SAM - Special Bulletin 2011-001

Subject: Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contribution Rate, Public Service Superannuation Act (PSSA)/Retirement Compensation Arrangement (RCA) Employee and Employer Contribution Rates, Salary Thresholds, Indexation, Pension Adjustment (PA) Calculations

January 17, 2011 Updated March 14, 2011

1. Purpose

1.1. The purpose of this bulletin is to provide the following information:

  1. the change in employee contribution rates to the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) and the average maximum pensionable earnings (AMPE) for the 2011 taxation year;
  2. the Public Service Pension Fund (PSPF-Fund 2) employee contribution rate for the 2011 taxation year;
  3. the Retirement Compensation Arrangement (RCA) employee contribution rate for the 2011 taxation year;
  4. the PSPF-Fund 2 and RCA employer contribution rates for the government and the public service corporations for the 2011 taxation year;
  5. the Public Service Superannuation Act (PSSA) salary thresholds for the 2011 taxation year;
  6. the rate of pension indexing for the 2011 taxation year; and
  7. examples of pension adjustment (PA) calculations for the 2010 taxation year.

2. Policy

2.1. CPP/QPP

For the 2011 taxation year, the employee contribution to the CPP/QPP remains at 4.95%.

The 2011 taxation year changes related to CPP/QPP are:

2011 taxation year changes related to CPP/QPP
  CPP/QPP Contributions
YEARLY MAXIMUM PENSIONABLE EARNINGS $48,300.00
YEARLY BASIC EXEMPTION $3,500.00
YEARLY MAXIMUM CONTRIBUTORY EARNINGS $44,800.00
YEARLY MAXIMUM CONTRIBUTIONS $2,217.60

The five-year average maximum pensionable earnings (AMPE) for 2011 taxation year is $46,080. The AMPE is calculated based on the average of the yearly maximum pensionable earnings (YMPE) for the current year plus the four previous years. The annual CPP/QPP reduction in the benefit payable under the PSSA for individuals who retire in 2011 will be based on the lesser of the five-year average salary, or the AMPE at the earlier of the termination date, OR the date the employee reaches age 65, OR the date the employee becomes entitled to receive CPP/QPP disability benefits. Refer to the Superannuation Administration Manual (SAM) section 4-7-2 for additional details.

2.2. PSPF-Fund 2 Employee Contribution Rate

In an attempt to achieve a more balanced cost-sharing ratio between plan members and the government, the Treasury Board ministers have approved phased-in increases to the plan member contribution rates under the PSSA beginning in calendar year 2006. Please refer to ARCHIVED Compensation Directive 2005-024 for additional information concerning the contribution rates increase.

Effective January 1, 2011, the employee contribution rate is:

  • 5.8% on pensionable earnings up to the YMPE ($48,300);
  • 8.4% on pensionable earnings in excess of the YMPE ($48,300).

2.3. Salary Threshold under the PSSA

For 2011, employees whose annual salary rate is in excess of $142,800 will contribute to the PSPF-Fund 2 in respect of salaries below this limit and to the RCA account in respect of those salaries above the limit.

2.4. RCA Employee Contribution Rate

The phased-in increase mentioned in Section 2.2., will also apply to the RCA.

Since salaries that exceed the threshold under the PSSA are also in excess of the YMPE, the contributions will be deducted at the same rate as those contributions payable under the PSSA.

Effective January 1, 2011, the employee contribution rate is:

  • 8.4% on pensionable earnings in excess of the salary threshold ($142,800).

2.5. Employer Contribution Rate

2.5.1. PSPF-Fund 2

Government and Public Service (Crown) Corporations

The employer contribution rates, effective January 1, 2011, are as follows:

  • Updated For current contributions, single rate leave without pay (LWOP) and single rate elective service, the employer's rate is 1.86 times the employee's single rate of contributions.
  • For double rate LWOP and double rate past service, the employer's rate is 0.43 times the employee's double rate of contributions.

