# ARCHIVED SAM - Special Bulletin 1998-015

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December 17, 1998

**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:

**1.2.** Use of the masculine in this text is generic and applies to both men and women.

- the change in CPP/QPP rate of the contribution for 1999;
- the rate of pension indexation for 1999;
- the Employer contribution rate to the Retirement Compensation Arrangement (RCA) and the Public Service Superannuation Act (PSSA) salary thresholds for 1999; and
- to provide examples of how to calculate the PA for 1998 and 1999.

## 2. POLICY

### 2.1. CPP/QPP

**2.1.1.** Effective January 1, 1999, the CPP/QPP contribution rate will increase to 3.5%.

**2.1.2.** The PSSA specifically refers to the integration with CPP. As a result of the increased CPP contribution rate, the contributions required to the superannuation account effective January 1, 1999, will be 7.5% minus 3.5% required on the CPP earnings. That is, PSSA contributions on that portion of salary for which CPP contributions are required will be 4.0%.

**2.1.3.** This change will affect PSSA contributions on service occurring on or after January 1, 1999.

**2.1.4.** The 1999 changes related to CPP/QPP are:

MAXIMUM PENSIONABLE EARNINGS | $37,400 |
---|---|

BASIC EXEMPTION | $3,500 |

MAXIMUM CONTRIBUTORY EARNINGS | $33,900 |

MAXIMUM CONTRIBUTION | $1,186 |

**2.1.5.** The Average Maximum Pensionable Earnings (AMPE) for 1999 is $ 36,700. The annual CPP/QPP reduction in the benefit payable under the PSSA for individuals who retire in 1999 will be based on the lesser of the 6 year average salary or the AMPE for 1999.

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

**2.2.1.** Part III of the PSSA provides for the 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 .9% effective January 1, 1999.

### 2.3. PSSA Salary Threshold and RCA Contributions

**2.3.1.** For 1999, employees whose annual salary rate is in excess of $99,300.00 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, 1999, as follows:

**2.3.3.** For current contributions, single rate Leave Without Pay (LWOP), and single rate past service, the Employer rate is 9.78 times the employee contributions. For double rate LWOP and double rate past service , the employer rate is 4.39 times the employee contributions. 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

The following are the various maximums related to the PA for 1998 and 1999. The maximum PA for 1998 is $14,900. The maximum PA for 1999 is $14,900 (conditional on Federal Budget). The maximum RRSP contribution for 1999 as specified in the 1996 Federal Budget is $13,500. Consequently, employees whose 1998 PA is $13,500 or over could have no RRSP room in 1999. The 1998 Yearly Maximum Pensionable Earnings (YMPE) for CPP/QPP is $36,900. The 1999 YMPE for CPP/QPP is $37,400. The maximum Benefit Entitlement Accrued is $1,722.22. The PA Calculation will be based on the benefit entitlement multiplied by the factor 9, less $600.00. You will find in Appendix A of this Bulletin examples of PA Calculations and a worksheet that has been developed as an aid to calculate the PA figure. Please note that the cases where Rehabilitation and Dual Employment have occurred, adjustments are required prior to calculation. **NOTE:** The Public Works and Government Services Canada (PWGSC)-Travaux publics et Services gouvernementaux Canada (TPSGC) 2386 (Certification Notice - Pension Support System ) MUST indicate a PA figure for Reciprocal Transfer Agreements (RTAs) and for terminated employees who received a lump sum benefit (i.e. Return of Contributions, Transfer Value, or transfer of benefits to another pension plan). A Pension Adjustment Reversal Special Bulletin will be issued shortly with further details.

## 3. INQUIRIES

Any request for information regarding the foregoing should be addressed to your PWGSC Compensation Service Office.

Original Signed by

P. Charko

P. Charko

Director General

Compensation Sector

Government Operational Service

## APPENDIX "A"

### PENSION ADJUSTMENT CALCULATION FOR 1998

#### Example 1: Annual pensionable salary: $45,000.

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

- (1.3% x $36,900.00) + (2% x $45,000.00 - $36,900.00),
- $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.

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

- (1.3% x $36,900.00) + (2% x [$95,000.00 - $36,900.00
- $479.70 + $1,182.00
- $1641.70 (benefit entitlement

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

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 $1,641.70 x 26/26 = $1,641.70.
- Partial year $1,641.70 x 22/26 = $1,389.13.

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

- Full year 9 x $1,641.70 = $14,775.30.
- Partial year 9 x $1,395.65 = $12,502.17.

**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 22/26 = $507.69.

**Step 6:** Subtract the result of step 5 from the result of step 4; this result is the PA for 1998.

- Full year $14,775.30 - $600.00 = $14,175.30.
- Partial year $12,502.17 - $507.69 = $11,994.48.

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

- IMPOSE $14,900.00.

#### Example 3: Annual pensionable salary: $120,000.

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

- (1.3% x $36,900.00) + (2% x [$99,100.00 - $36,900.00]),
- $479.70 + $1,244.00,
- $1,723.70 (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 1998.

- 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 1998 TAX YEAR, THE MAXIMUM SALARY USED IN THE PA CALCULATION WILL BE $99,100.**

### PENSION ADJUSTMENT WORKSHEET

#### EMPLOYEE IDENTIFICATION

- Name:
- Personal Record Identifier (PRI):
- PA calculation for __________(year)

#### INFORMATION REQUIRED TO CALCULATE THE PA

- Yearly Maximum Pensionable Earnings (YMPE) for this year $
- Pensionable earnings (element 734
^{1}) $ - Number of pensionable pay periods (element 118
^{1}) - Total number of pay periods in the year (bi-weekly = 26)
- Annualized pensionable earnings: (B/C) x D $

^{1}For clients serviced by the Regional Pay System

#### CALCULATION

##### Step 1: Annual benefit entitlement (maximum $1,722.22 for 1998 and 1999):

*If E equals to or is lesser than YMPE :*

0.013 x E

(0.013 x _________) =

*If E is greater than YMPE:*

(0.013 x YMPE) + (0.02 x (E - YMPE))

(0.013 x_______) + (0.02 x (________ - _______)) = $________^{2}

^{2}(if greater than $1,722.22, impose $1,722.22)

##### Step 2: Benefit entitlement accrued:

Annual benefit entitlement (step 1) divide by D, and then, multiply by C

(_________ / _________ ) x __________ = $________

step 1 (D) (C)

##### Step 3: **Pension adjustment** (maximum $14,900 for 1998 and 1999):

(9 x benefit entitlement) - ( $600 divide by D, and then, multiply by C)

accrued

(9 x _______________) - ( $600 / ________ x __________) = $________^{3}

step 2 (D) (C)

^{3}(if greater than $14,900, impose $14,900)

- Date modified: