other similar pension schemes, to determine whether the CAF practice of adding unpaid service in the calculation of the 35 years of pensionable service is supported by a reasonable interpretation of the law and intended purpose.

The Committee noted that the term Res F service was not clearly defined within the CFSA or CFSR. The Committee found that Supp Res service is not defined in the Queen's Regulations and Orders for the Canadian Forces (QR&O) as a “type of service”, and therefore should not be included as Res F service for the purposes of calculating the total years of pensionable service when a CAF member buys back service. In addition, neither the CFSA nor the CFSR state that time on the Supp Res list should be subject to being bought back in the same manner as the types of Res F service listed in the QR&O. As a result, the Committee found that elective service does not include unpaid time spent in the Supp Res, nor annuitant breaks.

Finally, the Committee noted that the CFSA states that CAF members are “not required” to contribute to their pension at the prescribed rates after they have attained 35 years of pensionable service. However, nothing in the legislation or regulations prevents a CAF member from continuing to contribute after 35 years of service. The Committee found that the grievor should have been allowed to reach the maximum allowable pension benefit of 70% under the CFSA.

The Committee recommended that the grievor's unpaid time spent in the Supp Res and his annuitant breaks should not be counted as pensionable time and that he should be permitted to buy back any further service (his last 18 months) if required to reach the 70% maximum pension earnings.

FA Decision Summary

The FA, the Chief of the Defence Staff, disagreed with the Committee's findings and its recommendation to uphold the grievance. He also disagreed with the Committee's systemic recommendations. The FA noted that the issues in the grievance all flowed from the 2007 amendments to the CAF pension regime which redefined the manner in which part-time service was considered. The FA found that “each day of “Canadian Forces service” can be associated with a specific rate of pay” but that the term "pensionable service” is broader and refers to a period. For instance, a reservist could accrue 21 days of “Canadian Forces service” during a month but 30 days of “pensionable service” for the same month. He noted that section 6 of the CFSA defines the term “pensionable service" as it applies to annuities under the Act and found that the Committee should not have relied on Chapter 9 of the QR&Os to assist it in interpreting what is comprised in Res F service for purposes of the annuity scheme. The FA stated that prior to 1 March 2007, only service during which a CAF member was liable to perform a duty could be credited as “pensionable service”, and it was not possible to elect to buy-back Supp Res time. He stated, however, that under the modernized CFSA and CFSR, periods during which the grievor was a member of the Supp Res and/or on annuitant breaks meet the definition of “Res F service” and the requirements to be counted as “pensionable service”. Section 3.1(1) of the CFSA provides that the Governor in Council may make regulations concerning the application of the CFSA to members of the Res F, and Parliament defined the Res F in the broadest way possible, as comprising all sub-components including the Supp Res. The FA also found that “Res F service”, for the purpose of election for buy-back, comprises all service in the Res F during which the CAF member was not required to make pension contributions, as per section 12.2 of the CFSR. The FA therefore found that the periods of time the grievor spent on unpaid annuitant breaks while in the PRes and in the Supp Res counted as part of the 35 years maximum allowable pensionable service, as these periods met the definition of “Res F Service” found at subsection 12.2( 1) of the CFSR. The FA stated that Parliament had made a policy choice, in the modernized CFSA, to place a cap of 35 years of pensionable service on benefits, rather than a cap of 70%, the latter of which could have been reached by completing more than 35 years of service if necessary. The FA noted that the modernized CFSA and CFSR provide an advantageous regime to CAF members, several others of whom have been able to benefit from an unreduced annuity at an earlier date. He noted that the only method of recourse for the grievor would be a change in the Act itself that would be made retroactive or a request for ministerial review as found in section 93 of the CFSA.