# ARCHIVED SAM - Special Bulletin 1999-011

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December 15, 1999

**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 the Bulletin is to provide information regarding:

- the change in CPP/QPP employee contribution rates for 2000;
- the rate of pension indexing for 2000;
- the employer contribution rate to the Retirement Compensation Arrangement (RCA) and the
*Public Service Superannuation Act*(PSSA) salary thresholds for 2000; and - to provide examples of how to calculate the PA for 1999.

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

## 2. POLICY

### 2.1. CPP/QPP

**2.1.1.** Effective January 1, 2000, the CPP/QPP employee contribution rate will increase to 3.9 %.

**2.1.2.** The 2000 changes related to CPP/QPP are:

MAXIMUM PENSIONABLE EARNINGS | $37,600.00 |
---|---|

BASIC EXEMPTION | $ 3,500.00 |

MAXIMUM CONTRIBUTORY EARNINGS | $34,100.00 |

MAXIMUM CONTRIBUTION | $ 1,329.90 |

**2.1.3.** The Average Maximum Pensionable Earnings (AMPE) for 2000 is $36,620. Effective from June 17, 1999, the AMPE is calculated based on the average of the Yearly Maximum Pensionable Earnings (YMPE) for the current year plus the four previous years (refer to Superannuation Administration Manual [SAM] Special Bulletins 1999-005 dated April 20, 1999 and 1999-006 dated June 28, 1999). The annual CPP/QPP reduction in the benefit payable under the *Public Service Superannuation Act *[PSSA] for individuals who retire in 2000 will be based on the lesser of the 5-year average salary or the AMPE for 2000.

### 2.2. PSSA Employee Contribution Rate

**2.2.1.** As described in SAM Special Bulletin 1999-005, the PSSA contribution rate and formula for calculating PSSA contributions have changed. Effective from January 1, 2000, the employee contribution rate is:

- 4% on salaries up to the YMPE ($37,600.00) and
- 7.5% on salaries in excess of the YMPE ($37,600.00).

Please note that the CPP exemption is no longer subject to the higher rate as it is no longer taken into account in determining the PSSA contributions; contributions on all salaries up to the YMPE will be calculated at the lower rate of 4%. (Refer to Special Bulletin 1999-005 for examples.)

You will find in Appendix B of this Bulletin, a comparison of the pre and post-reform PSSA contributions.

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

**2.3.1.** 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.

**2.3.2.** The pension increase authorized under Part III of the PSSA is 1.5 % effective January 1, 2000.

### 2.4. PSSA Salary Threshold and RCA Contributions

**2.4.1.** For 2000, 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

**2.4.2.** The employer contribution rate for the RCA has been established effective from January 1, 2000, as follows:

**2.4.3.** For current contributions, single rate Leave Without Pay (LWOP) and single rate past service, the employer rate is **11.93.** times the employee's single rate contributions.

For double rate LWOP and double rate past service, the employer rate is **5.465** times the employee's double rate contributions.

**2.4.4.** At this time, 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.

As described in SAM Special Bulletin 1999-005, PSSA changes will be introduced that will require Public Service Corporations to move to the full employer rate for matching single rate contributions paid by employees **effective April 1, 2000**. Further details will be provided in advance of that date.

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

**2.4.6.** Please note that there has been **no change** to the employer contribution rate for Supplementary Death Benefit (SDB) premiums as a result of the changes to the SDB plan described in SAM Special Bulletins 1999-005 dated April 20, 1999, and 1999-009 dated September 23, 1999.

The employer's monthly contribution rate continues to be **$0.01 per $250.00 of the basic benefit** of each participant.

### 2.5. PA Calculations

**2.5.1.** The following are the various maximums related to the PA for 1999 and 2000.

- The maximum PA for 1999 is $14,900.00.
- The maximum PA for 2000 is $14,900.00.
- The maximum Registered Retirement Savings Plan (RRSP) contribution for 2000 as specified in the 1996 federal budget is $13,500.00. Consequently, employees whose PA for 1999 is $13,500.00 or over could have no RRSP room in 2000.
- The 1999 YMPE is $37,400.00.
- The 2000 YMPE is $37,600.00.
- The maximum Benefit Entitlement accrued for 1999 and 2000 is $1,722.22.
- The PA calculation will be based on the benefit entitlement multiplied by the factor 9, less $600.00.

Please note that the PA calculation **has not changed** as a result of the contribution rate change described in Section 2.2. The PSSA benefit rate remains the same, i.e. 2% for all pensionable earnings above the YMPE and 1.3% for all earnings below the YMPE (due to the reduction of 0.7% at age 65 or earlier if in receipt of a disability benefit under the CPP or QPP prior to age 65).

