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February 22, 2019




All Teachers

Stefanie Tuff, Assistant Executive Director

Tentative Agreement – Severance Payout

The Association continues to work on finalizing logistical details around the payout of severance benefits should the Tentative Agreement be ratified on February 26. A detailed “Frequently Asked Questions” document is under development, in consultation with government, including Teacher Payroll officials. The following information is provided in response to some of the most frequent questions being received by NLTA with respect to the changes to severance in the Tentative Agreement:

1.   Effective March 31, 2018, there will be no further accrual of service or salary for the purpose of severance pay. Severance will be paid out to all teachers, including substitute and replacement teachers, who have at least one year of continuous service as of March 31, 2018. As per Clause 21.05 of the Collective Agreement, a fraction of one half (0.5) of year or more shall be counted as a full year of service for rounding purposes (see #3 below for further detail).

2.   Continuous service means service without a break, unless the break is identified in the Collective Agreement as an exception. The following situations do NOT constitute a break in service continuity for teachers for severance purposes:

  • Periods of approved leave;
  • The teacher left the employment of a school board to further his/her education as a teacher and returned to employment with a school board at the commencement of the next school year after the completion of the education;
  • The teacher taught for at least twenty (20) days in any school year; or
  • Any time service for severance is accrued pursuant to Clause 33.05 (for example, teaching at the College of the North Atlantic or a government school …).

3.   Service for severance purposes is calculated as follows, in accordance with Clause 21.05 of the Collective Agreement:

  • A five (5) hour instructional day constitutes a day of service.
  • Total years of service are determined by dividing the total days of service by the number of days in a school year (190 days before September 1, 2002, 195 days since then). Severance accrues at 2% per year, up to a maximum of 40% (or 20 years).
  • A fraction of one-half (½) of a year or more shall be counted as a full year and is rounded up. A fraction of less than one-half (½) of a year is rounded down.

For example: A teacher has worked for a period of 10 years in a combination of substitute, replacement and permanent positions. On March 31, 2018, she was in a full-time, permanent position. She had one year off on approved unpaid leave, and prior to becoming permanent she always worked at least 20 days each school year. Her service is therefore continuous. Her amount of service is determined by dividing the total number of days she taught during the continuous period by the number of days in a school year (195). Over the 10 year period up to March 31, 2018, the teacher worked 1,297 days. Divided by 195, this amounts to 6.7 years, which is rounded up to 7. So, the teacher in this example would have 7 years of continuous service for severance purposes, which at 2% per year equates to a 14% severance payout.

4.   If the tentative agreement is ratified, the timeline for payout of severance to eligible teachers will be no later than December 31, 2019. Information and application packages will be made available and teachers may apply and may receive their payout earlier than this date; however, the Association negotiated this time frame to ensure teachers will have enough time to consider their options, seek financial advice, apply for income tax waivers (see #5 below), etc. before making a significant financial decision.

5.   Eligible teachers will have the option to:

  • take their severance payout by the date determined; or,
  • defer payment of severance until retirement with the amount calculated and frozen as of March 31, 2018.

If option (a) above is chosen, the funds will be paid directly to the teacher, must be treated as employment income as per Canada Revenue Agency (CRA) rules, and will be subject to all applicable statutory deductions (income tax, EI, CPP). There is a $15,000 tax waiver from CRA, which means that teachers can receive up to $15,000 of their payout without income taxes deducted, to be contributed to an RRSP if they have the personal RRSP contribution space to do so. Any amount in excess of $15,000 will be paid with income tax deducted.
To contribute more than $15,000 to an RRSP without income tax deducted, teachers must apply individually to CRA for a personal tax waiver by completing CRA form T1213.

If option (b) above is chosen, and payment is received at the point of retirement, the severance payout will qualify as a retiring allowance and no EI or CPP will be deducted. All or a portion of the funds can be transferred directly to an RRSP, without income tax withholdings, if the teacher has sufficient RRSP contribution space to do so. No waiver is required for this if the severance payout is taken upon retirement. However, any amount of severance paid directly to the teacher at retirement (as opposed to being transferred directly to an RRSP) will be subject to income tax deductions at source.

If you have any questions, please contact an Administrative Officer in Programs and Services at 726-3223 or 1-800-563-3599 (toll-free).