ARCHIVED — Vol. 145, No. 41 — October 8, 2011
Regulations Amending the Canada Pension Plan Regulations
Canada Pension Plan
Canada Revenue Agency
(This statement is not part of the Regulations.)
Issue and objectives
On January 1, 2012, a new Post-Retirement Benefit (PRB) will be available to Canada Pension Plan (CPP). This additional benefit will be available to employees and self-employed workers who are under 70 years of age who continue to work in 2012 or later. Anyone who is at least 60 but under 65 years of age, including anyone currently receiving CPP or Québec Pension Plan benefits who return to work, will be required to pay CPP contributions. CPP contributions will be voluntary for those who are at least 65 but under 70 years of age. Contributions paid by working beneficiaries will increase their retirement pensions.
Recent amendments to the CPP have also extended the period during which a person can elect to include certain earnings in his or her contributory self-employed earnings in particular cases. In order to allow these two legislated provisions to operate as intended, the Canada Pension Plan Regulations must be amended.
The first objective of the proposal is to allow the PRB to operate as intended by prescribing the manner of employee elections (and revocations thereof) provided for under the amended CPP and the second is to extend the time limit for payment of CPP contributions resulting from an election made in relation to self-employed earnings.
Description and rationale
The Economic Recovery Act (stimulus) [S.C. 2009, c. 31], which received Royal Assent on December 15, 2009, contained amendments to the Canada Pension Plan agreed to by the federal, provincial and territorial Ministers of Finance on May 25, 2009, at the conclusion of the 2007–2009 triennial review of the Canada Pension Plan.
The Economic Recovery Act (stimulus) introduced the Post-Retirement Benefit (PRB) to the CPP. The PRB extends participation in the Canada Pension Plan to working beneficiaries (self-employed workers and employees 60 years of age and over who receive CPP benefits while continuing to work). As of January 1, 2012, contributions towards the PRB will be mandatory for working beneficiaries who are at least 60 years of age but under the age of 65 and their employers, and optional in respect of working beneficiaries who have reached 65 years of age but who are less than 70. Individuals in the latter group will be required to contribute towards the PRB unless they elect to opt out. Such elections are revocable so as to enable individuals who have opted out to return to the CPP. The manner of making the elections and revocations is to be prescribed by the proposed Regulations.
The proposed amendments to the Regulations set out that PRB-related elections and revocations must be in writing in a form prescribed by the Minister of National Revenue (MNR) and be provided to the individual’s employer to ensure they receive proper notice of the employee’s choice not to contribute towards the PRB or of any revocation of a prior election. By requiring employees to inform their employers directly of their intentions, employers will be well positioned to make timely adjustments to payroll records, as required. In the case where an employee wishes to restart contributions towards the PRB, direct employee-to-employer notification will limit the instances where an employer would be required to make retroactive contributions on account of the PRB.
Elections to have certain earnings included in contributory self-employed earnings
The Economic Recovery Act (stimulus) also amended subsection 13(3) of the CPP to extend the period during which a person can elect to include certain earnings in contributory self-employed earnings. Currently, subsection 13(3) provides that such an election must be made before June 15 of the following year. However, in some circumstances where it is determined that CPP contributions had been withheld in respect of a worker who was not in pensionable employment, a refund of these contributions is issued to the worker pursuant to section 38 of the CPP after this deadline has passed. In order to allow the worker to receive credit for such periods, subsection 13(3) was amended to extend the election period to one year following the date on which the refund is issued to the worker in question. Consequential to extending the election period is the need to extend the time limit for paying the resulting CPP contributions. The proposal would amend section 29 and subsection 29.1(2) of the Regulations to provide that a person must pay the required CPP contributions within one year from the day on which the MNR refunds an amount under section 38 of CPP.
The proposed Regulations are consequential to legislative changes enacted in the Economic Recovery Act (stimulus).
These proposed amendments would come into force on January 1, 2012.
As the implementation, administration and enforcement of the new election/revocation mechanisms and payment period are attributable to the legislative amendments, the costs of the regulatory amendments are estimated to be less than $1 million annually.
The payment and collection of CPP contributions for the working beneficiaries who opt into the PRB and for those who elect to include certain earnings in their contributory self-employed earnings will be done through the existing tax system by the Canada Revenue Agency (CRA).
During the development of the election and revocation form relating to the PRB, the CRA paid particular attention to the administrative burden the required paperwork would place on both the employee and the employer. As a result of this analysis, the CRA developed one form which will serve both the election and revocation process. The CRA ensured that only the necessary information was required so that the form could be completed rapidly by the employee and administered quickly by both the employer and CRA. An employee simply needs to provide identification data [name, surname, address, date of birth and social insurance number (SIN)] and to attest that the eligibility requirements for making the election/revocation (age, working beneficiary) are met and that the form will be provided to the relevant employer.
An employer’s obligation regarding the election/revocation is limited to adjusting the employee’s payroll deductions, as appropriate. This is currently done in a number of situations where employees either start contributing to CPP (e.g. on turning 18) or stop (e.g. reach age 70 or are eligible for a CPP disability pension).
The regulatory amendments relating to the extended payment period will have no impact on an employer’s business or administrative burden since no action on their part is required.
The Department of Finance and the Department of Human Resources and Skills Development were consulted and support these amendments.
As the legislative amendments regarding the Post-Retirement Benefit and the extended payment period were approved by the Ministers of Finance of Canada and the provinces as part of the triennial review, no further consultations with the provinces were conducted within the context of these regulatory amendments.
Implementation, enforcement and service standards
A coordinated, proactive communication strategy has been developed by the Canada Revenue Agency and the Department of Human Resources and Skills Development to meet the needs of the working beneficiaries and their employers.
These amendments offer no unique legal or policy issues and can be dealt with using existing compliance and enforcement frameworks and standards.
CPP-EI Rulings Division
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
Place de Ville, Tower A, 19th Floor
320 Queen Street
Notice is hereby given that the Governor in Council, pursuant to subsections 7(1) and (3) and 40(1) (see footnote a) of the Canada Pension Plan (see footnote b), proposes to make the annexed Regulations Amending the Canada Pension Plan Regulations.
Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to Denyse Bertrand, Policy Analyst, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency, 22nd Floor, Tower A, Place de Ville, 320 Queen Street, Ottawa, Ontario K1A 0L5 (tel.: 613-957-2079; fax: 613-954-0896; email: firstname.lastname@example.org).
Ottawa, September 29, 2011
Assistant Clerk of the Privy Council
REGULATIONS AMENDING THE CANADA PENSION PLAN REGULATIONS
1. Paragraph 29(f) of the Canada Pension Plan Regulations (see footnote 1) is replaced by the following:
- (f) pays the contribution referred to in section 10 of the Act within one year from April 30 of the following year or within one year from the day on which an amount is refunded to the employee under section 38 of the Act.
2. Paragraph 29.1(2)(d) of the Regulations is replaced by the following:
- (d) the Indian pays the contribution referred to in section 10 of the Act within one year after April 30 of the following year or within one year after the day on which an amount is refunded to the employee under section 38 of the Act.
3. The Regulations are amended by adding the following after section 83:
83.1 The election referred to in subsection 12(1.1) of the Act is made or revoked by providing the prescribed form to an employer of the person.
83.2 The election referred to in subsection 13(1.1) of the Act is made or revoked by
- (a) filing the prescribed form, together with the return of the person’s self-employed earnings for the year, with the Minister within one year from June 15 in the year following the year for which the return is filed; or
- (b) filing the prescribed form with the Minister within one year from June 15 in the year following the year for which the return of the person’s self-employed earnings has been filed.
COMING INTO FORCE
4. These Regulations come into force on January 1, 2012.