2012 Canada Pension Plan Changes
On December 15, 2009, the government of Canada passed legislation making several changes to the Canada Pension Plan. Some of the changes began taking effect in 2011 while others take effect as of January 1, 2012.
One of the most significant changes which will take effect on January 1, 2012 is the requirement for people between the ages of 60 and 65 who currently collect Canada Pension Plan benefits, to resume contributions to the Canada Pension Plan if they continue to earn employment income.
Employers will be required to withhold and match CPP contributions from these employees. Self-employed individuals will be assessed CPP as part of their annual personal income tax filings.
These contributions will be added to a new pool of Canada Pension Plan benefits known as Post-Retirement Benefits (PRB) which, effective January 1 of the year following the contributions, will be added to the current retirement benefit. The PRB amount can reach up to 1/40th of the annual maximum retirement pension ($288 per year or $24 monthly for 2011) for each year, adjusted for age. The PRB, like other CPP benefits will be adjusted over time based upon changes to the Consumer Price Index.
Also effective January 1, 2012, individuals aged 65 to 70 who are drawing CPP benefits and who are continuing to earn employment income, will by default be required to resume contributions to the Canada Pension Plan if they continue to earn employment income. If the person over the age of 65 does not wish to continue to contribute to the Canada Pension Plan, they must file form CPT30 with both their employer and the government in the month prior to the month they wish to have their CPP contributions cease.
This means that anyone between the age of 65 and 70 not wanting to begin re-contributing to the Canada Pension Plan on January 1, 2012, must file the CPT30 form no later than December 31, 2011.
Copies of the CPT30 form can be found at the following web address:
Other changes made to the Canada Pension Plan include:
- An increase in the amount of CPP benefits you will receive if you delay taking your CPP benefits past age 65;
- A decrease in the amount of CPP benefits you will receive if you draw your CPP benefits before age 65;
- An increase in the number of years that will "drop out" of the calculation of your Canada Pension Plan benefits due to years of zero or low earnings; and
- The removal of the work cessation test in order to begin drawing CPP benefits before age 65
If you would like to discuss these changes and their effect on you and/or your business, please contact your Collins Barrow tax advisor.
Michael Pestowka, CA, is a Tax Partner in the Chatham office of Collins Barrow.
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Information is current to December 16, 2011. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.