Pension plan error leaves man on hook for $7K
Close to 1,000 employees enrolled in wrong pension plan, says Public Services Department
Casey Babb says when he opened a letter from Public Services and Procurement Canada (PSPC) last Friday, he was shocked at what he read.
Due to an error made by the federal department's Public Service Pay Centre, the Ottawa man has been paying into the wrong pension plan group for nearly six years.
The result: he owes the government about $7,000 and was given a little over a year to pay the sum back into the right pension plan.
"They've dropped this on me during a pandemic," he said. "And I mean, even at the best of times, this would be totally outrageous."
Babb — currently on paternity leave with a newborn child — calls it a "gut punch" and worries he's not the only one who will be receiving a letter.
He believes the problem dates back to when he changed jobs, moving from the Department of National Defence to Natural Resources Canada, and how the federal government altered its pensions plans in 2013.
Anyone who worked for the federal government before then would pay more into their pension but retire sooner, Babb said.
Conversely, those who started work after 2013 pay less into their plan each paycheque but need to work longer to receive full pension.
Although he worked for the federal government before 2013, the government switched him into the newer pension plan when he changed jobs, he said.
"So what that means is: for the last six years, I've been paying – because of the Government of Canada pay centre – I've been paying too little every paycheque into my pension," he said.
"It's been this cumulative drip over the last six years, every two weeks, that they didn't catch and ... didn't address," he said.
About 1,000 enrolled in wrong plan: government
While Babb was given options for how to pay the $7,000 back, at most he has 16 months unless he can prove financial hardship. He also wasn't given the chance to continue paying into the same pension plan and suspects he won't be afforded that option.
Babb said he caught the mistake years ago and flagged it to the federal government. He said if the problem had been addressed sooner, he wouldn't owe as much money.
"They [knew] that this is happening and I'm still paying into the wrong pension," he said.
According to the PSPC, all employees with overdue pension contributions from more than one pay period will be receiving letters. They will have a month to respond and confirm their preferred method for repayment.
"When Phoenix was first implemented in 2016, there were delays in enrolling some employees into the Public Service Pension Plan (PSPP), and unfortunately close to 1,000 employees were enrolled in the incorrect group within the plan," said Jean-François Létourneau, a spokesperson for the department.
"These errors are regrettable, and PSPC has taken steps to support employees experiencing financial difficulty as a result."
Take responsibility, urges Babb
According to Létourneau, some of those affected may be entitled to receive a refund in contributions if they contributed too much into their pension. The department began sending letters to employees in October and recovery has either started or been completed for 426 cases, he said.
For Babb, the federal government should either excuse these debts or at least come up with better repayment options.
"There needs to be some responsibility here," he said. "You can't just start sending out dozens or hundreds or thousands of letters to Canadians."