Vol. 148, No. 22 — October 22, 2014
SI/2014-81 October 22, 2014
JOBS AND GROWTH ACT, 2012
Order Fixing the Day on which this Order is made as the Day on which Sections 195 and 196 of the Act Come into Force
P.C. 2014-1020 October 9, 2014
Whereas subsection 205(2) of the Jobs and Growth Act, 2012 (see footnote a) provides that sections 195 and 196 of that Act come into force, in accordance with subsection 114(4) (see footnote b) of the Canada Pension Plan (see footnote c), on a day or days to be fixed by order of the Governor in Council;
And whereas, in accordance with subsection 114(4) (see footnote d) of the Canada Pension Plan (see footnote e), the lieutenant governor in council of each of at least two thirds of the included provinces, as defined in subsection 114(1) (see footnote f) of that Act, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to the amendments contemplated by sections 195 and 196 of the Jobs and Growth Act, 2012 (see footnote g);
Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 205(2) of the Jobs and Growth Act, 2012, chapter 31 of the Statutes of Canada, 2012, fixes the day on which this Order is made as the day on which sections 195 and 196 of that Act come into force.
(This note is not part of the Order.)
To bring into force amendments to the Canada Pension Plan (CPP) that were recommended by federal, provincial and territorial ministers of Finance at the conclusion of the 2010–2012 triennial review, and which were announced in the Economic Action Plan 2012.
The Order states that sections 195 and 196 of the Jobs and Growth Act, 2012 (the Act) will come into force on the day or days that the Order is made.
- — To make changes consequential to the reforms made to modernize the CPP as part of the 2007–2009 triennial review.
- — To ensure that there is consistency within the legislation.
The chief actuary is required, under the legislation, to produce an actuarial report on the CPP every three years, which launches the triennial review process. As joint stewards of the CPP, federal, provincial and territorial ministers of Finance review the CPP as part of this process and make recommendations as to whether benefits and/or contribution rates should be changed. In addition, the ministers may also recommend amendments that reflect societal changes, court decisions as well as housekeeping amendments.
Taken together, sections 195 and 196 of the Act amend the CPP to
- (i) clarify the end point of an individual’s contributory period. This amendment is needed, as the 2007–2009 triennial review introduced a new post-retirement benefit and it was intended, at that time, that the contributions for the post-retirement benefit would not be part of an individual’s CPP contributory period;
- (ii) clarify the formula for the provisions which allow certain periods of low earnings to be dropped from the calculation of an individual’s “average career earnings” for the purpose of determining CPP benefits. The formula currently specifies that the earnings to be dropped from the calculation are the earnings that are “less than” earnings gained elsewhere in the contributory period. The formula should say “less than or equal to” for the provision to work in the way it was intended to and the way it has always been administered; and
- (iii) make the provisions for CPP disability applicants who apply under the “late applicant provisions” consistent with those for regular CPP disability benefit applicants. Specifically, this amendment would allow late CPP disability applicants to use a partial drop-out year under the child rearing provision for the purpose of extending their “minimum qualifying period,” which is required for eligibility for the CPP disability benefit.
According to the latest actuarial report (26th) of the CPP tabled in Parliament on December 3, 2013, the CPP is financially sustainable at the minimum contribution rate of 9.84% of pensionable earnings. The current legislated contribution rate of the CPP is 9.9%. The technical amendments will not have an impact on CPP’s minimum contribution rate nor will they affect the CPP benefits.
Pursuant to subsection 114(4) of the Canada Pension Plan, the amendments require the consent of at least two thirds of included provinces, representing at least two thirds of the population, in order to come into effect. The necessary consent has been obtained.
The amendments were also part of the parliamentary process, as they were included in the Jobs and Growth Act, 2012. Concerns about the changes were not raised during the parliamentary process.
Income Security Section
Social Policy Division
Department of Finance