The Meaning of “Reserve Force Service” in Pension Calculations

Topic

The Meaning of “Reserve Force Service” in Pension Calculations

Case Number

• 2015-187 (F&R date: 2016-03-14)

Issue

Regular Force members are entitled to buy back prior pensionable service which had not counted towards an annuity, in order to increase the amount of their eventual pension. However, because the Canadian Armed Forces (CAF) includes unpaid time spent on the Supplementary Reserve (Supp Res) and unpaid annuitant breaks in the calculation of 35 years of service, some CAF members who make a buyback are considered to have accumulated 35 years before they have reached entitlement to a pension of 70%. The CAF then does not allow them to make further contributions to increase their eventual annuity percentage towards 70%.

The CAF have interpreted the Canadian Forces Superannuation Act (CFSA) and its regulations as meaning that unpaid time on the Supp Res list and on annuitant breaks comes within the definition of “service”. For this reason, the CAF considers that this time must also be bought back and counted towards the total years of pensionable service even though it does not count as pensionable service for increasing the percentage of the eventual annuity towards 70%. 

If it was intended that time on the Supp Res list should be subject to being bought back in the same manner as the types of reserve service listed in the Queen's Regulations and Orders (QR&O), it would logically be stated as such in the legislation or regulations. However, it is not. It is the Committee’s view that elective service does not include unpaid time spent in the Supp Res or on annuitant breaks. This issue has affected or will be affecting many CAF members who have elected to buy back Reserve Force (Res F) service.

Furthermore, it is the Committee’s view that the intent of the legislative scheme is to permit contributors to reach a 70% annuity. While CAF members must contribute at a reduced rate after reaching 35 years of service, the CFSA does not on its face prevent them from also making supplementary contributions until they reach the 70% maximum and the Committee considers that they should be allowed to do so.

Recommendation

• That the files of those CAF members who have been affected by the current CAF interpretation be audited;
• That the audit use the Committee’s suggested interpretation to recalculate the affected annuities;
• That affected CAF members be allowed to buy-back further service if applicable;
• That currently serving military members, when eligible, be allowed to continue contributions until they reach the maximum pension benefits of 70%;
  and
• That a broad information campaign be conducted allowing CAF members in receipt of an annuity to identify themselves if affected.

Final Authority Decision

The Final Authority (FA), the Chief of the Defence Staff, 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 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.

Noting that section 6 of the CFSA defines the term “pensionable service" as it applies to annuities under the Act, the FA 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 current annuity scheme. Under this scheme, “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. The FA thus 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 Canadian Forces Superannuation Regulations (CFSR), which was not previously the case prior to amendment of the Act.

He stated, that under the modernized CFSA and CFSR, periods during which a CAF member is 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”. 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.

Finally, 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.