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ADMINISTRATIVE REPORT Author/Local: Marilyn Clark/7666
RTS No. 00298
FROM: Director of Human Resources
SUBJECT: Self Funded Leave Plan - Exempt Staff
THAT the City of Vancouver approve a self-funded leave plan for exempt employees and pay $600 a year for administration.
The City Manager RECOMMENDS approval of the recommendation.
There is no applicable Council Policy.
The purpose of this report is to seek Council’s approval to offer a self-funded leave plan to exempt employees.
Employees have indicated that, during the course of their careers with the City, they would like the opportunity to apply for a self-funded leave which would provide them with a self-funded absence to pursue educational or personal goals that would enhance their work abilities or skills.
Section 801 of the Income Tax Act makes provision for a salary deferral arrangement between an employer and an employee. The main purpose of this arrangement is to permit an employee to fund, through salary deferral, a leave of absence from the employee’s employment.
The plan consists of a deferral period and a leave period. During the deferral period, employees who are approved as participants in the plan, can defer up to 33 1/3 percent of their salary. These funds are held in trust in an account with a financial institution and invested on behalf of the employee. Under no circumstances can the deferral period be in excess of six(6) years.
The leave period is determined under Section 6801 as no less than six(6) consecutive months and no more than 1 year. There is a provision for a minimum three(3) months leave if the employee is attending full-time at a designated educational institution. During the leave period, the employee receives funds they have deferred.
The guidelines developed by the City would enable employees who have worked for the City of Vancouver for a minimum of five(5) consecutive years to apply for a self-funded leave that must be approved by their department head. When reviewing an employee’s application for self-funded leave plans, consideration will be given to the reason for the leave request and the department’s operational requirements.
After the leave period is completed, the employee must return to regular employment for a period no less than the period of the leave.
During the deferral period, employees may only, in exceptional circumstances, withdraw from the plan and receive the deferred salary amount and accrued interest.
It is our intention at this time to offer the plan to exempt employees.
It is proposed that the City pay a financial institution up to $600.00 in administration costs per year. As the program develops and participation increases, the cost of administration will increase incrementally. Any administrative costs over $600.00 will be covered by deductions from the participants’ interest incomes.
The City of Vancouver will establish the above program as of January 1, 1999. Initially, only those individual's exempt from a bargaining unit will be eligible.
The basic program design is one which meets current Federal income tax guidelines. Any
changes to the tax guidelines may result in changes to or elimination of the program.
The purpose of the program is to provide an opportunity for renewal and continued commitment of staff to the City. The program is designed to allow eligible staff to fund a paid leave for an extended period by means of an adjustment to normal base salary over several years.
For example, a person could elect to defer 20% of their salary for 4 years. The person could then take a one (1) year self-funded leave in the 5th year and receive income during that year equal to the amount deferred, which would equal 80% of their normal salary.
Leave can be used for education, training, and improvement of work-related skills and abilities and it is intended that staff return to the City after the leave is completed. It is voluntary and is established in accordance with a defined formula of income adjustment. The following guidelines and requirements govern the operation of the self-funded leave plan.
The following guidelines are applicable to the Self-Funded Leave Program:
1 . All exempt staff are eligible to apply to participate in the Program.
2. Staff will normally have a leave minimum of six (6) months to a maximum of twelve (12) months. There is a provision for a minimum three (3) months leave if the person is attending full-time at a designated educational institution.
3. Staff will be eligible for Leave once during every six (6) years.
4. Staff must be employed by the City of Vancouver, Board of Parks and Recreation, Police Board or Vancouver Public Library Board, for a minimum of five (5) consecutive years prior to application for leave.
5.Staff may enroll in the program to accommodate opportunities for training and development; an educational program; and other programs for improvement of work-related skills and abilities.
6. Approval of any leave is made by the Department Head prior to the employee enrolling in the program.
The City assumes no responsibilities for any consequences arising out of the Program related to effects on pension income, income tax arrangement, unemployment insurance, or any other liability arising from participation in the Program. Under current pension legislation-Pension (Municipal Act), the period of self-funded leave will not be credited service for pension purposes; however, there are provisions to buy-back service credit. Benefits coverage for provincial medical, extended health, dental, and life insurance can continue during the self-funded leave with the employee contributing the full share of premium costs.
DETAILED DESCRIPTION OF PROGRAM
1.1 "Deferral Period" means the number of months for which compensation is deferred in accordance with Section 3.1, including the months referred to in Section 4.7.
1.2"Deferred Salary Amount" means the portion of the total annual base salary authorized by the Participant to be deducted by the City and forwarded to the Trustee on behalf of the employee.
1.3"City" means the separate employers of the City of Vancouver, Board of Parks and Recreation, Police Board, and Vancouver Public Library Board.
1.4"Participant" means a Regular employee who has completed an application and whose application has been approved
1.5"Trustee" means a financial institution holding these funds in trust for employees and administered in accordance with our leave plan.
2.1Applications ("Self-Funded Leave Application" form) are to be submitted to the Department Head for consideration and approval.
2.2 Applications are to be submitted by September 1st: in order for the staff person to participate in the Program in the following and subsequent calendar years.
2.3 The employee must indicate on the application form the amount of leave which is being requested.
2.4 Once approved, the "Self-Funded Leave Application" becomes the formal agreement between the employee and the City, acknowledging the terms and conditions of the program.
