Changes to the Canada Pension Plan
Well, it looks like it's finally happening. Last Monday the federal government and most provinces agreed to some changes to Canada's Pension Plan (CPP) and hope to finalize the agreement by July 15th. Changes to CPP require seven out of 10 provinces, representing 2/3 of the population to be in agreement. Only Quebec and Manitoba declined.
The new CPP rate will increase a person's CPP benefit to 33%, as opposed the 25% it's currently set up for. The changes will benefit middle income retirees. It will be more costly to business. In a nutshell, there will be a phased in increase between 2019 and 2025 eventually increasing today's CPP, at 4.95% to 5.95% for both employees and employers. The yearly maximum pensionable earnings will increase from this year's $54,900 to $82,700 in 2025.
What happened to the 2 provinces that didn't jump on board? Well, Manitoba has a newly elected government. Quebec already has increased their Quebec Pension Plan rate and will continue to raise their rate over a similar time period. Tuesday Ontario announced it was abandoning its plan for a provincial pension plan (ORPP). The Canada Pension Plan provides workers and their family with partial replacement of earnings in the case of retirement, disability or death. From a payroll perspective, it is a statutory deduction in all provinces and territories except for Quebec. It is the first priority statutory deduction over employment insurance and income taxes.