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1996-008-e.html
SUPERANNUATION ADMINISTRATION MANUAL
SPECIAL BULLETIN: 1996-008
Appendix "A"
December 9, 1996
SUBJECT: |
CPP/QPP Contribution Rate, PSSA Pension Increase, PSSA Thresholds/Employer Rate, PA Calculations |
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1 |
PURPOSE |
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1.1 |
The purpose of this Bulletin is to provide information regarding i) the change in Canada/Québec Pension Plan (CPP/QPP) rate of contribution for 1997; ii) the rate of pension indexation for 1997; iii) the Employer contribution rate to the Retirement Compensation Arrangement (RCA) and the PSSA salary thresholds for 1997; and iv) to provide examples of how to calulate the Pension Adjustment (PA) for 1996. |
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2 |
POLICY |
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2.1 |
CPP/QPP |
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2.1.1 |
The CPP and QPP contribution rates are different for 1997. Effective January 1, 1997, the CPP contribution rate will increase from 2.8 % to 2.925 %. Effective January 1, 1997 the QPP contribution rate will increase from 2.8 % to 3 %. |
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2.1.2 |
As a result of the increased CPP contribution rate, the contributions required to the Superannuation Account effective January 1, 1997, will be 7.5 % minus 2.925 % required on CPP earnings. That is, contributions required under the Public Service Superannuation Act (PSSA) on that portion of salary for which CPP contributions are required will be 4.575 %. |
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2.1.3 |
This change will affect PSSA contributions on service occurring on or after January 1, 1997. |
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2.1.4 |
The 1997 changes related to CPP/QPP are: MAXIMUM PENSIONABLE EARNINGS $35,800 BASIC EXEMPTION $3,500 MAXIMUM CONTRIBUTORY EARNINGS $32,300 |
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2.1.5 |
The Average Maximum Pensionable Earnings (AMPE) for 1997 is $35,366.67. The annual CPP/QPP reduction in the benefit payable under the PSSA for individuals who retire in 1997 will be based on the lesser of the six-year average salary or the AMPE for 1997. |
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2.2 |
Pension Increase under the Supplementary Benefits Provision of the PSSA |
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2.2.1 |
Part III of the PSSA provides for annual pension increases depending on the cost of living index, for all pensions payable to former public servants or their survivors. |
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2.2.2 |
The pension increase authorized under Part III of the PSSA is 1.5% effective January 1, 1997. |
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2.3 |
PSSA Salary Thresholds and RCA Contributions |
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2.3.1 |
For 1997, employees whose annual salary rate is in excess of $98,700.00 will contribute to the PSSA in respect of salary below this limit and to the RCA in respect of those salaries above the limit. Public Service Corporations |
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2.3.2 |
The Employer contribution for the RCA has been established effective from January 1, 1997 as follows: For current contributions, "single rate" LWOP and "single rate" past service, the Employer rate is 15 TIMES the employee contributions. For "double rate" LWOP and "double rate" past service, the Employer rate is 7 TIMES the contributions made by the employee. |
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2.3.3 |
There has been no change to the Employer rate required for matching PSSA contributions. For Public Service Corporations, the EMPLOYER contribution rate continues to be equal to the "single rate" contributions paid by employees for current service, single rate types of LWOP and single rate past service elections. |
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2.3.4 |
Public Service Corporations do not match PSSA contributions where the employee is paying LWOP deficiencies or past service arrears at the double rate. |
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2.4 |
PA Calculations The following are the various maximums related to the PA for 1996: The maximum PA for 1996 is $14,500. The maximum RRSP contributions for 1997 as specified in the last Federal Budget is $13,500. Consequently, employees whose 1996 PA is $13,500 or over could have no RRSP room in 1997. The 1996 Yearly Maximum Pensionable Earnings (YMPE) for CPP/QPP is $35,400. There are no excluded earnings for the calculations of the 1996 PA and the maximum Benefit Entitlement Accrued is $1,722.22. You will find in Appendix A of this Bulletin, three examples of how to calculate the PA for 1996. |
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3 |
INQUIRIES |
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3.1 |
Any request for information regarding the foregoing should be addressed to your PWGSC Compensation Services Office. |
Original Signed by
P. Charko
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P. Charko
Director General
Compensation Sector
Government Operational Service
Reference: CJA 9006-12
9006-24
9007-10-8
9007-7-8
APPENDIX "A"
PENSION ADJUSTMENT CALCULATION FOR 1996
Example 1: Annual pensionable salary: $45,000.00
| Step 1: |
Determine the annual benefit entitlement:
(1.3% x $35,400.00) + (2% x $45,000.00 - $35,400.00)
$460.20 + $ 192.00
$652.20 (benefit entitlement) |
| Step 2: |
If the annual benefit entitlement is greater than $1,722.22, IMPOSE $1,722.22.
(In this case benefit entitlement does not exceed $1,722.22) |
| Step 3: |
Pro-rate benefit entitlement by number of pensionable pay periods.
| [A] |
Full year $652.20 x 26/26 = $652.20 |
| [B] |
Partial year $652.20 x 13/26 = $326.10 |
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| Step 4: |
Multiply result of step 3 by a factor of 9.
| [A] |
Full year 9 x $652.20 = $5,869.80 |
| [B] |
Partial year 9 x $326.10 = $2,934.90 |
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| Step 5: |
Pro-rate $1,000.00 by number of pensionable pay periods.
| [A] |
Full year $1,000.00 x 26/26 = $1,000.00 |
| [B] |
Partial year $1,000.00 x 13/26 = $500.00 |
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| Step 6: |
Subtract result of step 5 from result of step 4; this result is the PA for 1996.
| [A] |
Full year $5,869.80 less $1,000.00 = $4,870.00 |
| [B] |
Partial year $2,934.90 less $500 = $2,435.00 |
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| Step 7: |
If result is greater than $14,500.00, IMPOSE $14,500.00. |
Example 2: Annual pensionable salary: $95,000.00
| Step 1: |
Determine the annual benefit entitlement:
(1.3% x $35,400.00) + (2% x $95,000.00 - $35,400.00)
$460.20 + $ 1,192.00
$1,652.20 (benefit entitlement) |
| Step 2: |
If the annual benefit entitlement is greater than $1,722.22.00, IMPOSE $1722.22.
(In this case benefit entitlement does not exceed $1,722.22) |
| Step 3: |
Pro-rate benefit entitlement by number of pensionable pay periods.
| [A] |
Full year $1,652.20 x 26/26 = $1,652.20 |
| [B] |
Partial year $1,652.20 x 22/26 = $1,398.02 |
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| Step 4: |
Multiply result of step 3 by a factor of 9.
| [A] |
Full year 9 x $1,652.20 = $14,869.80 |
| [B] |
Partial year 9 x $1,398.02 = $12,582.18 |
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| Step 5: |
Pro-rate $1,000.00 by number of pensionable pay periods.
| [A] |
Full year $1,000.00 x 26/26 = $1,000.00 |
| [B] |
Partial year $1,000.00 x 22/26 = $846.15 |
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| Step 6: |
Subtract result of step 5 from result of step 4; this result is the PA for 1996.
| [A] |
Full year $14,869.80 - $1,000.00 = $13,870.00 |
| [B] |
Partial year $12,582.18 - $846.15 = $11,736.00 |
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| Step 7: |
If result is greater than $14,500.00, IMPOSE $14,500.00. |
Example 3: Annual pensionable salary: $120,000.00
| Step 1: |
Determine the annual benefit entitlement:
(1.3% x $35,400.00) + (2% x [$98,600.00 - $35,400.00])
$460.20 + $1,264.00
$1,724.20 (benefit entitlement) |
| Step 2: |
If the annual benefit entitlement is greater than $1,722.22, IMPOSE $1,722.22. |
| Step 3: |
Pro-rate benefit entitlement by number of pensionable pay periods.
| [A] |
Full year $1,722.22 x 26/26 = $1,722.22 |
| [B] |
Partial year $1,722.22 x 25/26 = $1,655.98 |
| [C] |
Partial year $1,722.22 x 22/26 = $1,457.26 |
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| Step 4: |
Multiply result of step 3 by 9.
| [A] |
Full year 9 x $1,722.22 = $15,500 |
| [B] |
Partial year 9 x $1,655.98 = $14,903.82 |
| [C] |
Partial year 9 x $1,457.26 = $13,115.34 |
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| Step 5: |
Pro-rate $1,000.00 by number of pensionable pay periods.
| [A] |
Full year $1,000.00 x 26/26 = $1,000.00 |
| [B] |
Partial year $1,000.00 x 25/26 = $961.54 |
| [C] |
Partial year $1,000.00 x 22/26 = $846.15 |
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| Step 6: |
Subtract result of step 5 from result of step 4; this result is the PA for 1996.
| [A] |
Full year $15,500.00 - $1,000.00 = $14,500.00 |
| [B] |
Partial year $14,903.82 - $961.54 = $13,942.00 |
| [C] |
Partial year $13,115.34 - $846.15 =$12,269.00 |
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| Step 7: |
If result is greater than $14,500.00, IMPOSE $14,500.00. |
NOTE: FOR THE 1996 TAX YEAR, THE MAXIMUM SALARY USED IN THE PA CALCULATION WILL BE $98,600.00.
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