Annual Report of the Canada Pension Plan 2001-2002
Managing the CPP
Collecting and Recording Contributions
Contributions to the CPP are paid on earnings between a minimum and a maximum amount. The minimum is $3,500 (it remains constant) and the maximum is adjusted annually to reflect the growth in the average Canadian industrial wage. The maximum amount of pensionable earnings as of January 1, 2002, was $39,100 (up from $38,300 in 2001). Contributions stop once a contributor reaches the age of 70 or begins to receive a CPP retirement pension or disability benefit.
The contribution rates for the year 2002 are 4.7 percent for employees and 4.7 percent for employers. Persons who are self-employed pay both portions, for a total of 9.4 percent. Approximately 94 percent of contributions come from employers and employees and the remaining six percent from the self-employed.
All CPP contributions are remitted to the Canada Customs and Revenue Agency (CCRA). In 2001-02, contributions amounted to $23.4 billion.
CCRA also assesses and verifies earnings and contributions, advises employers and employees of their rights and responsibilities, conducts audits, and reconciles reports and T4 slips. To verify that contribution requirements are being met, CCRA applies a compliance and enforcement process that can vary from a computerized data match to an on-site audit.
There are approximately 1.4 million existing employer accounts. During 2001-02, CCRA conducted 53,942 audits, concentrating on files with irregularities.
Administrative Costs
In 2001-02, it cost approximately $371 million to administer the CPP, with HRDC accounting for the largest portion - $279 million (see Table 3). CCRA required approximately $78 million and Public Works and Government Services Canada (PWGSC) $12 million, for services to the CPP. The Office of the Superintendent of Financial Institutions (OSFI), where the Office of the Chief Actuary is housed, and the Department of Finance incurred costs of $1.4 million and about $500,000, respectively.
Since the administrative costs of the CPPIB are drawn from CPPIB investment income, they are reported in that organization's annual report. This is consistent with the arm's length administration of the Board. In 2001-02, the CPPIB reported $11.4 million in investment and administrative expenses.
CPP administrative expenses in 2001-02 represent 1.8 percent of the $20.5 billion in benefits paid. This ratio compares very favourably with that of other pension plans. Administrative costs for large pension plans in the private sector, for example, average five percent of expenditures.
CPP administrative costs also compare favourably with those of RRSPs. Table 3 presents the CPP's administrative expenditures for the last three years.
| Expenditures (in $ thousands) | ||||
|---|---|---|---|---|
| Department/Agency | 1999-2000 | 2000-2001 | 2001-2002 | |
| Human Resources Development Canada | $241,328 | $242,865 | $279,159 | |
| Canada Customs and Revenue Agency | 58,193 * | 77,746 | 77,618 | |
| Public Works and Government Services Canada | 14,094 | 12,810 | 12,440 | |
| Office of the Superintendent of Financial Institutions | 1,181 | 1,102 | 1,364 | |
| Finance Canada | 346 | 395 | 492 | |
| Total | $315,142 | $334,918 | $371,073 | |
* This amount has been reduced by $13 million as a result of an audit of administrative costs covering the fiscal years 1994-1995 to 1997-1998. back to table
The Appeals Process
There are three opportunities for review of a person's CPP benefit application. Most requests for review concern an application for disability benefits.
The first level of review involves a request to the Minister of HRD for a reconsideration (or administrative review) of a decision concerning a benefit or a division of pension credits. The number of requests for reconsideration in disability cases declined slightly from 12,649 in 2000-01 to 12,092 in 2001-02. During that same period (between April 2001 and March 2002), the number of benefits awarded at appeal increased from 25 to 28 percent.
A person who is not satisfied with the decision made at the departmental reconsideration level can appeal to a Review Tribunal. A Review Tribunal is an independent, impartial body made up of three people chosen by the Commissioner of Review Tribunals from a panel of 300 to 325 part-time members appointed by Order-in-Council. The grant rate at the Review Tribunal level was 40 percent in 2001-02.
The final opportunity for review is the Pension Appeals Board (PAB) - a tribunal operating at arm's length from HRDC. PAB members are judges or former judges of the federal court or a superior, district or county court of a province. Hearings are not automatic at this level; claimants or the Minister of HRD must request "leave to appeal." Ninety-five percent of the 1,257 applications for leave to appeal received in 2001-02 concern CPP disability benefits. The grant rate for the PAB in 2001-02 was 63 percent of applications received.
| THE APPEALS PROCESS |
|---|
| INITIAL DECISION |
| Human Resources Development Canada (HRDC) issues a decision on CPP benefit eligibility. |
| If the client is not satisfied with the decision, he or she can submit a request for review to theMinister of Human Resources Development. |
| FIRST LEVEL OF REVIEW Review of client file by HRDC and decision issued |
| If the client is not satisfied with the decision, he or she has 90 days to appeal to the Office of the Commissioner of Review Tribunals. |
| SECOND LEVEL OF REVIEW Appeal to the Office of the Commissioner of Review Tribunals |
| The case is heard and a decision is issued. |
| If either the client or HRDC is not satisfied with the decision, an application for "Leave to Appeal" may be submitted to the Pension Appeals Board. |
| THIRD LEVEL OF REVIEW Appeal to the Pension Appeals Board |
| If leave is granted, the case is heard and a decision is issued. |
| The decision of the Pension Appeals Board is final, subject to judicial review by the Federal Court. |
The appointment of a significant number of additional members to the Office of the Commissioner of Review Tribunals and the PAB also made it possible to process appeals more quickly. To reduce the waiting period, initiatives are in place to increase the volume of cases heard each year.
HRDC continues to work closely with the Office of the Commissioner of Review Tribunals and the Pension Appeals Board to improve co-ordination among their offices and to update management practices at the appeals level. As a result, all three organizations have improved client communications.