Legislative Updates (CAN)

2021 YMPE ANNOUNCED

The Canada Revenue Agency (CRA) has recently announced the maximum pensionable earnings for 2021 will be $61,600, up from $58,700 in 2020. This represents close to 5% increase.   

Contributors who earn more than $61,600 in 2021 are not required or permitted to make additional contributions to the Canada Pension Plan (CPP).

The basic exemption amount for 2021 remains as $3,500.

The CRA announced the increase in YMPE reflects the growth in average Canadian weekly wages and salaries, calculated using a CPP legislated formula.

The 2021 contribution rate for employees and employers has increased to 5.45%, an in crease of .20% (5.25% in 2020). The 2021 contribution rate for self-employed has increased to 10.9% from 10.5% in 2020.

The 2021 maximum employer and employee contribution has increased to $3,166.45 from $2,898.00 in 2020.

The 2021 maximum self-employed contribution has increased to $6,332.90 from $5,796.00 in 2020.

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2020 YMPE Announced

On November 1st, the Canada Revenue Agency (CRA) announced the maximum pensionable earnings for 2020 will be $58,700, up from $57,400 in 2019.

Contributors who earn more than $58,700 in 2020 are not required or permitted to make additional contributions to the Canada Pension Plan (CPP).

The basic exemption amount for 2020 remains as $3,500.

The CRA announced the increase in YMPE reflects the growth in average Canadian weekly wages and salaries, calculated using a CPP legislated formula.

The 2020 contribution rate for employees and employers has increased to 5.25% from 5.1% in 2019. The 2020 contribution rate for self-employed has increased to 10.5% from 10.2% in 2019.

The increase in contribution rate is due to the CPP enhancement implemented in January 2019 as reported by the CRA.

The 2020 maximum employer and employee contribution has increased to $2,898 from 2,748.90 in 2019.

The 2020 maximum self-employed contribution has increased to $5,796 from $5,497.80 in 2019.

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2019 YMPE Announced

On November 1st, the Canada Revenue Agency announced that the maximum pensionable earnings for 2019 will be $57,400, up from $55,900 in 2018.

Contributors who earn more than $57,400 in 2019 are not required or permitted to make additional contributions to the Canada Pension Plan.

The basic exemption amount for 2019 remains $3,500.

The 2019 contribution rate for employees and employers has increased to 5.10% an increase of .15%.

The 2019 contribution rate for self-employed will also increase to 10.2%.

The 2019maximum employer and employee contribution to the plan will be $2,748.90, up from $2,593.80 in 2018.

The 2019 maximum self-employed contribution will be $5,497.80, up from $5,187.60 in 2018.

Check out our website for a breakdown of these rates and others.

 

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Marriage after retirement

If you are a retired member  of the Canada Pension Plan or Quebec Pension Plan and marry after retirement, your spouse is NOT entitled to a survivor pension in the event of your death. However, you may choose to provide your spouse with a pension at the time of your death, by having your pension reduced. You must apply for this option within one year from the date of your marriage or one year from the date your pension starts, whichever is later.Facebooktwitterredditlinkedinmail

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Indexing rate – Retired members – Pension

The indexing rate for 2018 in Canada is 1.6%.

The indexing of public service pension plan benefits is governed by two pieces of legislation; the Public Service Superannuation Act (PSSA) and the Supplementary Retirement Benefits Act (SRBA).

Pension increases for retired members and their survivors are calculated each year using Consumer Price Index (CPI) data published by Statistics Canada. In accordance with the SRBA, the increase is based on a comparison of the twelve-month average of the monthly CPI for the year just ended, to the twelve-month average of the monthly CPI for the previous year. The SRBA specifies that the twelve-month period from October 1 to September 30 is to be used to calculate the increase payable the following January. The index used for the calculation is the CPI for Canada for all items (not seasonally adjusted).

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Expanded Canada Pension Plan Benefits Who, Exactly?

Robert Brown, a fellow with the Canadian Institute of Actuaries, wonders in this post (see link below) how the recent expansion to the Canada Pension Plan will impact various levels of beneficiaries.

One would expect, based on the press and government messaging at the time, that dramatically increasing benefits would benefit everyone (a rising tide lifts all boats, after all).

Not in this case, it appears. The lower income Canadians will basically see little benefit and in fact might even do worse under the new formula. Here is the article (click to open):

Robert Brown: Low-income workers may lose from expanded Canada Pension Plan

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Disclosure, Not Prescription: ESG Comes to Ontario DB Plans

As of January 1, 2016, all occupational defined benefit pension plans in Ontario are required to disclose any environmental, social and governance (ESG) factors that are incorporated in the pension fund’s investment policies and procedures.

This requirement is a first for Canada and was approved by the Ontario legislature in late 2014, after first being proposed in 2011. The UK, Germany, Sweden, France and Belgium also have similar regulations.

The amendment to the Ontario Pension & Benefits Act is supported by Ontario’s largest pension funds including the Ontario Teacher’s Pension Plan and OMERS, both of which have actively disclosed ESG since the 2000’s.

This new regulation is not prescriptive and does not require pension plans to adopt or promote any special ESG policies, but we expect that pension trustees will consider ESG investments more closely as a result of this requirement, as has happened in other jurisdictions. Several other provinces in Canada including BC, Alberta and Nova Scotia are considering following suit.

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Has Your Pension Plan Filed U.S. Form W-8BEN-E?

That’s right, there is now another filing for Canadian pension plan sponsors, this time having to do with American tax rules.

American citizens, unlike citizens of most other countries, are required to pay taxes on all income worldwide, regardless of where it is earned and regardless of where the citizen was living at the time. To track and enforce compliance, Uncle Sam passed the Foreign Account Tax Compliance Act (FATCA) as of July 1, 2014, which requires financial institutions worldwide to report on investment income credited to any of their clients who are US citizens.

As an aside, many financial institutions in Europe and elsewhere find this requirement so onerous that they have actually closed the accounts of US customers. Fortunately, registered pension plans in Canada are exempt from the requirement, but they are NOT exempt from filing exemption forms with EACH financial institution holding pension fund assets, where that institution is itself a “foreign financial institution” under FATCA.

Pension plan administrators must file Form W-8BEN-E with each such financial institution, including financial institutions located outside of Canada (such as investment managers based in France, for example). In addition, if any of the filing information changes, the plan administrator must notify all financial institutions where it has filed Form W-8BEN-E of any such changes within 30 days.

Because the pension plan administrator is certifying required information, we strongly advise that pension plan sponsors confer with their counsel to ensure they have met the requirements of FATCA. Contact Penad for more information on how to ensure you are in compliance with this requirement.

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2017 YMPE Announced

The Canada Revenue Agency announced on November 3rd that the maximum pensionable earnings for 2017 will be $55,300—up from $54,900 in 2016.

Contributors who earn more than $55,300 in 2017 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2017 remains $3,500.

The employee and employer contribution rates for 2017 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2017 will be $2,564.10 each and the maximum self-employed contribution will be $5,128.20.

For a breakdown of these and other rates check out our website

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2016 YMPE Announced

The Canada Revenue Agency announced on November 2nd that the maximum pensionable earnings for 2016 will be $54,900—up from $53,600 in 2015.

Contributors who earn more than $54,900 in 2016 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2016 remains $3,500.

The employee and employer contribution rates for 2016 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2016 will be $2,544.30 each and the maximum self-employed contribution will be $5,088.60. The maximums in 2015 were $2,479.95 and $4,959.90

 

For a breakdown of these and other rates check out our website

 

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