**2.5.2.** You will find in Appendix A of this Bulletin, examples of PA calculations for 1999 and a worksheet that has been 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 2.5.6 of this bulletin).

#### 2.5.3. Terminated Employees Who Receive a Lump Sum Benefit Payment

Until further notice, the Public Works and Government Services Canada (PWGSC)-Travaux publics et Services gouvernementaux Canada (TPSGC) 2386 (Certification Notice - Pension Support System) **must** continue to be used to indicate PA figures from 1990 to the year of termination for terminated employees who received a lump sum benefit (i.e. Transfer Value or transfer of funds to another pension plan under a Reciprocal Transfer Agreement [RTA]). In cases where the employee received a Return of Contributions, the PA figures are to be reported on the PWGSC-TPSGC 2577 (Request for Return of Superannuation Contributions). Refer to SAM Special Bulletin 1998-14 dated December 17, 1998, for additional information.

#### 2.5.4. Leave without Pay

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.

However, the PA reported for any calendar year previous to the year of the election not to count a period of LWOP as pensionable **cannot be cancelled**. This rule applies even if the employee terminated immediately following the LWOP and received a return of pension contributions.

Please refer to Compensation Directive 1995-010 dated March 6, 1995, which provides additional details on LWOP situations.

#### 2.5.5. Employees on Leave without Pay 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 former 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 union. Please refer to SAM Special Bulletin 1999-03 dated February 15, 1999, for additional details.

#### 2.5.6. Clients serviced by the Regional Pay System (RPS)

It is the responsibility of departmental personnel to advise the pay office 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, e.g. relocation of spouse) and situations where the employee is on pensionable LWOP for **educational leave**. Please refer to Compensation Directive 1994-012 dated March 23, 1994, for additional information.

In addition, any employee who was on **rehabilitation leave with a pension type code 59 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 pay office, by memorandum, the employee's number of pensionable pay periods and the amount of pensionable earnings for the period reflected under code 59 in the RPS. Please note that this period will be from **the date that code 59 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 59 in Field 39, the pay office 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

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

Original Signed by

B. Bartley

B. Bartley

A/Director General

Compensation Sector

Government Operational Service

Reference: CJA 9006-12, 9006-24,

9007-7-8, 9007-10-8,

9207-2-37

## APPENDIX A

### PENSION ADJUSTMENT CALCULATION FOR 1999

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

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

- (1.3% x $37,400.00) + [2% x ($45,000.00 - $37,400.00)]
- $486.20 + $152.00
- $638.20 (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 $638.20 x 26/26 = $638.20
- Partial year $638.20 x 13/26 = $319.10

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

- Full year $638.20 x 9 = $5,743.80
- Partial year $319.10 x 9 = $2,871.90

**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, rounded to the nearest dollar, is the PA for 1999.

- Full year $5,743.80 - $600.00 = $5,144.00
- Partial year $2,871.90 - $300.00 = $2,572.00

**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 :

- (1.3% x $37,400.00) + [2% x ($95,000.00 - $37,400.00)]
- $486.20 + $1,152.00
- $1,638.20 (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 $1,638.20 x 26/26 = $1,638.20
- Partial year $1,638.20 x 22/26 = 1,386.17

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

- Full year $1,638.20 x 9 = $14,743.80
- Partial year $1,386.17 x 9 = $12,475.53

**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, rounded to the nearest dollar, is the PA for 1999.

- Full year $14,743.80 - $600.00 = $14,144.00
- Partial year $12,475.53 - $507.69 = $11,968.00

**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 :

- (1.3% x $37,400.00) + [2% x ($99,300.00
^{1}- $37,400.00)] - $486.20 + $1,238.00
- $1,724.20 (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 13/26 = $861.11
- Partial year $1,722.22 x 22/26 = $1,457.26

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

- Full year $1,722.22 x 9 = $15,499.98
- Partial year $861.11 x 9 = $7,749.99
- Partial year $1,457.26 x 9 = $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 13/26 = $300.00
- 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, rounded to the nearest dollar, is the PA for 1999.