2.5.2. RCA Account

Government and Public Service (Crown) Corporations

The contribution rates, effective January 1, 2011, are as follows:

  • Updated For current contributions, single rate LWOP and single rate elective service, the employer's rate is 9.50 times the employee's single rate of contributions.
  • Updated For double rate LWOP and double rate elective service, the employer's rate is 4.25 times the employee's double rate of contributions.
Note:
Past Service Contribution Rates

Employer contribution rates to be applied for past service, for which the contributions are made to either the PSPF-Fund 2 or the RCA Account, are based on when the plan members remit their contributions, regardless of when the service was elected or the LWOP occurred.

For example, if plan members remit their contributions in 2010, apply the employer contribution rate for 2010 and so on.

2.5.3. Supplementary Death Benefit (SDB)

Public Service (Crown) Corporations

The employer's monthly contribution rate for SDB premiums continues to be $0.01 per $250 of the basic benefit of each employee.

2.6. Pension Increase under the Supplementary Retirement Benefits Provision of the PSSA

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

The pension increase authorized under Part III of the PSSA is 1.4 % effective January 1, 2011.

2.7. PA Calculations

The following are the various maximums related to the PA for 2010 and 2011 taxation years:

  • The maximum PA for the 2010 taxation year is $21,850.
  • The maximum PA for the 2011 taxation year is $22,370.
  • The YMPE for the 2010 taxation year is $47,200.
  • The YMPE for the 2011 taxation year is $48,300.
  • The maximum salary used in the PA calculation for the 2010 taxation year is $139,500.
  • The maximum salary used in the PA calculation for the 2011 taxation year is $142,800.
  • The maximum benefit entitlement accrued for the 2010 taxation year is $2,494.44. The maximum benefit entitlement accrued for the 2011 taxation year is $2,552.22.

The PA calculation will be based on the benefit entitlement (for PA purposes) multiplied by the factor 9, less $600 prorated, if necessary, by the number of pensionable pay periods in the year.

Appendix A of this bulletin contains examples of PA calculations for 2010 and a worksheet developed as an aid to calculate the PA figure. Please note that in cases where rehabilitation leave and dual employment have occurred, adjustments are required prior to the calculation (refer to Section 2.7.4. of this bulletin).

2.7.1. Terminated Employees Who Receive a Lump Sum Benefit Payment

The form Public Works and government Services Canada (PWGSC)-Travaux publics et Services gouvernementaux Canada (TPSGC) 2386 (Certification Notice -- Pension Support System) must be used to indicate PA figures from 1990 to the year of termination when a termination payment (transfer value [TV], cash termination allowance [CTA] or transfer of funds to another pension plan under a reciprocal transfer agreement [RTA] or a pension transfer agreement [PTA]) is made to a member after December 31, 1996. In cases where the employee received a return of contributions (ROC), the PA figures are to be reported on the form PWGSC-TPSGC 2577 (Request for Return of Superannuation Contributions). For additional information, refer to the Section SAM 2-6-7.

2.7.2. LWOP

It is important that an employee proceeding on LWOP be informed of the effect of PA reporting when he elects not to count the LWOP as pensionable service.

Where the employee elects not to count a period of LWOP as pensionable before the end of a calendar year, the period of non-pensionable LWOP for that year will not be included in the PA calculation. The PA for any subsequent years will not be reported until the employee returns to duty and recommences accumulating pension credits.

A PA reported for any calendar year previous to the year in which the employee elects not to count a period of LWOP as pensionable service cannot be cancelled. This rule applies even if the employee terminated immediately following the LWOP and received a return of superannuation contributions.

Please refer to ARCHIVED CD 1995-010 dated March 6, 1995, for additional details on situations where an employee opts not to count a period of LWOP as pensionable.

In cases where an employee terminates employment immediately following a LWOP period, it is important to remember that, for pension purposes, the termination date is the day following the date on which the Pension Centre is notified in writing that the employee has ceased to be employed (refer to Section SAM 2-2-3). There are instances where the employee is terminated for pay purposes, but because the Pension Centre is not notified in time, the termination date is extended for pension purposes. In this case, when the additional pension contributions are calculated, the PA must also be amended to reflect the additional pensionable service.

