CPP Enhancement- Affecting all businesses across Canada
On June 20, 2016 at the Federal-Provincial-Territorial Finance Minister’s Meeting in Vancouver, an agreement in principle was reached on Canada Pension Plan (CPP) enhancement.
The primary objective of the CPP enhancement is to increase the retirement replacement rate from 25% of final average income to 33.33% for retirees with a full working career, defined as 40 years or greater. Secondly, the CPP revisions will increase the earnings ceiling for contribution and benefits purposes. Young Canadians just entering the workforce will see the largest increase in benefits.
In order to achieve these objectives, the contribution rate will gradually increase, commencing January 1, 2019, for all Employers and Employees. The contributions maximum will increase from the 2016 level of $54,900 to $82,700 by 2025. Full revisions will be phased in over a seven-year period to allow businesses to fiscally plan for these changes.
Contribution rates will be increased over 5 years commencing January 1, 2019. Thereafter the maximum earnings limit will then be increased over the following 2 years. The separate CPP contribution rate on income between $54,900 and the eventual $82,700 is expected to be 4% each for both employers and employees. Current retirees will receive no additional money from the CPP as part of the revised arrangement.
FSCO Targeted Reviews
FSCO has recently announced a new program of targeted reviews for selected Ontario- registered pension plans. According to FSCO, each review will focus on a specific regulatory requirement, process, or practice and findings will be shared with stakeholders on an aggregate basis.
Two reviews have been announced at this time, with more to come:
- Form 7- Contribution an monitoring processes (announced November 2017)
- Member Option Statements- Termination and Retirement (announced February 2018)
The plan administrator will be contacted by FSCO if selected for a particular review. If selected, please contact The Leslie Group immediately and we will assist you in ensuring all requirements are met.