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SUPERANNUATION ADMINISTRATION MANUAL
SPECIAL BULLETIN: 2004-001
January 6, 2004
SUBJECT: |
CPP/QPP Contribution Rate,
PSSA Indexation, PSSA Thresholds/Employer Rate, PA Calculations |
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1
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PURPOSE
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1.1
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The purpose of this bulletin is to provide
the following information:
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i) the change in the Canada Pension Plan
(CPP) and Quebec Pension Plan (QPP) employee contribution rates and the
average maximum pensionable earnings (AMPE) for 2004;
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ii) the Public Service Pension Fund (PSPF)
employee contribution rate for 2004;
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iii) the rate of pension indexing for 2004;
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iv) the Public Service Superannuation
Act (PSSA) salary thresholds for 2004;
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v) to provide examples of how to calculate
the pension adjustment (PA) for 2003;
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vi) the employer contribution rates for
public service corporations.
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1.2
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In this text, use of the masculine is generic
and applies to both men and women.
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2
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POLICY
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2.1
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CPP/QPP
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Effective January 1, 2004, the CPP/QPP employee
contribution rate will increase to 4.95 %.
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The 2004 changes related to CPP/QPP are:
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MAXIMUM PENSIONABLE EARNINGS |
$40,500.00 |
BASIC EXEMPTION |
$ 3,500.00 |
MAXIMUM CONTRIBUTORY EARNINGS |
$37,000.00 |
MAXIMUM CONTRIBUTIONS |
$ 1,831.50 |
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The 5 year average maximum pensionable earnings
(AMPE) for 2004 is $39,080.00. The AMPE is calculated based on the average
of the yearly maximum pensionable earnings (YMPE) for the current year
plus the four previous years. The annual CPP/QPP reduction in the benefit
payable under the PSSA for individuals who retire in 2004 will be based
on the lesser of the 5-year average salary and the AMPE at the earlier
of the termination date or the date the employee reaches age 65 and is
in receipt of CPP or QPP retirement benefits or the date the employee
becomes entitled to receive CPP/QPP disability benefits (refer to SAM
4-7-2).
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2.2
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PSPF Employee Contribution Rate
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Effective January 1, 2004, the employee
contribution rate is:
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4.0% on salaries up to the
YMPE ($40,500.00);
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7.5% on salaries in excess of the YMPE ($40,500.00).
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2.3
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Pension Increase under the Supplementary
Retirement Benefits Provision of the PSSA
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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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The pension increase authorized under Part
III of the PSSA is 3.3 % effective January 1, 2004.
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2.4
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PSSA Salary Threshold and RCA Contributions
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For 2004, employees whose annual salary
rate is in excess of $105,900 will contribute to the PSPF in respect
of salary below this limit and to the Retirement Compensation Arrangement
Account (RCA) in respect of those salaries above the limit.
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2.5
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Crown Corporations -- Employer Contribution
Rate
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PSPF
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The employer contribution rate for the PSPF
has been established effective January 1, 2004, as follows:
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For current contributions, single rate leave
without pay (LWOP) and single rate past service, the employer rate is 2.14
times the employee's single rate contributions.
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For double rate LWOP and double rate past
service, the employer rate is 0.56 times the employee's double
rate contributions.
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RCA
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The employer contribution rate for the RCA
has been established effective January 1, 2004, as follows:
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For current contributions, single rate LWOP
and single rate past service, the employer rate has decreased to 7.9
times the employee's single rate contributions.
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For double rate LWOP and double rate past
service, the employer rate is 3.45 times the employee's double
rate contributions.
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SDB
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The employer's monthly contribution rate
for Supplementary Death Benefit (SDB) premiums continues to be $0.01
per $250.00 of the basic benefit of each employee.
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2.6
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PA Calculations
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The following are the various maximums related
to the PA for 2003 and 2004:
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The maximum PA for 2003 is $14,900.00.
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The maximum PA for 2004 is $15,900.00.
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The maximum registered retirement savings
plan (RRSP) contribution for 2004 as specified in Bill C-28 (2003 federal
budget) is $15,500.00. Consequently, employees whose PA for 2003 is $15,500.00
or over could have no RRSP room in 2004.
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The 2003 YMPE is $39,900.00.
