Starting in 2012, the federal and provincial governments are making a series of changes to the Canada Pension Plan that affect employees aged between 60 and 70. These changes permit CPP and QPP contributions for employees when CPP or QPP retirement benefits are received, before employees turn 70 years of age. These changes bring the CPP into line with similar changes made to the QPP in 1997. The purpose, in part, is to offer more support to employees who wish to phase in their retirement.
For payroll purposes, the main impact of these changes is to increase the complexity of CPP calculations.
For years up to and including 2011, there were only 3 distinctions based on an employee’s age:
- before age 18, when employees are CPP exempt;
- between the ages of 18 and 70, when CPP contributions apply, unless employees are in receipt of CPP or QPP retirement or disability benefits; and
- after age 70, when no CPP contributions apply.
Now, starting in 2012, there will be at least 4 distinctions based on age:
- before age 18, when employees are CPP exempt;
- between the ages of 18 and 65, when CPP contributions are mandatory, unless employees are in receipt of disability benefits;
- between the ages of 65 and 70, when employees may opt out of paying CPP contributions, if they are in receipt of CPP or QPP retirement benefits; and
- after age 70, when no CPP contributions apply.
This means that starting in 2012, for employees aged between 65 and 70, knowing whether an employee is subject to or exempt from CPP contributions requires the employer to know whether or not:
- the employee is receiving either CPP or QPP retirement benefits; and
- the employee has opted out of making CPP contributions.
This applies to employees who began receiving CPP or QPP benefits in prior years as well as to employees who begin receiving them in 2012. In other words, an employee, aged 65 to 70, previously exempt from CPP in 2011, is subject to CPP as of pay dates after January 1, 2012, unless the employer is provided with evidence of opting out. Employees between age 65 and 70 may opt out by filing CRA Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. This form must be filed with both the employer and the CRA. As its name implies, employees, once they have decided to opt out of contributions, can subsequently revoke this decision.
A person who opts out of CPP contributions, or revokes a prior opting out, also changes the amount of the Year’s Maximum Pensionable Earnings and the Year’s Basic Exemption, in much the same way that this is adjusted if a person turned 18 or 70.
The employer obligation to match employee CPP contributions is unchanged, meaning an employee aged 65 to 70 who opts out, will also remove the requirement for employer contributions. Also unchanged is the distinction between disability and retirement benefits. An employee in receipt of CPP or QPP disability benefits is always exempt from CPP. Its only retirement benefits that impact eligibility between ages 65 and 70.
Alan McEwen
Alan McEwen & Associates
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The earliest that what is called the post-retirement benefit can be paid is January 2013.
Apparently there is no application process. Any post-retirement benefits will be paid automatically.
Alan
I understand that employees over age 6o who are receiving CPP benefits and are NOT making contributions will be required to start again Jan 1/12. Will these newly enforced contributions change the amount of monthly benefit they receive? If so, how/when will that be applied?
I understand that employees aged 6o or older who is in receipt of CPP and is currently NOT making CPP contributions must resume contributions Jan 1, 2012. Will these newly imposed contributions have an effect on the amount of monthly CPP benefit received? If so, when/how?
George, look at the Economic Recovery Act in the 2009 annual statues of Canada, Chapter 31. Starting at section 25 you will see amendments to the Canada Pension Plan. These specify that employees age 65 to 70 have to make an election to opt out of paying CPP when they are in receipt of a retirement pension. The form for making this election is the CPT30. Thanks, Alan.
Curious, is this confirmed that employees between 65 and 70, previously exempt from CPP must file a CPT30. It seems like they would need to file it Dec. 2011 to take effect January 1st 2012.
I have been reading various government documents and it sort of intimates this but is never definitive.