Canada Pension Plan

Submitted by on Thu, 2016-06-23 15:57

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.

Submitted by on Wed, 2016-05-11 16:30

When you have a place of business operating in Quebec and in any other Province and you transfer an employee between locations during a calendar year, there are special reporting requirements that need to be followed.

If an employee is transferred in the middle of a pay period, do not divide the contributions between the CPP and QPP . Instead, all of the employee's earnings for the pay period are subject to the plan that governs the establishment to which the employee was transferred. When calculating the amount of CPP contributions, when an employee is transferred from Quebec to another province, do take into account the QPP contributions already deducted. The total of the CPP and QPP contributions to both plans cannot be more than the maximum CPP contributions for the year. Effective January 1, 2014, if an employer transfers an employee to Quebec from another province, the employer must multiply the total CPP contributions withheld from the employee since the beginning of the year by a weighting factor to calculate the maximum QPP contribution to deduct. Calculate the weighting factor by dividing the QPP contribution rate for the year by the CPP rate for the year.

An employee transferred between provinces, will not only need 2 X T4s slips, but with one of the provinces being Quebec, will need an RL-1 too. One T4 slip will show the province of employment as Quebec and will include the remuneration earned while in the province of Quebec, the Quebec Pension Plan (QPP) contributions deducted, the applicable pensionable earnings and any other applicable reportings. The second slip will show the other Province as the Province of employment. It will include the Canada Pension Plan (CPP) contributions deducted, the applicable pensionable earnings, and any other applicable reportings.