The Enhanced Canada Pension Plan. March 2018

Transcription

1 The Enhanced Canada Pension Plan March 2018

2 Background The Government of Canada announced its plans to work with the provinces and territories to strengthen the Canada Pension Plan in Budget 2016 Bill C-26, An Act to Enhance the Canada Pension Plan, came into force on March 3, 2017 Implementation of the enhancement will begin on January 1, 2019 The CRA is maintaining a focus on: 2 regulations external communications continued engagement

3 Features CPP benefits will gradually increase from one-quarter to onethird of pensionable earnings Employee contributions, and the employee share of contributions by self-employed individuals, to the enhanced portion of the CPP, will be tax deductible The limit on pensionable earnings will also increase by 14% (limit is currently $55,900) CPP retirement, disability and survivor benefits will increase based on how much and how long a person contributes to the enhancement Fully enhanced benefits will require 40 years of contributions 3

4 Features Annual CPP contributions will increase modestly over seven years, starting January 1, 2019 Employees and self-employed individuals will continue to be able to claim the existing nonrefundable tax credit for contributions to the base (existing)regular CPP contributions New Canada Workers Benefit (CWB) will be increased to the benefit help offset higher contributions for of low-income earning Canadians 4

5 Contribution rate phase-in Upper earnings limit phase-in CPP Enhancement Contribution rates Year Projected YMPE Projected upper earnings limit Employer/ Employee (Below YMPE) Combined Rate (Below YMPE) Combined Rate (Above YMPE) 2018 $55,900 $55,900 0% 0% 0% 2019 $58,500 $58, % 0.30% 0% 2020 $60,100 $60, % 0.60% 0% 2021 $61,900 $61, % 1.00% 0% 2022 $63,700 $63, % 1.50% 0% 2023 $65,700 $65, % 2.00% 0% 2024 $67,700 $72, % 2.00% 8.00% 2025 $69,700 $79, % 2.00% 8.00% 5 *YMPE: yearly maximum pensionable earnings

6 Additional contributions Estimated annual employer/employee contributions Estimated bi-weekly employee contributions (nominal, pre-tax) Year Earning $27,450 Earning $54,900 Earning max Earning $27,450 Earning $54, $0 $0 $0 $0 $0 $ $70 $150 $170 $1 $3 $ $140 $310 $340 $3 $6 $ $240 $510 $580 $5 $10 $ $360 $770 $900 $7 $15 $ $480 $1,030 $1240 $9 $20 $ $480 $1,030 $1660 $9 $20 $64 Earning max 2025 $480 $1,030 $2100 $9 $20 $81 6

7 Example 1 If your employee earns $20,675 annually: Year Bi-weekly CPP contributions 2018 $ $ $ $ $ $ $ $

8 Example 2 If your employee earns $41,350 annually: Year Bi-weekly CPP contributions 2018 $ $ $ $ $ $ $ $

9 Example of contributions with upper earnings limit If your employee earns $82,700 annually: Year Contribution rate Bi-weekly CPP contributions $ $ $ $ $ $ on upper earnings $ % on YAMPE on upper earnings $ % on YAMPE 9

10 Implementation Impacts on business considered in program design Businesses to withhold and report CPP and the enhanced contributions at source in the same way they do now No changes to the T4 slip as a result of the enhancement Total CPP contributions deducted will be reported in box 16 Total pensionable earnings will be in box 26 10

11 Implementation T4127 payroll deductions formulas will be provided on November 15, 2018 T4032 and T4008 guides will be available on December 15,

12 Canada Workers Benefit (CWB) CWB is a strengthened version of the Working Income Tax benefit Refundable tax credit for low-income workers to the enhanced portion in % of each dollar of working income in excess of $3,000* Reduced by 12% on net income over $17,025* Phased out entirely when income reaches $28,975 *For couples/families in Net income is the amount reported on line 236 of an income tax and benefit return. 12

13 Milestones of the CPP Enhancement Bill C-26 (the enhancement legislation) received Royal Assent Five-year phase-in of contribution rate increases up to current pensionable earnings limit begins Two-year phase-in of the new earnings range on which contributions will be collected begins The Enhanced CPP will continue to mature over the 40- year period December 2016 January 2019 January 2024 March January 2025 January 2065 Provinces completed orders in council and a federal order in council brought the legislation into force The first partial benefits begin to be paid by the Enhanced CPP Enhancement is fully phased in; full contributions apply The first full pensions are paid by the Enhanced CPP 13

14 Support for business Department of Finance Canada backgrounder 28th CPP Actuarial Report (highlighting the changes): Updated payroll deductions formulas to be released in November

15 More information Canada.ca: Enhanced Canada Pension Plan Canada Workers Benefit Podcast on Enhanced Canada Pension Plan 15

16 16 Questions?

17 Next webinars Enhanced CPP for individuals June13, 2018 What to expect during a trust accounts examination and an employer compliance audit September 26, 2018 Stay tuned! 17