The provinces and federal government have reached an agreement in principle to make changes to the Canada Pension Plan (CPP). The changes will be phased in over several years starting on January 1, 2019. A brief summary of the changes is as follows:
1. by the end of 2023, CPP contributions will rise by 1% (to 5.95% of pensionable earnings) for both employers and employees;
2. by the end of 2025, the upper limit of pensionable earnings will increase in increments from the current $54,900 (in 2016) to $82,700; and
3. income replacement benefits will increase from one-quarter (25%) to one-third (33%) of pensionable earnings or from the current maximum of $13,110 to approximately $27,000 per annum.
The amount of the premium increase is relatively modest and will be phased in over five years. Employers should start budgeting for this increase in premiums and reviewing whether they should adjust their retirement contributions to reflect this cost and the corresponding increase in employee’s CPP pension benefits. For Ontario employers, the CPP agreement means Ontario will not proceed with its much more costly Ontario Retirement Pension Plan legislation according to the Ontario government. Quebec, which has long operated its own separate Quebec Pension Plan in lieu of CPP plans to make its own enhancements later.
The purpose of this update is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Roper Greyell LLP or any member of the firm on the points of law discussed. Interested parties are urged to seek specific advice on matters of concern and not to rely solely on the text of this bulletin.