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The 2004 YMPE is $40,500.00
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The maximum salary used in the PA calculation
for 2003 is $100,100.00.
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The maximum salary used in the PA calculation
for 2004 is $105,900.00.
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The maximum benefit entitlement accrued
for 2003 is $1,722.22. As per Bill C-28, the maximum benefit entitlement
accrued for 2004 is $1,833.33.
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The PA calculation will be based on the
benefit entitlement multiplied by the factor 9, less $600.00 prorated,
if necessary, by the number of pensionable pay periods.
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You will find in Appendix A of this bulletin
examples of PA calculations for 2003 and a worksheet that has been developed
as an aid to calculate the PA figure. Please note that in cases where
rehabilitation leave and dual employment have occurred, adjustments are
required prior to the calculation (refer to Subsection 2.6.4 of this
bulletin).
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2.6.1
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Terminated Employees Who Receive
a Lump Sum Benefit Payment
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Until further notice, the form PWGSC-TPSGC
2386 (Certification Notice -- Pension Support System) must continue
to be used to indicate PA figures from 1990 to the year of termination
for terminated employees who received a lump sum benefit (i.e., transfer
value or transfer of funds to another pension plan under a reciprocal
transfer agreement [RTA] or a pension transfer agreement [PTA]). In cases
where the employee received a return of contributions, the PA figures
are to be reported on the form PWGSC-TPSGC 2577, Request for Return of
Superannuation Contributions. For additional information, refer to Superannuation
Administration Manual (SAM) Special Bulletin 1998-14 dated December
17, 1998.
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2.6.2
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LWOP
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It is important that an employee proceeding
on LWOP be informed of the effect of PA reporting when he elects not
to count the LWOP as pensionable service.
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Where the employee elects not to count a
period of LWOP as pensionable before the end of a calendar year,
the period of non-pensionable LWOP for that year will not be
included in the PA calculation. The PA for any subsequent years will
not be reported until the employee returns to duty and recommences accumulating
pension credits.
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When an election is made not to count a
period of LWOP as pensionable, a PA reported for any calendar year previous
to this period cannot be cancelled. This rule applies even if the employee
terminated immediately following the LWOP and received a return of superannuation
contributions.
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Please refer to Compensation
Directive 1995-010 dated March 6, 1995, which provides additional
details on situations where an employee opts not to count a period
of LWOP as pensionable.
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In cases where an employee terminates employment
immediately following a LWOP period, it is important to remember that
for pension purposes, the termination date is the day following the date
on which the Superannuation Directorate is notified in writing that the
employee has ceased to be employed (refer to Section
2.2.3 of the Superannuation Administration Manual [SAM]). There are
instances where the employee is terminated for pay purposes, but because
the Superannuation Directorate is not notified in time, the termination
date is extended for pension purposes. In this case, when the additional
pension contributions are calculated, the PA must also be amended to
reflect the additional pensionable service.
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2.6.3
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Employees on LWOP to Serve as Full-time
Paid Officials of Bargaining Agents
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In cases where a contributor, who is on
LWOP to serve as a full-time paid official of a bargaining agent (union),
provides written confirmation that the union has reported a PA for the
pensionable LWOP under the PSSA, that period must not be
included in the PA reported by the former employer. This confirmation
should be in the form of a letter from the union advising that the benefit
accrual under the PSSA has been included in the PA reported by the union.
Please refer to SAM
Special Bulletin 1999-03 dated February 15, 1999, for additional
details.
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2.6.4
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Clients serviced by the Regional
Pay System (RPS)
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It is the responsibility of departmental
personnel to advise the pay office of the required information concerning
specific situations such as dual employment (employee
on pensionable LWOP and occupying a term position where he contributes
to PSSA, for example relocation of spouse) and situations where the employee
is on pensionable LWOP for educational leave. Please
refer to Compensation Directive
1994-012 dated March 23, 1994, for additional information.
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In addition, any employee who was on rehabilitation
leave with a pension type code 62 in Field 39 at any time
during the calendar year, will not have a PA reported
automatically for this period. In order to have a PA calculated for
the rehabilitation leave period, departments must report to the pay
office, by memorandum, the employee's number of pensionable pay periods
and the amount of pensionable earnings for the period reflected under
code 62 in the RPS. Please note that this period will be from the
date on which the code 62 was input into the system and
not from the effective date of the rehabilitation leave.
