Table of Contents

  • Alphabetical Listing
  • Introduction
  • Attendance
  • Benefits
  • Classification
  • Definitions
  • Employee and     Labour Relations
  • General Employee     Information
  • Human Resources      Contact Numbers
  • Leave
  • Occupational Health     and Safety
  • Pay
  • Staffing
  • Travel
  • Workforce     Development

Deferred Salary Leave Plan

Policy Statement 

Permanent employees with at least 12 months continuous service may avail of a deferred salary leave plan, designed to help plan and finance a leave of absence for periods of 6 - 12 months.

Application

This policy applies to all employees. Bargaining unit employees should also consult their respective collective agreements.

Definitions

Responsibilities

Department

It is the responsibility of individual departments to:

• ensure that employee participation in the Deferred Salary Leave Plan will not adversely affect operational requirements;
• review employee requests and approve requests where feasible.

Employee

It is the responsibility of employees to:

• review the Deferred Salary Leave Plan options and understand the implications of participation;
• ensure that they are financially able to participate in the Plan.

Enrolment

Employees wishing to participate in the Plan must make written application to their Deputy Ministers, providing as much advance notice as possible.

Deputy Ministers may approve employees' requests based on the operational requirements of the department during the employees anticipated absence.

Employees will be notified, within three months of their request, of their approval to participate in the Plan.

Approved requests will be sent to the Government Accounting Division of Treasury Board Secretariat who administer the Plan. Once the approved request is received the employee will be placed on the deferred salary payroll.

Administration

The minimum leave period is 6 months, except where an employee is attending a designated educational institution on a full time basis; in this case the minimum period of leave is 3 months. The maximum period of leave is 12 consecutive months, starting immediately after the deferral period.

The period over which an employee may defer salary may not exceed 6 years.

Employees can defer a maximum of 33 1/3% of their gross salary in a taxation year.

The following table presents examples of calculations for Plan participation:

Over the period of Plan participation, an employee's salary plus the percentage of salary deferred must equal 100% of the employee's pre-plan salary.

The percentage of gross salary to be received by the employee is fixed for the deferral period and the leave period.

The deferred portion of an employee's salary will be deposited into an account with the Government of Newfoundland and Labrador. This account accrues interest which must be paid to the employee at the end of each calendar year. This interest is considered to be income from employment, and is therefore subject to income tax for the year in which it was earned. The interest rate, on the deferred portion of an employee's salary will be the rate of interest earned by Government on its bank accounts.

For taxation purposes Canada Customs and Revenue Agency requires that at the end of the leave period, employees return to the Employer under whom they participated in the deferred salary leave program for, at least the same amount of time as the leave period. As such, the Deferred Salary Leave Plan cannot serve as an early retirement program.

Salary and Benefits During Deferral and Leave Periods

During the deferral period, employees continue to receive their normal salary less the amount they have chosen to contribute to the Plan.

During the leave period, an employee's gross annual salary will consist of the sum of the contributions made to the Deferred Salary Leave Plan during the deferral period, plus interest. Salary will be received through the normal payroll procedures.

Income tax information slips (T4) for the completion of participating employee's tax return will reflect that portion of salary actually received in the taxation year.

The interest earned on the deferred portion of an employee's salary will be considered to be employment income. This interest amount is taxable as employment income and will be included on T4 slips. Income tax information slips will be issued yearly as the interest is paid.

Employment status will be that of leave without pay. The provisions and cost-sharing arrangements for employee benefits will be consistent with the Human Resources Policy Manual and collective agreements.

While on leave no payments will be made for:

• overtime;
• call back;
• stand-by;
• automobile allowance;
• Labrador allowance;
• sick leave;
• family responsibility leave;
• annual leave;
• paid leave;
• statutory holidays; or
• any other monetary compensation provided to employees who are at work.

No annual leave, sick leave or paid leave will be credited while employees are on the leave period portion of the Deferred Salary Leave Plan. This time will not be counted toward the requirements for service to achieve additional annual leave or paid leave credits and will not be recognized for severance pay purposes. The leave period, however, will not be considered a break in service.

Employees may purchase their deferred salary leave periods for pension credits on return to work.

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Withdrawal From the Plan

Once approved for participation in the Deferred Salary Leave Plan, employees may withdraw from the Plan prior to the leave period only under exceptional circumstances such as:

• extreme financial hardship;
• death;
• total and permanent disability;
• transfer to another position where Plan participation is not approved;
• lay-off, termination or resignation.

Employees who wish to withdraw from the Plan must inform their Deputy Minister in writing outlining the reasons for the request. The Deputy Minister will then forward this information to the Government Accounting Division of Treasury Board Secretariat who will review the case and decide if it meets the criteria for withdrawal.

Employees who are permitted to withdraw from the Plan will receive a refund of their contributions plus the accrued interest on the contributions. Refunds will be made within 90 days of the approval to withdraw from the Plan.

The lump sum payment refunded to an employee is subject to Canada Pension Plan (CPP) contribution. This CPP contribution would be based on the gross amount of the payment using the employee contribution rate for the year in which the withdrawal occurs.

Unless specifically requested by the employee, the Government Accounting Division of Treasury Board Secretariat will apply the lump sum income tax rate to the refund amount.

Returning From Leave

Employees returning from the Deferred Salary Leave Plan will be:

• assigned to the same or equivalent position held prior to going on leave; and
• eligible for the same step in the salary scale paid prior to going on leave.
  

Last Updated: May 14, 2001
Reference: TBM 2000-073