2.7.3. Employees on LWOP to Serve as Full-time Paid Officials of Bargaining Agents

In cases where a contributor, who is on LWOP to serve as a full-time paid official of a bargaining agent (union), provides written confirmation that the union has reported a PA for the pensionable LWOP under the PSSA, that period must not be included in the PA reported by the primary employer. This confirmation should be in the form of a letter from the union advising that the benefit accrual under the PSSA has been included in the PA reported by the bargaining agent. Please refer to Section SAM 2-4-8 for additional details.

2.7.4. Clients serviced by the Regional Pay System (RPS)

It is the responsibility of departmental personnel to advise the pay office (PO) of the required information concerning specific situations such as dual employment (employee on pensionable LWOP and occupying a term position where he contributes to PSSA; for example relocation of spouse) and situations where the employee is on pensionable LWOP for educational leave. Please refer to ARCHIVED CD 1994-012 dated March 23, 1994, for additional information.

In addition, any employee who was on rehabilitation leave with a pension type code 62 in Field 39 at any time during the calendar year will not have a PA reported automatically for this period. In order to have a PA calculated for the rehabilitation leave period, departments must report to the PO, by memorandum, the employee's number of pensionable pay periods and the amount of pensionable earnings for the period reflected under code 62 in the RPS. Please note that this period will be from the date on which the code 62 was input into the system, and not from the effective date of the rehabilitation leave.

On receipt of the department's written notice for any employee on rehabilitation leave with pension type code 62 in Field 39, the PO will credit Master Employee Record (MER) Element 734 by the amount of pensionable earnings and adjust MER Element 118 by the proper number of pensionable pay periods.

3. Inquiries

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

Original Signed by
Carrie E. Roussin

Carrie E. Roussin
Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA 9006-12, 9006-24, 9007-7-8, 9007-10-8, 9207-2-37

Appendix "A"

Pension Adjustment Calculation for 2010

Example 1 - Annual pensionable salary: $55,500

Step 1: Determine the annual benefit:

  • (1.375% x $47,200) + (2% x ($55,500 - $47,200))
  • =$649 + $166
  • =$815 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,494.44,

  • IMPOSE $2,494.44
    (In this case, the benefit entitlement does not exceed $2,494.44.)

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

  1. Full year $815.00 x (26 ÷ 26) = $815.00
  2. Partial year $815.00 x (13 ÷ 26) = $407.50

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

  1. Full year $815.00 x 9 = $7,335.00
  2. Partial year $407.50 x 9 = $3,667.50

Step 5: Prorate $600 by the number of pensionable pay periods.

  1. Full year $600 x (26 ÷ 26) = $600
  2. Partial year $600 x (13 ÷ 26) = $300

Step 6: Subtract the result of step 5 from the result of step 4; this result, rounded to the nearest dollar, is the Pension Adjustment (PA) for the 2010 taxation year.

  1. Full year $7,335.00 - $600.00 = $6,735.00
  2. Partial year $3,667.50 - $300.00 = $3,367.50

Step 7: If the result is greater than $21,850,

  • IMPOSE $21,850 (In this case, the result is less than $21,850.)

Example 2 - Annual pensionable salary: $98,000

Step 1: Determine the annual benefit:

  • (1.375% x $47,200) + (2% x ($98,000 - $47,200))
  • =$649 + $1,016
  • =$1,665 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,494.44,

  • IMPOSE $2,494.44
    (In this case, the benefit entitlement does not exceed $2,494.44.)

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

  1. Full year $1,665.00 x (26 ÷ 26) = $1,665.00
  2. Partial year $1,665.00 x (22 ÷ 26) = $1,408.85

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

  1. Full year $1,665 x 9 = $14,985
  2. Partial year $1,408.85 x 9 = $12,679.65

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

  1. Full year $600.00 x (26 ÷ 26) = $600.00
  2. 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, rounded to the nearest dollar, is the PA for the 2010 taxation year.

  1. Full year $14,985.00 - $600.00 = $14,385.00
  2. Partial year $12,679.65 - $507.69 = $12,171.96

Step 7: If the result is greater than $21,850,

  • IMPOSE $21,850
    (In this case, the result is less than $21,850.)

Example 3 - Annual pensionable salary: $155,000

Step 1: Determine the annual benefit:

  • (1.375% x $47,200) + (2% x ($139,500 Footnote 1 - $47,200))
  • =$649 + $1,846
  • =$2,495 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,494.44,

  • IMPOSE $2,494.44
    (In this case, the annual benefit entitlement of $2,494.44 will be imposed.)

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

  1. Full year $2,494.44 x (26 ÷ 26) = $2,494.44
  2. Partial year $2,494.44 x (13 ÷ 26) = $1,247.22
  3. Partial year $2,494.44 x (22 ÷ 26) = $2,110.68

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

  1. Full year $2,494.44 x 9 = $22,450.00
  2. Partial year $1,247.22 x 9 = $11,225.00
  3. Partial year $2,110.68 x 9 = $18,996.12

Step 5: Prorate $600 by the number of pensionable pay periods.

  1. Full year $600.00 x (26 ÷ 26) = $600.00
  2. Partial year $600.00 x (13 ÷ 26) = $300.00
  3. 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, rounded to the nearest dollar, is the PA for the 2010 taxation year.

  1. Full year $22,450.00 - $600.00 = $21,850.00
  2. Partial year $11,225.00 - $300.00 = $10,925.00
  3. Partial year $18,996.12 - $507.69 = $18,488.43

Step 7: If the result is greater than $21,850,

  • IMPOSE $21,850
    (In this case, the result does not exceed $21,850.)

Pension Adjustment (PA) Worksheet

Employee Identification

  • Name:
  • Personal Record Identifier (PRI):
  • Date of Birth:

PA Calculation for Year

Information Required to Calculate the PA:
  1. Yearly Maximum Pensionable Earnings (YMPE) for this year $
  2. Pensionable earnings (element 734 Footnote 2 ) $
  3. Number of pensionable pay periods (element 118 Footnote 2 ) $
  4. Total number of pay periods in the year (biweekly) $
  5. Annualized pensionable earnings: (B ÷ C) x D $
Calculation
Step 1: Annual benefit entitlement (maximum $2,494.44 for 2010 and $2,552.22 for 2011):

If E is equal to or lesser than the YMPE

0.01375 Footnote 3 x E

0.01375 Footnote 3 x (______) = $ _________

If E is greater than the YMPE

(0.01375 Footnote 3 x YMPE) + (0.02 x (E - YMPE))

(0.01375 Footnote 3 x ______) + (0.02 x (______ - _____)) = $ ______ Footnote 4

For taxation year 2011, if greater than $2,552.22, impose $2,552.22

Step 2: Benefit entitlement accrued:

(Annual benefit entitlement ÷ D) x C

(__Step 1__ ÷ __(D)__) x __ (C) __ = $ ____ Footnote 4

Step 3: Pension adjustment (maximum $21,850 for 2010 and $22,370 for 2011):

(9 x benefit entitlement accrued) - ($600 ÷ D x C)

(9 x __Step 2__) - ($600.00 ÷ __ (D) __ x __ (C) ___) = $ _____ Footnote 4

For taxation year 2010, if greater than $21,850, impose $21,850.

For taxation year 2011, if greater than $22,370, impose $22,370.

Footnotes

Footnote 1

Return to footnote 1 referrer

For the 2010 taxation year, the maximum salary used in the PA calculation will be $139,500.

Footnote 2

Return to footnote 2 referrer

For clients serviced by the Regional Pay System (RPS)

Footnote 3

Return to footnote 3 referrer

For taxation year 2010, if greater than $2,494.44, impose $2,494.44. For taxation year 2011, if greater than $2,552.22, impose $2,552.22.

Footnote 4

Return to footnote 4 referrer

For taxation year 2008 and subsequent years, use appropriate factor according to year in which the employee turns age 65, refer to the SAM 2-6-7 for additional details.