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On receipt of the department's written notice
for any employee on rehabilitation leave with pension type code 62 in
Field 39, the pay office will credit Master Employee Record (MER) Element
734 by the amount of pensionable earnings and adjust MER Element 118
by the proper number of pensionable pay periods.
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3
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INQUIRIES
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3.1
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Any request for information regarding the
content of this bulletin should be addressed to your Public Works and
Government Services Canada (PWGSC) Compensation Services Office.
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Original Signed by
R. Jolicoeur |
R. Jolicoeur
Director General
Compensation Sector
Accounting, Banking and Compensation
Reference(s): CJA 9006-12, 9006-24
9007-7-8, 9007-10-8
9207-2-37
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APPENDIX "A"
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PENSION ADJUSTMENT CALCULATION
FOR 2003 |
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Example 1 -- Annual pensionable
salary: $42,000.00 |
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Step 1: |
Determine the annual benefit : |
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(1.3% x $39,900.00) + [2.0% x ($42,000.00 -
$39,900.00)] |
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=$518.70 + $42.00 |
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=$560.70 (annual benefit entitlement) |
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Step 2: |
If the annual benefit entitlement
is greater than $1,722.22, |
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IMPOSE $1,722.22 |
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(In this case, the benefit entitlement does
not exceed $1,722.22) |
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Step 3: |
Prorate the benefit entitlement
by the number of pensionable pay periods. |
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[A] |
Full year $560.70 x 26/26 = $560.70 |
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[B] |
Partial year $560.70 x 13/26 = $280.35 |
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Step 4: |
Multiply the result of step 3 by
a factor of 9. |
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[A] |
Full year $560.70 x 9 = $5,046.30 |
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[B] |
Partial year $280.35 x 9 = $2,523.15 |
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Step 5: |
Prorate $600.00 by the number of
pensionable pay periods. |
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[A] |
Full year $600.00 x 26/26 = $600.00 |
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[B] |
Partial year $600.00 x 13/26 = $300.00 |
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Step 6: |
Subtract the result of step 5 from
the result of step 4; this result, rounded to the nearest dollar, is the
PA for 2003. |
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[A] |
Full year $5,046.30 - $600.00 = $4,446.30 |
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[B] |
Partial year $2,523.15 - $300.00 = $2,223.15 |
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Step 7: |
If the result is greater than $14,900.00, |
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IMPOSE $14,900.00
(In this case, the result is less than $14,900.00) |
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Example 2 -- Annual pensionable
salary: $95,000.00 |
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Step 1: |
Determine the annual benefit : |
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(1.3% x $39,900.00) + [2.0% x ($95,000.00 -
$39,900.00)] |
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=$518.70 + $1,102.00 |
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=$1,620.70 (annual benefit entitlement) |
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Step 2: |
If the annual benefit entitlement
is greater than $1,722.22, |
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IMPOSE $1,722.22 |
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(In this case, the benefit entitlement does
not exceed $1,722.22) |
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Step 3: |
Prorate the benefit entitlement
by the number of pensionable pay periods. |
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[A] |
Full year $1,620.70 x 26/26 = $1,620.70 |
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[B] |
Partial year $1,620.70 x 22/26 = $1,371.36 |
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Step 4: |
Multiply the result of step 3 by
a factor of 9. |
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[A] |
Full year $1,620.70 x 9 = $14,586.30 |
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[B] |
Partial year $1,371.36 x 9 = $12,342.24 |
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Step 5: |
Prorate $600.00 by the number of
pensionable pay periods. |
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[A] |
Full year $600.00 x 26/26 = $600.00 |
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[B] |
Partial year $600.00 x 22/26 = $507.69 |
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Step 6: |
Subtract the result of step 5 from
the result of step 4; this result, rounded to the nearest dollar, is the
PA for 2003. |
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[A] |
Full year $14,586.30 - $600.00 = $13,986.30 |
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[B] |
Partial year $12,342.24 - $507.69 = $11,834.55 |
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Step 7: |
If the result is greater than $14,900.00, |
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IMPOSE $14,900.00
(In this case, the result is less than $14,900.00) |
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Example 3 -- Annual pensionable
salary: $120,000.00 |
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Step 1: |
Determine the annual benefit : |
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(1.3% x $39,900.00) + [2.0% x ($100,100.00*
- $39,900.00)] |
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=$518.70 + $1,204.00 |
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=$1,722.70 (annual benefit entitlement) |
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Step 2: |
If the annual benefit entitlement
is greater than $1,722.22, |
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IMPOSE $1,722.22
(In this case, the benefit entitlement does exceed $1,722.22) |
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Step 3: |
Prorate the benefit entitlement
by the number of pensionable pay periods. |
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[A] |
Full year $1,722.22 x 26/26 = $1,722.22 |
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[B] |
Partial year $1,722.22 x 13/26 = $861.11 |
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[C] |
Partial year $1,722.22 x 22/26 = $1,457.26 |
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Step 4: |
Multiply the result of step 3 by
a factor of 9. |
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[A] |
Full year $1,722.22 x 9 = $15,499.98 |
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[B] |
Partial year $861.11 x 9 = $7,750.00 |
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[C] |
Partial year $1,457.26 x 9 = $13,115.34 |
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Step 5: |
Prorate $600.00 by the number of
pensionable pay periods. |
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[A] |
Full year $600.00 x 26/26 = $600.00 |
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[B] |
Partial year $600.00 x 13/26 = $300.00 |
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[C] |
Partial year $600.00 x 22/26 = $507.69 |
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Step 6: |
Subtract the result of step 5 from
the result of step 4; this result, rounded to the nearest dollar, is the
PA for 2003. |
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[A] |
Full year $15,499.98 - $600.00 = $14,899.98 |
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[B] |
Partial year $7,750.00 - $300.00 = $7,450.00 |
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[C] |
Partial year $13,115.34 - $507.69 = $12,607.65 |
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Step 7: |
If the result is greater than $14,900.00, |
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IMPOSE $14,900.00
(In this case, the result is less than $14,900.00) |
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*FOR THE 2003 TAXATION
YEAR, THE MAXIMUM SALARY USED IN THE PA CALCULATION WILL BE $100,100.00. |
PENSION ADJUSTMENT WORKSHEET |
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EMPLOYEE IDENTIFICATION |
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Name: |
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PRI: |
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PA Calculation for (year): |
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INFORMATION REQUIRED TO CALCULATE THE
PA: |
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A. Yearly Maximum Pensionable Earnings (YMPE)
for this year |
$ |
B. Pensionable earnings (element 734*) |
$ |
C. Number of pensionable pay periods (element
118*) |
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D. Total number of pay periods in the year
(biweekly) |
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E. Annualized pensionable earnings: (B ÷ C)
x D |
$ |
*For clients serviced by the Regional Pay System |
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CALCULATION |
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Step 1: Annual benefit entitlement (maximum
$1,722.22 for 2003 and $1,833.33 for 2004): |
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If E is equal to or lesser than
the YMPE |
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0.013 x E
0.013 x ( ______ ) = $ _________ |
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If E is greater than the YMPE |
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(0.013 x YMPE) + [0.02 x (E - YMPE)]
(0.013 x |
______ |
) + [0.02 x ( |
______ |
- |
_____ |
)] = $ |
______ |
* |
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(* For taxation year 2003 if greater than
$1,722.22, impose $1,722.22) |
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(* For taxation year 2004 if greater than
$1,833.33, impose $1,833.33) |
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Step 2: Benefit entitlement accrued: |
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(Annual benefit entitlement ÷ D) x C |
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( |
____ |
÷ |
______ |
) x |
______ |
= $ __________ |
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Step 1 |
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(D) |
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(C) |
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Step 3: Pension adjustment (maximum
$14,900.00 for 2003 and $15,900.00 for 2004): |
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(9 x benefit entitlement accrued) - ($600.00 ÷ D
x C) |
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(9 x |
____ |
) - ($600.00 ÷ |
______ |
x |
_____ |
) = $ |
_______ |
* |
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Step 2 |
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(D) |
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(C) |
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(* For taxation year 2003, if greater than
$14,900.00, impose $14,900.00) |
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(* For taxation year 2004, if greater than
$15,900.00, impose $15,900.00) |
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