ARCHIVED CD 2005-024: Information Notice to Employees

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Pension Plan Contribution Rate Increase

The purpose of this notice is to remind you that as per the announcement made by the Treasury Board Secretariat (TBS) in July 2005, the contribution rates for the public service pension plan increased beginning on January 1, 2006.

Increasing contribution rates ensures the long-term sustainability of the public service pension plan. Prior to January 2006, members contributed 4% of pensionable earnings up to the yearly maximum pensionable earnings (YMPE), under the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP), and 7.5% on the portion of pensionable earnings above the maximum (the 2005 YMPE was $41,100.00).

This rate had been in effect since January 2000. In 1999, pension reform legislation was introduced and plan member contribution rates were frozen for the years 2000 to 2003. It was also decided that plan member contribution rates would remain unchanged for 2004 and 2005 to allow for consultation and review regarding the rates that would apply for the period beginning in 2006.

Prior to this rate increase, the government was paying 72% of the costs of the public service pension plan and plan members were paying only 28%. A 60:40 cost-sharing ratio between the employer and the members, respectively, is the historical average.

To better align plan member contributions and the cost of plan benefits, the Treasury Board ministers approved an increase in contribution rates to achieve a more balanced cost sharing for the plan.

Since 2006, the increase in contribution rates is effective January 1 of each affected year. The following table sets out the plan member contribution rates to be applied.

Contribution rates

  Current 2006 2007 2008 2009 2010 2011 2012 2013
Pensionable earnings up to the YMPE under the CPP/QPP 4.0% 4.3% 4.6% 4.9% 5.2% 5.5% 5.8% 6.1% 6.4%
Pensionable earnings over the YMPE under the CPP/QPP 7.5% 7.8% 8.1% 8.4% 8.4% 8.4% 8.4% 8.4% 8.4%

Please note that for those employees who are paid in arrears, the increase only affects the pay period that covers January service (normally the second pay period in January).

Note also that, effective May 30, 2006, Correctional Service Canada employees with "actual operational service" no longer pay the 1.25% additional premium, and employees with "deemed operational service" have seen a reduction of the additional premium to 0.62%.

Any inquiries on the information contained in this notice should be addressed to your compensation advisor.