- Full year $15,499.98 - $600.00 = $14,900.00
- Partial year $7,749.99 - $300.00 = $7,450.00
- 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

^{1}FOR THE 1999 TAXATION YEAR, THE MAXIMUM SALARY USED IN THE PA CALCULATION WILL BE $99,300.00

### 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
^{2}) $ - Number of pensionable pay periods (element 118
^{2}) - Total number of pay periods in the year (biweekly = 26)
- Annualized pensionable earnings: (B ÷ C) x D $

^{2}For clients serviced by the Regional Pay System

#### CALCULATION

##### Step 1: Annual benefit entitlement (maximum $1,722.22 $ for 1999 and 2000):

*If E is equal to or lesser than the YMPE:*

0.013 x E

(0.013 x _______ ) = $ _______

*If E is greater than the YMPE:*

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

(0.013 x ________ ) + [0.02 x ( ________ - ________ )] = $ ________ ^{3}

(^{3} If greater than $1,722.22, impose $1,722.22)

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

Annual benefit entitlement (Step 1) ÷ D x C

( __**Step 1**___ ÷___**(D)**___) x___**(C)**___= $ ______

##### Step 3: **Pension adjustment** (maximum $14,900.00 for 1999 and 2000):

(9 x benefit entitlement accrued) - ($600.00 ÷ D x C)

(**9** x __**Step 2**______ ) - ($600.00 ÷ ___**(D)**_____ x ___**(C)**____ ) = $ ________ ^{4}

^{4} If greater than $14,900.00, impose $14,900.00)

## APPENDIX B

### Comparison of Pre and Post-reform PSSA contributions

In order to illustrate the effects of the contribution rate change described in section 2.2 of this Bulletin, the following is a comparison of the biweekly PSSA contributions required using the rules in effect prior to and from January 1, 2000.

#### Example 1

- Annual Salary: $34,896.00 (biweekly earnings: $1,337.63)
- YMPE: $37,600.00
- CPP rate: 3.9%
- Annual exemption of $3,500.00

Pay Period | Pre-reform Biweekly Deduction |
Post-reform Biweekly Deduction |
---|---|---|

1 to 26 | $53.41 | $53.51 |

Total annual increase in PSSA deductions |
$ 2.60 |

As a result of the contribution rate change, PSSA deductions increase by $0.10 per pay, for a total of $2.60 for the full year. This increase is due to a combination of factors:

- The biweekly exemption of $134.62 ($3,500.00 ÷ 26), which was previously costed at 7.5%, is now subject to a 4% contribution rate.
- The remaining earnings of $1,203.01 ($1,337.63 - $134.62) are now subject to a 4% contribution rate rather than the 3.6% that would have been required if the CPP contribution rate was still taken into account in determining the PSSA contribution rate.

#### Example 2

- Annual salary: $65,105.00 (biweekly earnings: $2,495.59)
- YMPE: $37,600.00
- CPP rate: 3.9%
- Annual exemption of $3,500.00

Pay Period | Pre-reform Biweekly Deduction |
Post-reform Biweekly Deduction |
---|---|---|

1 to 14 | $ 95.10 | $ 99.82 |

15 | $146.44 | $ 99.82 |

16 | $187.17 | $181.36 |

17 to 26 | $187.17 | $187.17 |

Total annual increase in PSSA contributions |
$ 13.65 |

The YMPE ceiling is reached one pay period later as a result of the basic exemption removal from the PSSA calculation. Once the YMPE is reached, the total biweekly PSSA contributions are the same as previously, i.e. 7.5% of total earnings, in this case $187.17.

#### Example 3

- Annual salary: $109,600.00 (biweekly earnings: $4,207.17)
- Earnings subject to PSSA: $3,806.35
- Earnings subject to RCA: $394.82 (RCA annual threshold is $99,300.00)
- YMPE: $37,600.00
- CPP rate: 3.9%
- Annual exemption of $3,500.00

Pay Period | Pre-reform Biweekly Deduction |
Post-reform Biweekly Deduction |
---|---|---|

1 to 9 | $171.89 | $181.86 |

10 | $273.96 | $198.08 |

11 to 26 | $315.09 | $315.09 |

Total annual increase in PSSA deductions |
$13.85 |

In this example, the increase is due to a combination of factors:

- Although the biweekly exemption of $134.62 ($3,500.00 ÷ 26), is no longer charged at 7.5%, the increase in the low rate from 3.6% to 4% accounts for an overall increase in pay periods 1 to 9.
- The remaining earnings of $3,671.73 ($3,806.35 -$134.62) are now subject to a 4% contribution rate rather than 3.6% that would have been required if the CPP contribution rate was still taken into account in determining the PSSA contribution rate.

Once the YMPE is reached, the total biweekly PSSA contributions are the same as previously, i.e. 7.5% of total earnings, in this case $315.09.

- Date modified: