# ARCHIVED SAM - Special Bulletin 1997-014

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December 10, 1997

**SUBJECT:** Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contribution Rate, *Public Service Superannuation Act* (PSSA) Indexation, PSSA Thresholds/Employer Rate Pension Adjustment (PA) Calculations

## 1. PURPOSE

**1.1.** The purpose of this Bulletin is to provide information regarding:

- the change in CPP/QPP rate of contribution for 1998;
- the rate of pension indexation for 1998;
- the Employer contribution rate to the Retirement Compensation Arrangement (RCA) and the Public Service Superannuation Act salary thresholds for 1998; and
- to provide examples of how to calculate the Pension Adjustment (PA) for 1997.

## 2. POLICY

### 2.1. CPP/QPP

**2.1.1.** Effective January 1, 1998, the CPP/QPP contribution rate will increase to 3.2 %.

**2.1.2.** The PSSA specifically refers to integration with CPP. As a result of the increased CPP contribution rate, the contributions required to the Superannuation Account effective January 1, 1998, will be 7.5 % minus 3.2 % required on CPP earnings. That is, PSSA contributions on that portion of salary for which CPP contributions are required will be 4.3 %.

**2.1.3.** This change will affect PSSA contributions on service occurring on or after January 1, 1998.

**2.1.4.** The 1998 changes related to CPP/QPP are:

MAXIMUM PENSIONABLE EARNINGS | $36,900 |
---|---|

BASIC EXEMPTION | $3,500 |

MAXIMUM CONTRIBUTORY EARNINGS | $33,400 |

MAXIMUM CONTRIBUTION | $1,068.80 |

**2.1.5.** The Average Maximum Pensionable Earnings (AMPE) for 1998 is $36,033.33. The annual CPP/QPP reduction in the benefit payable under the PSSA for individuals who retire in 1998 will be based on the lesser of the 6 year average salary or the AMPE for 1998.

### 2.2. Pension Increase under the Supplementary Benefits Provision of the PSSA

**2.2.1.** Part III of the PSSA provides for annual pension increases depending on the cost of living index, for all pensions payable to former public servants or their survivors.

**2.2.2.** The pension increase authorized under Part III of the PSSA is 1.9 % effective January 1, 1998.

### 2.3. PSSA Salary Thresholds and RCA Contributions

**2.3.1.** For 1998, employees whose annual salary rate is in excess of $99,100.00 will contribute to the PSSA in respect of salary below this limit and to the RCA in respect of those salaries above the limit. **Public Service Corporations**

**2.3.2.** The Employer contribution for the RCA has been established effective from January 1, 1998 as follows: For current contributions, "single rate" Leave Without Pay (LWOP) and "single rate" past service, the Employer rate is **12.62 TIMES** the employee contributions. For "double rate" LWOP and "double rate" past service, the Employer rate is **5.81 TIMES** the contributions made by the employee.

**2.3.3.** There has been no change to the Employer rate required for matching PSSA contributions. For Public Service Corporations, the EMPLOYER contribution rate continues to be equal to the "single rate" contributions paid by employees for current service, single rate types of LWOP and single rate past service elections.

**2.3.4.** Public Service Corporations do not match PSSA contributions where the employee is paying LWOP deficiencies or past service arrears at double rate.

### 2.4. PA Calculations

**2.4.1.** The following are the various maximums related to the PA for 1997: The maximum PA for 1997 is $14,900. The maximum RRSP contribution for 1998 as specified in the last Federal Budget is $13,500. Consequently, employees whose 1997 PA is $13,500 or over could have no RRSP room in 1998. The 1997 Yearly Maximum Pensionable Earnings (YMPE) for CPP/QPP is $35,800. The maximum Benefit Entitlement Accrued is $1,722.22.

**2.4.2.** For 1997 and future years, the PA calculation will be based on the benefit entitlement multiplied by the factor 9, less **$600.00.** Previously, the figure was $1,000.00. You will find in Appendix A of this Bulletin, 3 examples of how to calculate the PA for 1997.

## 3. INQUIRIES

**3.1.** Any request for information regarding the foregoing should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office

Original Signed by

P. Charko

P. Charko

Director General

Compensation Sector

Government Operational Service

Reference: CJA 9006-12, 9006-24,

9007-7-8, 9007-10-8

## APPENDIX "A"

### PENSION ADJUSTMENT CALCULATION FOR 1997

#### Example 1: Annual pensionable salary: $45,000.00

**Step 1:** Determine the annual benefit entitlement:

- (1.3 % x $35,800.00) + (2 % x $45,000.00 - $35,800.00),
- $465.40 + $ 184.00,
- $649.40 (benefit entitlement).

