Vol. 148, No. 13 — June 18, 2014
SOR/2014-135 May 29, 2014
CANADA PENSION PLAN
Regulations Amending the Canada Pension Plan Regulations
P.C. 2014-621 May 29, 2014
His Excellency the Governor General in Council, on the recommendation of the Minister of Employment and Social Development, pursuant to the definition “substantially gainful” (see footnote a) in subsections 42(1) and 89(1) (see footnote b) of the Canada Pension Plan (see footnote c), makes the annexed Regulations Amending the Canada Pension Plan Regulations.
REGULATIONS AMENDING THE CANADA PENSION PLAN REGULATIONS
1. The Canada Pension Plan Regulations (see footnote 1) are amended by adding the following after section 68:
68.1 (1) For the purpose of subparagraph 42(2)(a)(i) of the Act, “substantially gainful”, in respect of an occupation, describes an occupation that provides a salary or wages equal to or greater than the maximum annual amount a person could receive as a disability pension. The amount is determined by the formula
(A × B) + C
- A is .25 × the Maximum Pensionable Earnings Average;
- B is .75; and
- C is the flat rate benefit, calculated as provided in subsection 56(2) of the Act, × 12.
(2) If the amount calculated under subsection (1) contains a fraction of a cent, the amount is to be rounded to the nearest whole cent or, if the amount is equidistant from two whole cents, to the higher of them.
COMING INTO FORCE
2. These regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The Canada Pension Plan (CPP) confers benefits on eligible individuals which include retirement, disability and survivor’s pensions. To qualify for a CPP disability pension, a person must have a severe and prolonged disability that results in the person being incapable of regularly pursuing any “substantially gainful” occupation. While a substantially gainful occupation is one of several key factors used to determine when a person is deemed disabled for disability pension purposes, it is not defined in the CPP or the Canada Pension Plan Regulations (CPP Regulations).
From 1989 to 2012, under Employment and Social Development Canada (the Department) administrative policy, section 54.3 of the CPP Regulations was used to establish the benchmark of earnings above which a person was deemed to be pursuing a substantially gainful occupation. Section 54.3 pertained to the CPP retirement pension and set the benchmark at 12 times the CPP maximum monthly retirement pension. In 2009, the budget announced changes to the CPP, which resulted in the repeal of section 54.3 in 2013.
Prior to the repeal of section 54.3, the use of an administrative policy, which referenced a retirement provision in the CPP Regulations, resulted in inconsistent interpretations and application of the benchmark by tribunals and courts, since they are not bound by an administrative policy as they are by a regulation. In the absence of a regulation, there is a lack of transparency with respect to the benchmark for tribunals, courts, and CPP disability pension applicants and beneficiaries.
The objective of the Regulations Amending the Canada Pension Plan Regulations (the Amendment) is to prescribe the meaning of “substantially gainful,” in respect of an occupation. This will ensure consistency and transparency with respect to the benchmark for the Department, the Social Security Tribunal, courts, and CPP disability pension applicants and beneficiaries.
The Amendment specifies a calculation for “substantially gainful,” in respect of an occupation, equalling 12 times the maximum monthly disability pension amount. The CPP disability pension is indexed annually pursuant to the CPP to allow for inflation, and the amount for 2014 is $14,836.20 (based on $1,236.35 per month).
The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.
Small business lens
The small business lens does not apply to this proposal, as there are no costs on small business.
The CPP requires that federal, provincial and territorial ministers of finance review the financial state of the CPP every three years. As part of the 2010–2012 triennial review, the ministers agreed to the creation of a regulation-making authority that would prescribe the calculation of the benchmark.
The Jobs and Growth Act, 2012, introduced the regulationmaking authority to prescribe the meaning of “substantially gainful,” in respect of an occupation, which was reviewed at the House of Commons Standing Committee on Finance and the Senate Standing Committee on National Finance in November 2012. The Senate Standing Committee was interested in knowing what consultations had taken place and would take place on the proposed Amendment. In response, the Department committed to prepublication of the Amendment. The proposed Amendment was published in the Canada Gazette, Part I, on February 15, 2014, followed by a 30-day comment period.
In May and November 2011, and again in May 2012, key stakeholders provided views on “substantially gainful.” They were generally supportive of establishing clear and transparent criteria to determine what constitutes a substantially gainful occupation that would be easier for the public to understand. Some stakeholders expressed support while others asked for additional information, which was provided to them in the form of the Quebec Pension Plan (QPP) as an illustrative example. During a teleconference that took place during the 30-day comment period following prepublication, these key stakeholders again expressed general support for the proposed Amendment.
No other comments were received during the 30-day comment period, and no changes to the Amendment were required.
The Amendment will be used as a national benchmark of earnings to assist in assessing a person’s regular capacity for employment at the time of application or regained capacity for employment at reassessment. It creates a consistent and transparent benchmark for the Department, the Social Security Tribunal, courts, and CPP disability pension applicants and beneficiaries. It gives clarity to help guide the Social Security Tribunal and courts, resulting in more equitable treatment of applicants and beneficiaries since they are required to follow the Regulations.
The CPP disability pension provides partial income replacement and is part of a broader system of disability income supports. The benchmark is not intended to be a proxy for minimum wage or other measures of income; it is an indicator only of “substantially gainful,” in respect of an occupation for the purposes of the CPP disability pension.
It should also be noted that the QPP, which has similar benefits to those of the CPP, stipulates the same substantially gainful amount in its regulations as this Amendment sets for the CPP disability pension, that is, the annual maximum amount of a disability pension. The section of the QPP regulation stipulating the substantially gainful amount has been in effect since 1993. Internationally, disability programs in the United States and Australia also stipulate an economic measurement in the form of an annual dollar amount to demonstrate capacity to work at a substantially gainful level.
The amendment is expected to have minimal cost implications for the Plan and no costs to Canadians or businesses. It increases the benchmark by approximately $2,400 per year from the previous amount established in the policy. The Office of the Chief Actuary (OCA) has estimated an increase of potentially 108 CPP disability pension beneficiaries each year. For 2013, this would represent an annual additional program cost of approximately $1.1 million (108 individuals × 12 months × estimated average monthly disability benefit of $866). The OCA considered the impact of this additional expenditure to be insignificant on the expenditures and financial status of the CPP given the total of $38.3 billion CPP expenditures projected in the 25th CPP Actuarial Report for 2013.
Implementation, enforcement and service standards
Program, policy, procedural, and training materials will be updated to ensure uniformity in the administration of the Amendment by departmental staff. Departmental Web pages and disability-related correspondence will be updated with clearer information on the benchmark to ensure transparency for applicants and beneficiaries. As the Department already considers a benchmark through policy when determining a person’s regular capacity for work, there is an existing process in place to update policy direction to reflect the new amount, which is indexed annually. Therefore, administration costs associated with the amendment are negligible.
Canada Pension Plan Disability Directorate
Income Security and Social Development Branch
Employment and Social Development Canada
140 Promenade du Portage