Payment in lieu (PiL) of CFSP
17. What are the options for the payment in lieu (PiL) of a Canadian Forces Severance Pay (CFSP) benefit?
Members have three options regarding the payment of a severance benefit under the revised policy:
- elect to be paid a full severance benefit prior to release;
- elect to be paid part of a severance benefit prior to release and to receive any remaining severance benefit at release; or
- receive all severance benefits at release.
18. What is the process for making an election for a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
All eligible members should have received an estimate package in the mail which consists of an estimate of their years of eligible service and an information letter that explains the process.
19. What if an estimate package does not arrive or the estimate package is misplaced?
A member may request a duplicate estimate from their Unit Orderly Room. As there is no extension to the election period for any reason, it is extremely important that members who want at least part of their benefit paid out before release to get their estimate.
20. What should a member do if they disagree with the estimate of their service?
If the member does not agree with their estimate of years of eligible service, members should contact their Unit Orderly Room. Members may be asked to provide documentation supporting previous service. Questions concerning the estimate form should be directed to the member's Unit Orderly Room. It is important to act promptly if there is a discrepancy, as the election period will not be extended for any reason.
21. Can estimates of eligible service be reproduced?
Yes. CF members can request a reprint of their estimates from their Base/Unit Orderly Room. For estimate reprints in CCPS or RPSR, Base/Unit Orderly Room personnel may send an email to firstname.lastname@example.org with Estimate Reprint Request in the subject line.
22. Will an estimate of years of eligible service be reproduced and mailed to CF members who did not receive their estimate in the official language of their choice?
No. All estimates were based on the information in the pay systems for the Regular Force (CCPS) and the Reserve Force (RPSR) and were produced in the official language as identified in the pay system for each member.
CF members may request that their preferred official language be amended in the pay system. This change would only apply to the production of future documents (e.g. pay statements). The reprint functionality in the pay system would reprint estimates exactly as they were mailed to the member.
These templates may also be requested via email to: SocialPrograms-Programmessociaux@forces.gc.ca
23. Some estimates of eligible service did not reflect all eligible CF service. Will a separate estimate (one for Regular Force service and Primary Reserve service) be issued?
No. CF members have received an estimate based on information that is contained in the pay system for the Regular Force (CCPS) or for the Reserve Force (RPSR). CF members who received an estimate that did not reflect all their eligible CF service and who wish to receive a PiL for all or part of their severance pay are required to contact their Base or Unit Orderly Room to verify all of their eligible service.
24. Why were the estimates of eligible service mailed to individuals who have recently released from the CF?
All estimates were based on the information contained in the pay systems for the Regular Force (CCPS) and for the Reserve Force (RPSR) as at 29 Feb 2012. Consequently, members who have released since that date would still have received an estimate. However, these persons will not be able to make an election during the election period and will receive the CFSP to which they were entitled as part of the normal release process. (See question # 13)
25. Will the Unit Orderly Room provide financial advice to members?
No. CF members are encouraged to seek financial advice and counselling from a financial advisor.
SISIP FS offers a wide range of financial products and services to CF members.
26. When can a member elect to receive a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
The election period will be between 14 December 2012 and 13 March 2013. The member will have 90 days in which to elect whether to receive all or part of their accumulated severance benefit prior to their release from the CF.
The election period will not be extended, and no elections will be processed if received after the end of the election period.
27. What happens if a CF member does not make an election before the deadline?
An election for a payment in lieu (PiL) of a severance benefit is a one-time opportunity. Once made, an election is irrevocable.
If the deadline is missed or if a member chooses not to make an election, it will be deemed that a member has chosen to receive their severance benefit payment when the member ceases to serve in the Regular Force or in the Primary Reserve.
28. What if a member is on Leave Without Pay (LWOP) for maternity or parental reasons during the election period?
There are no special arrangements for a person who is on LWOP for maternity or parental reasons. It is the responsibility of each eligible CF member to ensure election deadlines are met. The necessary information will be mailed to their T4 address, as it will be for all members.
If the payment in lieu (PiL) election deadline is missed, it will be deemed that a member has chosen to receive their severance benefit payment when the member ceases to serve in the Regular Force or in the Primary Reserve.
