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Changes to the Net Pay Amount Commencing January 2006


INFORMATION NOTICE TO EMPLOYEES

Changes to the Net Pay Amount Commencing January 2006

The purpose of this notice is to provide you with information about changes to the net amount of pay commencing with the first pay of January 2006.

The following factors may affect your net pay:

(a) PSPP, CPP and QPP Contributions

At the beginning of each year, the lowest rate of the two possible rates of contribution to the Public Service Pension Plan (PSPP) is used until the maximum level of contribution for that rate is reached. Then, the higher rate of contribution is used for the remainder of the year. Beginning with the new year, PSPP contributions recommence at the low rate, until such time as they reach the maximum level of the contributions for the low rate. Therefore, if you are a contributor under the PSPP and you compare your last pay in December with your first pay in January, you may see that you have paid a larger amount of PSPP in December than in January.

For the calendar year 2006, the contribution rate will increase by 0.3%. Effective January 1, 2006, PSPP contributions will be 4.3% (to a maximum of $1,810.30 for the 2006 taxation year) on all pensionable earnings below and equal to the yearly maximum pensionable earnings (YMPE) ($42,100 for the 2006 taxation year) and 7.8% on all pensionable earnings over the YMPE. Please refer to Information Notice to Employees 2005-024 for additional information concerning pension changes.

Contributions to PSPP have a direct bearing on the income tax deducted at source since these contributions are deducted from the gross pay before determining the tax rate. Once the contributions reach the maximum PSPP low level, the contributions to PSPP will increase from 4.3% to 7.8%. The larger the PSPP contribution, the less income tax will be withheld from your pay.

Many employees reach their maximum level of Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions sometime during the year. If you reach the maximum level of CPP/QPP, you will see an increase in the amount of your net pay as there will no longer be CPP/QPP deductions withheld. Beginning with the new year, you will recommence paying CPP/QPP contributions until such time as you reach the maximum CPP/QPP contribution level for 2006.

The CPP and QPP rate, effective January 1, 2006, remains at 4.95% of pensionable earnings. The maximum CPP/QPP contribution is $1,910.70 for the 2006 taxation year.

The CPP contributions provide a federal tax credit of 15%. This tax credit is applied directly to the income tax that is owing and is not dependent on your income tax bracket. Please note that the Quebec Tax Reform eliminated the Quebec provincial tax credit for QPP effective January 1, 1998. The tax credit for QPP is now included in the basic credit amount of $9,555 for the 2006 taxation year.

(b) Quebec Parental Insurance Plan (QPIP)

Effective January 1, 2006, for employees working in the province of Quebec, premiums will be deducted at source for the new QPIP. Please refer to Information Notice to Employees 2005-023 for additional information concerning the QPIP.

(c) Employment Insurance (EI) Premiums

Your rate of EI premiums (excluding employees working in the province of Quebec), for the 2006 taxation year has decreased from 1.95% to 1.87%. The annual maximum insurable earnings remains at $39,000. If you reached the maximum EI premiums during the previous year, you will recommence paying EI premiums in the new year until the maximum premium level is reached. Once you reach the annual maximum premium deduction of $729.30 in 2006, you will see an increase in the amount of your net pay as there will no longer be EI deductions withheld from your pay.

If you work in the province of Quebec, your rate of EI premiums for the 2006 taxation year has decreased from 1.95% to 1.53%. The annual maximum insurable earnings remain at $39,000. If you reached the maximum EI premiums during the previous year, you will recommence paying EI premiums in the new year until the maximum premium level is reached. Once you reach the annual maximum premium deduction of $596.70 in 2006, you will see an increase in the amount of your net pay as there will no longer be EI deductions withheld from your pay. Please refer to Information Notice to Employees 2005-023 for additional information concerning EI premiums.

(d) Federal Tax Brackets and Rates Effective January 1, 2006

The federal income tax table has changed effective January 1, 2006, as follows:

(e) Provincial and Territorial Tax Brackets and Rates Effective January 1, 2006

Prince Edward Island

There are no changes to the tax brackets or rates.

Newfoundland and Labrador

There are no changes to the tax brackets or rates.

Nova Scotia

There are no changes to the tax brackets or rates.

Alberta

There are no changes to the tax brackets or rates.

New Brunswick

The provincial income tax table has changed effective January 1, 2006, as follows:

Manitoba

The provincial income tax table has changed effective January 1, 2006, as follows:

Ontario

The provincial income tax table has changed effective January 1, 2006, as follows:

The provincial surtax payable has been revised as follows:

Where the basic provincial tax payable is less than or equal to $4,016 (formerly $3,929), the surtax payable is $0.

Where the basic provincial tax payable is greater than $ 4,016 and less than or equal to $ 5,065 (formerly $4,957), the surtax payable is 20% of the basic provincial tax payable in excess of $4,016.

Where the basic provincial tax payable is greater than $ 5,065, the surtax payable is the total of 20% of the basic provincial tax payable in excess of $4,016 and 36% of the basic provincial tax payable in excess of $5,065.

Saskatchewan

The provincial income tax table has changed effective January 1, 2006, as follows:

British Columbia

The provincial income tax table has changed effective January 1, 2006, as follows:

Quebec

The provincial income tax table has changed effective January 1, 2006, as follows:

Yukon

The territorial income tax table has changed effective January 1, 2006, as follows:

Northwest Territories (N.W.T.)

The territorial income tax table has changed effective January 1, 2006, as follows:

Nunavut

The territorial income tax table has changed effective January 1, 2006, as follows:

Change in province of work

The income tax deducted from your pay is based on your province of work. In some situations, when you change your province of work, your tax liability may be such that you owe the Canada Revenue Agency (CRA) and/or the "Ministère du Revenu du Québec" (MRQ) at year end.

If you change your province of work at any time during the year, you are encouraged to review your personal tax situation in order to be aware of your tax liability upon filing at year end.

If you wish to have more federal and/or Quebec income tax deducted, you may do so by completing a "2006 Personal Tax Credits Return", form TD1 E (06) and/or, for the province of Quebec, a "Source Deductions Return 2006", form TP-1015.3-V (2006-01), and providing this documentation to your compensation advisor.

Any request for information regarding the content of this document should be addressed to your compensation advisor.

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