The federal government and the provinces, except for Quebec and Manitoba, have reached an agreement in principle to a Canada Pension Plan (CPP) enhancement that will be phased in over seven years beginning January 1, 2019. Ontario has said that the Ontario Retirement Pension Plan will not proceed if the deal is finalized. The agreement in principle must be approved by all signatories no later than July 15, 2016.
The basics of the deal are:
- Seven-year phase-in of benefits and contributions
- One per cent contribution increase for each of employers and employees when fully phased in
- Increase income replacement from one quarter to one third of pensionable earnings
- Maximum income subject to CPP contributions will be increased from C$54,900 to C$82,700, increased by inflation
- An increase to the federal Working Income Tax Benefit has been promised to help lower-income earners
- The enhanced portion of the CPP contributions are to be tax deductible to recognize the higher marginal tax rates on the higher level of covered earnings, rather than the current tax credit applied to contributions
Finance Minister Bill Morneau has said that Quebec and Manitoba will remain part of the process. Quebec has criticized the national plan for going too far and being "very costly." Quebec will be proposing an alternate expansion that will exempt income up to C$27,500 from premiums. A statement from Manitoba is expected later today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.