**Step 2:** If the annual benefit entitlement is greater than $1,722.22, IMPOSE $1,722.22.

(In this case benefit entitlement does not exceed $1,722.22.)

**Step 3:** Prorate the benefit entitlement by the number of pensionable pay periods.

- Full year $649.40 x 26/26 = $649.40.
- Partial year $649.40 x 13/26 = $324.70.

**Step 4:** Multiply the result of step 3 by a factor of 9.

- Full year 9 x $649.40 = $5,844.60.
- Partial year 9 x $324.70 = $2,922.30.

**Step 5:** Prorate $600.00 by the number of pensionable pay periods.

- Full year $600.00 x 26/26 = $600.00.
- Partial year $600.00 x 13/26 = $300.00.

**Step 6:** Subtract the result of step 5 from the result of step 4; this result is the PA for 1997.

- Full year $5,844.60 less $600.00 = $5,245.00.
- Partial year $2,922.30 less $300 = $2,622.00.

**Step 7:** If the result is greater than $14,900.00, IMPOSE $14,900.00.

#### Example 2: Annual pensionable salary: $95,000.00

**Step 1:** Determine the annual benefit entitlement:

- (1.3 % x $35,800.00) + (2 % x [$95,000.00 - $35,800.00]),
- $465.40 + $1,184.00,
- $1,649.40 (benefit entitlement).

**Step 2:** If the annual benefit entitlement is greater than $1,722.22.00, IMPOSE $1722.22.

(In this case, benefit entitlement does not exceed $1,722.22.)

**Step 3:** Prorate the benefit entitlement by the number of pensionable pay periods.

- Full year $1,649.40 x 26/26 = $1,649.40.
- Partial year $1,649.40 x 22/26 = $1,395.65.

**Step 4:** Multiply the result of step 3 by a factor of 9.

- Full year 9 x $1,649.40 = $14,844.60.
- Partial year 9 x $1,395.65 = $12,560.85.

**Step 5:** Prorate $1,000.00 by the number of pensionable pay periods.

- Full year $600.00 x 26/26 = $600.00.
- Partial year $600.00 x 22/26 = $507.69.

**Step 6:** Subtract the result of step 5 from the result of step 4; this result is the PA for 1997.

- Full year $14,844.60 - $600.00 = $14,245.00.
- Partial year $12,560.85 - $507.69 = $12,053.00.

**Step 7:** If the result is greater than $14,900.00, IMPOSE $14,900.00.

#### Example 3: Annual pensionable salary: $120,000.00

**Step 1:** Determine the annual benefit entitlement:

- (1.3 % x $35,800.00) + (2 % x [$98,700.00 - $35,800.00]),
- $465.40 + $1,258.00,
- $1,723.40 (benefit entitlement).

**Step 2:** If the annual benefit entitlement is greater than $1,722.22, IMPOSE $1,722.22.

**Step 3:** Prorate the benefit entitlement by the number of pensionable pay periods.

- Full year $1,722.22 x 26/26 = $1,722.22.
- Partial year $1,722.22 x 25/26 = $1,655.98.
- Partial year $1,722.22 x 22/26 = $1,457.26.

**Step 4:** Multiply the result of step 3 by 9.

- Full year 9 x $1,722.22 = $15,500.
- Partial year 9 x $1,655.98 = $14,903.82.
- Partial year 9 x $1,457.26 = $13,115.34.

**Step 5:** Prorate $600.00 by the number of pensionable pay periods.

- Full year $600.00 x 26/26 = $600.00.
- Partial year $600.00 x 25/26 = $576.92.
- Partial year $600.00 x 22/26 = $507.69.

**Step 6:** Subtract the result of step 5 from the result of step 4; this result is the PA for 1997.

- Full year $15,500.00 - $600.00 = $14,900.00.
- Partial year $14,903.82 - $576.92 = $14,327.00.
- Partial year $13,115.34 - $507.69 =$12,608.00.

**Step 7:** If the result is greater than $14,900.00, IMPOSE $14,900.00.

**NOTE: FOR THE 1997 TAX YEAR, THE MAXIMUM SALARY USED IN THE PA CALCULATION WILL BE 98,700.**

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