3.1 During the deferral period, which cannot exceed six (6) years including a one year postponement, the City will withhold from each Participant a flat amount or a fixed percentage of normal bi-weekly gross base salary for the year. Participants have the option of deferring either twenty percent or thirty percent of their base salary in any one year of deferral. The flat amount or fixed percentage shall be stipulated in the Self-Leave Agreement, subject to annual amendment by Participant declaration.
3.2 During the deferral period, funds will be held by the Trustee in a fully managed Treasury Bill pool on behalf of the participants.
3.3 Gross base salary is determined from the salary assigned to the person, excluding retroactive adjustments, during the period the member participates in the program. Acting pay, allowances and premium pay shall not be included in normal gross base salary.
3.4 Interest earned shall be paid out by the Trustee annually and will be remitted directly to the participants by the Trustee.
3.5 The participants shall bear all annual administrative costs of the program.
4.1The leave is considered to be without pay and therefore no sick leave, vacation, or any other entitlements accrue during the leave period.
4.2The leave of absence shall immediately follow the deferral period and be for the period as stipulated upon the selection made in accordance with Section 2.3.
4.3 During the leave, the Participant will receive payments in accordance with the bi-weekly pay schedule. The aggregate payments received during the leave will not exceed the Participant's Deferred Salary Amount.
4.4 The Participant may not receive any salary or wages from the City during the Leave or from any other person or partnership with whom the City does not deal at arm's length, other than the Deferred Salary Amount and described benefits.
4.5 All amounts deferred must be paid out no later than the end of the first taxation year that commences after the end of the Deferred Period. Amounts required by law to be paid by the City on behalf of the Participant will be deducted from the amounts paid under Section 4.3.
4.6 The Participant must return to their regular employment with the City after the leave for a period of time that is not less than the period of leave.
4.7 Upon return from the leave of absence, the Participant will return to the same position of employment that the Participant had held immediately before commencing the leave of absence, unless a different assignment is determined between the staff member and the Department Head.
4.8 In exceptional circumstances, either the employee or the City may request to postpone the leave of absence for up to twelve (12) months provided the leave of absence will still commence within five (5) years after the date the Deferral Period commences.
4.9 If the Participant does not take the leave as provided, all amounts held for the Participant are to be paid to the Participant within sixty (60) days or not later than the end of the first taxation year (whichever comes first) that commences after the end of the Deferral Period.
5.1During the period of leave, participants are eligible to continue in the following group benefit plans:
Premiums shall be paid in full by the Participant.
5.2 During the Deferral Period, the City shall report and submit income tax and CPP deductions based on the reduced gross base salary; El deductions will be on the regular (full) gross salary. Any changes to this as determined by CPP or EI regulations will be applied to the Participants.
5.3 The Deferred Salary Amount paid to the Participant during the leave will be subject to income tax and CPP deductions as determined by those agencies.
5.4 During the deferral period, the City shall use the Participant's normal gross base salary as the basis of calculating pension contributions and deductions, group life insurance, long-term disability coverage, and employee savings plan contributions and deductions.
5.5The Participant shall not be entitled to earn vacation and sick credits during the leave period. Any general salary increases which may have occurred during the leave period will be postponed for the period of leave.
5.6 If during the Deferral Period, the Participant becomes disabled as defined in the long-term disability plan documents and is thereby eligible to receive long-term disability benefits, the person shall receive long-term disability benefits based on the participant's gross annual salary.
If during the leave period, the participant becomes disabled as defined in the long-term disability plan document, the participant will be eligible for long term disability benefit payments immediately following the scheduled return to work providing the participant still meets the definition of total disability and has fulfilled the waiting period as defined in the long term disability plan document.
6.1 In exceptional circumstances such as financial hardships, placement on long-term disability or long-term placement on Workers' Compensation, and with approval of the City through the employee’'s Department Head prior to the leave commencing, a Participant may withdraw from the Plan and shall receive the Deferred Salary Amount and accrued interest not yet paid within sixty (60) days following such approval subject to all statutory deductions.
6.2In the event of termination of employment, a Participant must withdraw from the Plan and shall be paid the Deferred Salary Amount plus accrued interest not yet paid within sixty (60) days following such termination.
6.3 In the event a Participant dies, after the City is notified of such death, the Deferred Salary Amount and accrued interest not yet paid shall be paid to the employee's estate subject to the City receiving any necessary clearances and proofs that may be required, within sixty (60) days.
7.1 An employee shall be limited to one leave of absence and a total of twelve (1 2) months for each completed six (6) years of employment with the City.
7.2 An employee must be employed by the City for five (5) years before they can commence participation in the Plan. Only Regular staff are eligible to participate in the Plan.
7.3 Total staff participation in the Plan shall be limited at the discretion of the City. When reviewing participation, the City will consider operational needs, length of employment, completion of an earlier approved leave, deferral of an earlier approved leave, and number of employees participating in the program.
7.4 The Plan may be amended or terminated by the City. No amendments will be made that could affect any tax ruling which may be applicable to the Plan prior to amendment.
7.5 If an employee dies during the contributory period, the City shall pay to the employee's estate the total contributions plus interest less statutory deductions, within sixty (60) days following notification of death, subject to necessary proofs and clearance.
7.6If a Participant dies during the leave period, the balance (less statutory deductions) in the Fund at the date of death shall be paid in a lump sum to the estate of the Participant within sixty (60) days following notification of death, subject to necessary proofs and clearance.
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City of Vancouver Page 6
Self-Funded Leave Program
November 1998
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(c) 1998 City of Vancouver