29. How are Employment Insurance (EI) Benefits affected for CF members who are on a period of Leave Without Pay (LWOP) for maternity or parental reasons and who make an election for a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
The following information was supplied by Service Canada. Questions and requests for more information/clarification related to EI benefits and the PiL of CFSP should be directed to Service Canada. Residents of Québec should consult directly with Emploi et solidarité sociale Québec concerning the impact of the PiL on Québec Parental Insurance Plan (QPIP).
With respect to the Payment in Lieu (PiL) and the impact on EI benefits, the following applies:
- A payment in lieu (PiL) is considered earnings; and
- The entire gross amount of the PiL is allocated to the week in which the member makes their PiL election – not the week in which the payment is received.
- Since the entire PiL is allocated to one week, only one week of EI benefits is affected by the payment.
Accordingly, CF members on LWOP MATA/PATA who are in receipt of EI benefits and who make an election, during the election period (from 14 Dec 12 to 13 Mar 13), to receive a PiL for all or part of their severance pay entitlements will have their EI benefits reduced or eliminated for the week in which the member elected to receive a PiL of CFSP. These CF members are required to inform Service Canada of their elections.
30. Where can members access an election form?
The election form is included in CBI 204.40 which may be accessed on the:
31. Where do members send their election forms?
CF members who make a full and/or partial election will be required to submit a completed election form by mail, hand, email or facsimile to their Unit Orderly Room during the election period.
32. What happens to the election forms that were submitted prior to the commencement of the election period on 14 December 2012?
All election forms that were signed and/or received by the department prior to the start of the election period on 14 Dec 2012 have been returned to the members.
33. Will election forms be accepted after 13 March 2013?
The completed election form must be received no later than the last moment on 28 March 2013. Additionally, election forms submitted prior to the election period will not be accepted.
34. What happens once the election forms are submitted?
The member's Unit Orderly Room will perform the initial verification of the election form as well as the initial calculation of the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP).
Once the election form is verified, the Unit Orderly Room will process the payment if all of the following conditions apply:
- the member signing the election form is a member of the Regular Force; and
- eligible service includes no previous Regular or Reserve Force service; and
- the member elects to receive as a payment in lieu (PiL) 50% or less of their severance benefit entitlement.
Concerns or issues for these specific situations should be discussed with the members' Unit Orderly Room.
All other elections will be the responsibility of a special team called the DMCA 4 PIL Team, which will be supervised by DMCA 4. Located in Ottawa, the main tasks of the PiL team, commencing 15 Oct 2012, will be to:
- audit all Regular Force members' files who elect to receive more than 50% of the payment in lieu (PiL) prior to release;
- audit all Regular Force members' files with previous (Regular and/or Reserve Force) service who elect to receive any portion of the payment in lieu (PiL) prior to release;
- audit all Reserve Force members' files who elect to receive any portion of the payment in lieu (PiL) prior to release; respond to payment in lieu (PiL) related inquiries.
35. Once election forms have been submitted, will Sitreps be provided?
No. In order to meet processing requirements, status reports cannot be provided to members regarding their files.
36. What rate of pay will be used to determine the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
The payment in lieu (PiL) of a severance benefit will be based on the CF member's substantive rank and pay increment for the following effective dates:
- 1 October 2011, Colonel and above or Lieutenant-Colonel Legal and above;
- date of promotion if promoted substantively to Colonel or Lieutenant-Colonel Legal between 1 October 2011 and 29 February 2012; and
- 1 March 2012, NCMs and all other Officers.
37. What is the formula to calculate the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
In accordance with the policy provisions under CBI 204.40, the amount of a PiL of all or part of CFSP is calculated by the formula:
(MP÷ 30) x 7 x Y
- MP is the monthly rate of pay for the member's substantive rank, pay increment, and occupation or trade group in effect on 1 Oct 2011 for senior officers; or, the date of promotion if the member became a senior officer from 2 Oct 2011 and 29 Feb 2012; or, 1 Mar 2012 for other eligible CF members; and
- Y is the lesser of: (a) any number of years of eligible service; and (b) the difference of (30 – YPB); and
- YPB are the years of prior benefit (refer to CBI 204.40)
Example: PO1 Smith received an estimate of eligible years of service for 28 years and 300 days.
- PO1 Smith elects to receive all 28 years and 300 days as a PiL of CFSP.
The calculation is: (MP ÷ 30) x 7 x Y
($6140/30) = 204.67 x 7 x 28.82
PiL of CFSP = 41290.13
- PO1 Smith does not elect a PiL of CFSP and defers payment until release. CPO1 Smith releases CRA under Item 5(a) 10 years later. CFSP calculation is based on the member's monthly rate of pay for their substantive rank on release x 7 x 28.82.
38. When will payments be processed?
PiL of CFSP will be processed on an ongoing basis commencing 1 Apr 2013 and once all information is validated and/or any necessary audits are performed. Each member's situation will be different. CF members who are considering making an election for a PiL of CFSP should anticipate the possibility of lengthy processing times given anticipated volumes.
39. Can a member with mixed service (Regular Force and Reserve Force) elect just a part of the Regular Force service in order to avoid the audit process?
No. The calculation of CFSP is based on years of eligible service which consists of the number of years of service after a member's most recent date of enrolment. As this calculation is based on the total number of years of service, it is not possible to separate the Regular Force service from Reserve Force service when a member makes their election. Additionally, for CF members with mixed service who elect to receive a PiL, there is a requirement for the files to be audited in order to ensure that all eligible service is calculated correctly.
40. If a member elects to take the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) now, will they be entitled to a severance benefit upon release?
For CF members, the years of eligible service toward a severance benefit ceased to accrue effective either 1 Oct 2011 or 1 Mar 2012. CF members who elect to receive a part of their payment in lieu (PiL) now, will receive the other portion when they release from the CF, if eligible.
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).
If a member elected to receive a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) and is then released under one of these release items or by reason of death, the eligible years of service used to calculate the member's payment in lieu (PiL) will not be included in the calculation of the severance benefit payable upon release.
The severance benefit payable upon release will be calculated as seven (7) days per year of eligible service (less any years of eligible service used to calculate the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)) and paid at the rate of pay for the members' substantive rank at release, to a 30 year lifetime maximum.
41. What happens if a member elects a payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) and releases from the CF before the PiL payment has been processed?
Once a member has elected to receive a PiL of CFSP, this decision is irrevocable and the election cannot be withdrawn. For those who decide to leave the CF after they have submitted their PiL form and do not yet have payment, their file will be expedited as part of their release process.
42. In cases of separation or divorce, what are the regulations for the division of the payment in lieu (PiL) for Canadian Forces Severance Pay (CFSP)?
The CFSP policy, including the provisions pertaining to the PiL of CFSP, is governed by CBI 204.40. CBI 204.40 provides for the entitlement, eligibility, calculation, and payment provisions of the CFSP and the PiL of CFSP to eligible CF members. These provisions do not regulate or direct the division of severance pay benefits.
43. Can a member defer their payment to a different taxation year?
No. Payment cannot be deferred to another taxation year.
44. Will the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) be adjusted for any retroactive pay increases?
Yes. The payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) and/or the final severance benefit paid upon release will be adjusted for any applicable retroactive pay increases.
45. Will there be deductions from the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP)?
Employment Insurance (EI), Canada Pension Plan (CPP)/Quebec Pension Plan (QPP), and Quebec Parental Insurance Plan (QPIP) may be deducted from the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) if the maximum annual contribution limit has not been reached at the time the payment is made. In addition, the payment in lieu (PiL) is subject to income tax.
46. Will it be possible to directly transfer the payment in lieu (PiL) of a severance benefit into a Tax Free Savings Account (TFSA)?
Any contribution to a TFSA must be made using net income. Members are responsible for making the arrangements to deposit the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) into their TFSA. A financial advisor or financial institution will be able to assist with options and make the necessary arrangements.
SISIP FS offers a wide range of financial products and services to CF members.
47. Is it possible to apply the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) to a CF Pension buy-back for pensionable service?
There are no special provisions to transfer the payment in lieu (PiL) to a member's buy-back of pensionable service.
48. Will the payment in lieu (PiL) be taxable?
The payment in lieu (PiL) of a severance benefit is considered employment income. As such, the one time payment will be subject to Income Tax and will be reported as income on the T4 (Relevé 1 in Quebec).
If a CF member has unused RRSP room, they can request for a reduction of Income Tax at source. Please consult the Canada Revenue Agency (CRA) for further details; residents of Quebec should consult Revenu Quebec (MRQ).
49. Will the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) be exempt from taxes if received by CF members while on operations?
The PiL of CFSP is considered employment income by CRA. As such, a member who receives any PiL of CFSP while on operations will be receiving/increasing their employment income.
The rules for the computation of income tax as they apply to CF members on operations continue to be applicable in accordance with the Income Tax Act (ITA) at: http://laws-lois.justice.gc.ca/eng/acts/I-3.3/index.html, Division C Computation of Taxable Income, 110. (1) Deductions for payments (f) (v).
For individual taxation matters, CF members should contact CRA directly.
50. Is there a way to reduce the amount of Income Tax deducted from the payment in lieu (PiL) of a severance benefit?
The Canada Revenue Agency (CRA) and the Ministère du Revenu du Quebec has allowed the employer to reduce the required income tax on the full or partial amount paid to affected CF members as a payment in lieu (PiL) of severance benefit.
Should the CF member intend to contribute $10,000 or less to an RRSP, a completed Payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) - Tax Waiver $10,000 or less form must be included with their election form. Income tax will be withheld on any remaining amount not indicated on the Tax Waiver form.
The Tax Waiver forms (for Quebec and non-Quebec residents) are in the Canadian Forces Severance Pay (CFSP) Administrative Directive, available on the:
CRA approval is conditional on the following:
- Deductible RRSP contributions being made for the year payment is received.
- Deductible contributions made to the member's or their spouse's RRSP.
- Deductible contributions have to be based on the member's RRSP deduction limit even if contributions are made to their spouse's RRSP.
- Deductible contributions are equal to the part of the payment on which tax is not withheld pursuant to this approval.
- Approval is also conditional the RRSP contributions being deducted on the tax return submitted for the year payment is received.
This approval applies to the least of the following three amounts:
- The part of the payment in lieu (PiL) of a severance benefit for which no tax is to be withheld;
- The individual's RRSP deduction limit for the year in which payment is made; or
If the portion of the payment in lieu (PiL) of a severance benefit to be contributed to an RRSP will be more than $10,000 and the member's RRSP deduction limit is over $10,000, the member must complete, for the full amount up to their deduction limit, the CRA form T1213 Request to Reduce Tax Deduction at Source for Years and the MRQ form TP-1016-V (for members living in Quebec).
The completed form, which must be sent directly to the appropriate CRA Tax Services Office (TSO) and MRQ office (Quebec residents), will be reviewed and a Letter of Authority will be issued directly to the CF member if the eligibility criteria have been met. Processing of the T1213 or the TP-1016-V takes four to six weeks and the Letter of Authority will be issued only for a specific tax year. In order to avoid having to re-submit a T1213 and/or a TP-1016-V, members are reminded to indicate, at the top of each form, the year that payment is expected. If there is a balance owing for previous income taxes or if an income tax return is outstanding, the CRA will not usually issue a Letter of Authority. The Letter of Authority must accompany the member's election form to ensure the appropriate amount of income tax is withheld when the payment is made.
51. What if the Letter of Authority from CRA is not received before the election period ends?
If the Letter of Authority is not received prior to the deadline for making an election, a copy of the T1213 or TP-1016-V should be attached to the CFSP Election form to hold payment until the letter from CRA and/or MRQ is received.
52. CRA Form T1213, Request to Reduce Tax Deductions at Source for Year(s), requires employer contact information. What information should be provided?
CF members completing a T1213 should provide the following information:
53. Under the section Deductions from Income and non-refundable tax credits on the CRA Form T1213, Request to Reduce Tax Deductions at Source for Year(s), what are the details or a copy of the payment arrangement contract?
Under the section Request to reduce tax on CF members select lump sum and provide the PiL amount and indicate Payment in Lieu of Canadian Forces Severance Pay in the spaces provided.
CF members may attach, to the T1213, a copy of their estimate of eligible service.
54. CRA Form T1213, Request to Reduce Tax Deductions at Source for Year(s), is to request authorization to reduce tax for the year in which payment is made. What year should be indicated at the top of the T1213?
PiL of CFSP files for Reserve Force members, members with combined Regular and Reserve Force service, files for members with previous Regular Force service (released and re-enrolled into the Regular Force) or elections of more than 50% of entitlement will require verification of service before payments can be made. It is anticipated that the volume of PiL of CFSP elections will be high.
If payments are made in 2014, then a new CRA Form T1213 will need to be submitted to CRA.
55. Is there a way to reduce the income tax withheld at source for the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP) for deductions other than RRSP?
Members may complete Form T1213 for any deductions other than RRSPs and send it along with the supporting documents to a CRA Tax Services Office (TSO). The TSO will review the request and, if the member has met the criteria, the TSO will send the member a Letter of Authority. The member will be required to provide a copy of the Letter of Authority with their election form. Examples of situations where a tax reduction may be approved can be found at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/ncmtx/rdcng/thrty-eng.html.
56. With respect to the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP), will the Pay section (DMPAP) or the Unit Orderly Room make contributions to RRSP accounts on behalf of members?
No. Whether requesting a reduction of income tax withheld on the payment in lieu (PiL) of severance benefit for more than $10,000 or less than $10,000, the member is responsible for depositing the contributions directly to an RRSP account. Director Military Pay and Allowance Processing (DMPAP) or the Unit Orderly Room will not make deposits into the RRSP accounts on behalf of members.
57. In accordance with CRA rules, members can only transfer the eligible part of their retiring allowance to their own RPP or RRSP (i.e. $2,000 for each year or part-year of service before 1996 in which the member was employed by the employer from whom they received the retiring allowance and additional $1, 500 for each year or part of a year of service before 1989 in which no pension or DPSP benefit was earned from employer contributions that either vested in the member at the time of payment or were paid to the member). Does this rule apply to the payment in lieu (PiL) of the Canadian Forces Severance Pay (CFSP)?
No. This rule does not apply to the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP). Members can only transfer the eligible part of their retiring allowance to their own RPP or RRSP.
For more information on transferring the eligible part of a retiring allowance, please contact CRA or view the webpage at: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/lgbl-eng.html.
58. Can contributions be made by a member to their spouse's or common-law partner's RRSP?
Yes. A member may contribute to an RRSP for their spouse or common-law partner as long as the member has sufficient contribution room in their RRSP.
59. What happens if the member contributes more to an RRSP than their deduction limit?
A member may have to pay a tax on unused contributions that exceed their RRSP deduction limit by more than $2,000. For more information, members should discuss their particular circumstances directly with CRA.
60. Where can members find more information regarding RRSP deductions?
There are several ways to determine an individual's RRSP deduction limit:
- consult their most recent Notice of Assessment or Notice of Reassessment from CRA;
- contact CRA or MRQ or visit their websites;
- call the Tax Information Phone Service (TIPS) at 1-800-267-6999. Social Insurance Number, month and year of birth, and the total income reported on line 150 of their previous tax return will be required.
- call the income tax enquiries line for individuals at 1 (800) 959-8281.
61. How many such payouts will be made?
To date, over 100,000 Regular and Reserve Force members are affected by the cessation of severance accumulation for resignation and retirement.
62. What is the largest anticipated payment in lieu (PiL) likely to be?
The payment in lieu (PiL) of a Canadian Forces Severance Pay (CFSP) benefit is calculated at the rate of one week of pay for each year of eligible service up to a lifetime maximum of 30 years.
The largest potential payment in lieu (PiL) of a severance benefit would be at the maximum level paid to officers at the highest ranks.
63. What is the rationale behind this, in a time of government austerity?
The cessation of accumulation of severance benefits brought public service compensation more in line with the private sector, where severance benefits for voluntary separation are usually not offered. The compensation package for CF members is benchmarked to that of the public service.
64. Where can members find more information?
Supplemental information may also be available by contacting the DMCA 4 PiL Team at: email@example.com.
Top of Page
For information on Canadian Forces Severance Pay (CFSP) administration, the member may contact their Release Pay Office or DMCA 4.
For information on the payment in lieu (PiL) of Canadian Forces Severance Pay (CFSP), members may email the DMCA 4 PiL Team at:
+ DMCA 4 PIL TEAM.
For information regarding income tax deductions, RRSP contributions, T1213 and Letters of Authority contact:
For information regarding income tax deductions, RRSP contributions and TP-1016-V for residents of Quebec, contact: