June 21, 2019
TO: | ALL MEMBERS |
FROM: | PROGRAMS & SERVICES |
RE: | SEVERANCE INFORMATION – UPDATE |
The 2016-2020 Provincial Collective Agreement provides for the payout of severance to all teachers, including substitute and replacement teachers, who have at least one year of continuous service as of March 31, 2018. The NLESD and CSFP have provided a Frequently Asked Questions Document with supporting forms and instructions. Please be advised that, in response to concerns raised by the Association, the deadline for submitting the Election Form and other documentation for severance payouts has been extended. Teachers now have until Wednesday, July 31 to submit their severance payout forms to their school district.
Based on other issues we have raised with the school districts and government, as well as questions that have been raised by teachers, the Association offers the following clarifications and additional information, which may be of assistance to members.
1. Service Continuity
In General
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 (for example, general unpaid leave, unpaid sick leave, parenting leaves);
- 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 …).
Substitute/Replacement Teachers with a Break in Service for Parenting Reasons
Some substitute/replacement teachers did not always work at least 20 days in a school year because they took time away from work for parenting reasons (maternity/parental/adoption). If they had no position at the time, they would not have been “on leave” under the collective agreement. However, such absences (of up to one school year) from the workforce do not constitute a break in continuous service for severance purposes.
If you are a teacher to whom this applies, you must self-identify to the employer and provide the timeframe(s) during which you were unavailable for work for parenting reasons, as well as appropriate supporting documentation, such as a copy of a birth or adoption certificate(s). You should include this when you submit your Election Form to the school district, or as soon as possible after June 28, 2019 if you need some time to obtain the documentation.
Substitute/ Replacement Teachers with a Break in Service Due to Disability
Some substitute/replacement teachers did not always work at least 20 days in a school year because they were unable to work due to disability. If they had no position at the time, they would not have been “on leave” under the collective agreement. However, such an absence from the workforce does not constitute a break in continuous service for severance purposes.
If you are a teacher to whom this applies, you must self-identify to the employer and provide the timeframe(s) during which you were unavailable for work due to disability, as well as appropriate supporting documentation, such as medical information to support that the absence(s) was as a result of disability. You should include this when you submit your Election Form to the school district, or as soon as possible after June 28, 2019 if you need some time to obtain the documentation.
2. Estimating Your Severance Payout Amount
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 and was at step 7 on the salary grid with a Level VI teaching certificate, for an annual salary of $76,478. During her career, she has 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. Her severance estimate would be $76,478 × 0.14 = $10,707.
If you have less than 20 years of service for severance purposes and are uncertain as to how much continuous service you have as of March 31, 2018, your school district seniority list and/or your Teachers’ Pension Plan benefit statement (if you have ever paid into the TPP), which lists the number of days worked per school year, may be of assistance. To get a copy of your pension benefit statement, you can set up an account with the Teachers’ Pension Plan Corporation: https://secure.globalhrservices.ca/tppc/Default.aspx?tabid=989&returnurl=%2ftppc%2f (you will need your Employee ID number which you can find on your paystub).
Keep in mind that service for seniority or pension purposes is not always the same as service for severance. Service that counts for severance purposes includes:
- all days taught with a school district in the province, including substitute and replacement time;
- any time off on paid leave;
- up to 10 days of general unpaid leave per school year;
- injury on duty leave for temporary earnings loss;
- any time off on maternity/parental/adoption leave (as a permanent teacher or during a contract period);
- time off on deferred salary leave;
With the exception of the categories of unpaid leave referenced above, periods of unpaid leave do not count as service for severance purposes BUT, as noted in number 1 above, approved unpaid leave does NOT constitute a break in service continuity.
3. Employment Insurance
The NLTA has had ongoing communications with Service Canada regarding severance and its treatment for EI purposes. The information package released to teachers has been provided to Service Canada, and they have provided information on how such early payouts are usually treated. We know that some teachers have also received information from the Service Canada 1-800 line which has, at times, conflicted with the information provided to NLTA.
Teachers on an active EI claim with questions on if/how an early severance payout may impact their claim can contact Service Canada and receive a response within 5 business days. When asked if that information could be determined in advance, to share with our members, Service Canada indicated they could only provide advice on how such situations would usually be treated.
If teachers do not elect to defer receipt of their severance, they will receive their payout in October, November or December 2019 depending on their years of service. The NLTA has been advised by Service Canada that an early severance payout is usually processed and allocated as follows for teachers on an active EI claim (not working elsewhere) who have not terminated employment, nor retired:
- Teachers who elect to have severance paid out should indicate on their EI claim the week that they advised the Employer (by submitting the Election Form) they wished to take the payout (as opposed to deferring). It is not the date when the monies are actually received that should be reported, but the week in which the request for a payout was submitted. Teachers should keep a copy of their Election Form in the event that Service Canada requires proof of when it was submitted.
- If a teacher resigns or retires (a complete separation of employment), the severance payout would be allocated as earnings over several weeks (as per the normal approach). If the teacher is still working or available for work, severance would usually be allocated only to the week in which the teacher advised the Employer that they wanted to take the payout by submitting the Election Form.
- If a teacher requests to defer payment to a later date (but before resignation or retirement), the severance amount would be allocated to the week in which they notify the employer that they want to have it paid out. For example, if a teacher waits until May 2020 to make a decision to receive the payout, then the amount would be allocated to the relevant week in May 2020.
Teachers who prefer to wait until further information is available from Service Canada may wish to elect the option to defer their severance payout to a later date.
4. Election Form – Option #3
Teachers who have chosen or who plan to choose Option #3 (“Severance paid to me for transfer to RRSP (more than $15,000 – Complete T1213)”) on the school district Election Form can but are not required to also submit the Declaration of Intent form. We have recently clarified this with the employer and Teachers’ Payroll. To be clear, this is only an issue in the event that your T1213 application for a personal income tax waiver is denied, in which case the Declaration of Intent would be required by the school district in order for the employer to pay out up to $15,000 without income tax deducted for the purpose of RRSP contribution as per the corporate tax waiver. A personal tax waiver, as evidenced by an approval letter from Revenue Canada in response to a T1213 application, is required for amounts in excess of $15,000. The total amount approved for tax waiver purposes is either the amount approved through the T1213 application OR the $15,000 via the Declaration of Intent form. Teachers should not reduce the amount requested on a T1213 by the $15,000 on the Declaration of Intent as these amounts are not added together when the T1213 is approved.
If you have already submitted your Election Form, choosing Option #3, and did not submit the Declaration of Intent, this is not required and would only be needed if your T1213 application is denied. We have also been advised that anyone who selects Option #3 will not receive a payout until they have submitted a copy of the T1213 response letter from Revenue Canada to the District.
Example
A teacher is expecting a $32,000 severance payout and wishes to contribute it all to RRSPs. They select Option 3 and complete a T1213 for the full $32,000. They also choose to complete the Declaration of Intent form for $15,000 in the event that the T1213 application is denied.
- If the T1213 form is approved, income taxes will not be deducted from the $32,000 severance payout.
- If the T1213 form is not approved, income taxes will not be deducted from $15,000 of the severance payout and the remaining $17,000 will have income tax deducted at source.
We understand there has been some confusion on this particular option, so please contact an Administrative Officer in Programs and Services if you have questions.
5. Election Form – Option #4
Teachers who have chosen or who plan to choose Option #4 (“Transfer a portion to RRSP and remainder of severance paid to me (complete forms as per summary) Severance for transfer to RRSP $_________”) on the school district Election Form should review the information above regarding Option 3 when planning to make RRSP contributions over $15,000.
Example
A teacher is expecting a $32,000 severance payout and wishes to contribute some of it ($20,000) to RRSPs. They select Option 4 and complete a T1213 for $20,000. They also choose to complete the Declaration of Intent form for $15,000 in the event that the T1213 form is denied.
- If the T1213 form is approved, income taxes will not be deducted from $20,000 of the severance payout. The remaining $12,000 will have income tax deducted at source.
- If the T1213 form is not approved, income taxes will not be deducted from $15,000 of the severance payout. The remaining $17,000 will have income tax deducted at source.
We understand there has been some confusion on this particular option, so please contact an Administrative Officer in Programs and Services if you have questions.
If you have questions, you may contact an Administrative Officer in Programs and Services at 726-3223 or 1-800-563-3599 or mail@nlta.nl.ca.