Report on the Administration of the Members of Parliament Retiring Allowances Act for the Fiscal Year Ended March 31, 2003

Her Excellency the Right Honourable Adrienne Clarkson, C.C., C.M.M., C.D.
Governor General of Canada

Excellency:

I have the honour to submit to Your Excellency the Report on the Administration of the Members of Parliament Retiring Allowances Act for the Fiscal Year Ended March 31, 2003.

Respectfully submitted,

The paper version was signed by Reg Alcock
President of the Treasury Board

Introduction

The Members of Parliament Retiring Allowances Act (the Act or MPRAA) governs pension arrangements for members of Parliament-members of the House of Commons and senators. Under the Act, the pension plan also provides a survivor allowance for eligible spouses and children. This report begins with a summary of the plan's main provisions and then presents information, for the fiscal year 2002-03, on the transactions recorded in the pension plan accounts, on membership, and benefits paid. Historical data are also included.

In this report, "members" refers to active and retired participants in the plan. Where necessary, members of the House of Commons and senators are referred to separately.

Funding

Accounts

Two accounts are operated under the plan: the Retiring Allowances (RA) Account and the Retirement Compensation Arrangements (RCA) Account.

The RA Account records the transactions related to the benefits payable under the plan when these benefits accord with income tax rules for registered pension plans. The RCA Account records the transactions related to the benefits payable under the plan when the benefits exceed the limits imposed by those tax rules.

Members' contributions

Effective January 1, 2001, the contribution rate for members of the House of Commons was reduced from 9 per cent to 7 per cent of their sessional indemnities, while the contribution rate for senators remains unchanged at 7 per cent.

Some members receive additional allowances and salaries as speakers, ministers, leaders of the opposition, parliamentary secretaries, and so forth. These members must contribute to the plan, based on these additional allowances and salaries, unless they elect not to make such contributions or to contribute at a lower rate.

Government contributions

On a monthly basis, the government is required to contribute an amount to each account that, after taking into account members' contributions, will fund the costs of all future benefits that members have earned during that month. The government contribution rate for each account varies from year to year and can be expressed as a multiple of members' contributions. The ratios of government contributions to members' contributions for the calendar years 2002 and 2003 are as follows:

Multiple of Members' Contributions

Interest

Every quarter, the government credits interest on the balance of each account at a rate set by regulations. For the fiscal year ended March 31, 2003, the interest rate was 2.5 per cent per quarter.

Future unfunded liabilities

When the government identifies an unfunded liability after it tables a valuation report in Parliament, the government must cover that liability.

Allowances and Other Benefits

Annual allowance

Members

Upon ceasing to be a member of Parliament, members are entitled to an annual allowance after they have contributed to the plan for at least six years. For service up to and including July 12, 1995, former members are entitled to an immediate annual allowance. For service after that date, former members are not entitled to an annual allowance until they are 55.

The benefit accrual rate for members of the House of Commons is 5 per cent per year of service up to and including July 12, 1995; 4 per cent per year of service after that date until December 31, 2000; and 3 per cent per year of service effective January 1, 2001, to a maximum of 75 per cent of the average sessional indemnity. For senators, the accrual rate is 3 per cent per year of service to a maximum of 75 per cent of the average sessional indemnity. Effective January 1, 2001, the annual allowance is based on the member's average pay for the best five years of pay. Prior to that date, the annual allowance was based on the average pay for the best six years of pay.

The annual allowance of a retired member is suspended if that person becomes a member again, either as a member of the House of Commons or as a senator. The annual allowance of a retired member of the House of Commons or a Senator is suspended if that person starts working for the federal government and remuneration exceeds $5,000.

Prime minister

During an individual's tenure as prime minister, the incumbent must contribute for at least four years if this service is to be eligible for an allowance. The allowance will be paid once the prime minister is no longer a member of Parliament or is 65 years old, whichever comes later. The allowance is equal to two thirds of the annual salary payable to a prime minister at the time the payment of the allowance begins.

Withdrawal allowance

Some members may get a withdrawal allowance. This is a return of a member's contributions along with interest on those contributions at a rate set by regulations. Members get withdrawal allowances if they do not complete six years of contributory service, if they are expelled from the House of Commons, or if they leave the Senate by reason of disqualification.

Survivor allowance

Members

Eligible survivors and children of members may receive an allowance.

For survivors, this allowance is equal to three fifths of the basic annual allowance that the member would have been entitled to receive, or that the retired member was receiving, immediately before his or her death.

If a child is under the age of 18 or is a full-time student between 18 and 25 years of age, that child is entitled to a survivor allowance. This allowance is equal to one tenth of the member's basic annual allowance or two tenths if no survivor allowance is being paid.

Prime minister

An eligible survivor receives an allowance equal to one half of the allowance payable to a former prime minister for service as prime minister.

Indexing

Allowances to retired members and survivors are adjusted at the beginning of each calendar year. This adjustment corresponds to the percentage increase in the average of the Consumer Price Index (CPI) for the 12 months ended on the preceding September 30, over the CPI average for the 12 months ended a year earlier.

Indexing payments do not begin until the former member is 60 years old. But once indexing begins, payments reflect the cumulative increase in the CPI since the member left Parliament.

Survivor allowances are indexed immediately based on the date a member left Parliament.

Minimum benefit

When a member or retired member dies and there are no survivors entitled to an allowance, then the member's estate receives the amount by which the member's contributions exceed any allowances already paid.

Contributors

At March 31, 2003, there were 399 members contributing under the plan, and there were no vacant seats in the House of Commons. Tables 5 and 6 in this report present information on the number and distribution of allowances.

Table 1

Table 2

1. A refundable tax equal to 50 per cent of contributions and interest credited to the RCA Account, less 50 per cent of benefits paid out of the account, must be remitted each year to the Canada Customs and Revenue Agency.

Table 3

Table 3 (Continued)

1. Includes contributions for current and prior service and interest paid by members.

2. Includes a transfer of $9,941,788 from the Supplementary Retirement Benefits Account and an actuarial adjustment credit of $158,000,000.

3. Includes pension division payments.

Table 4

Table 4 (Continued)

2. Includes actuarial liability adjustment of $9,773,275.

Table 5

Table 6

1. The average annual allowance, including indexation, was $37,940 for former members of the House of Commons and $42,953 for former senators.