ARCHIVED SACCO 2005-003

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October 5, 2005

SUBJECT : Increase in plan member contribution rates to the Public Service Pension Plan

1. PURPOSE

1.1. The purpose of this special advice is to provide Crown corporations and territorial governments, not using the Regional Pay System (RPS), with information regarding the upcoming increase in pension plan member contribution rates to the Public Service Pension Plan (PSPP).

2. BACKGROUND

2.1. In an attempt to achieve a more balanced cost-sharing ratio between plan members and the government, the Treasury Board ministers have recently approved phased-in increases to the plan member contribution rates under the Public Service Superannuation Act (PSSA) and the retirement compensation arrangement (RCA), beginning on January 1, 2006.

2.2. This advice is to provide clients with advance information to start preparing for implementation.

3. POLICY

3.1. Members currently contribute to the PSPP at the following rates:

• 4% on pensionable earnings up to and including the yearly maximum pensionable earnings (YMPE) under the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP);
• 7.5% on pensionable earnings in excess of the YMPE under the CPP/QPP, including pensionable earnings in excess of the RCA threshold; and
• 1% on pensionable earnings for employees with 35 years of service.

3.2. Commencing in January 2006, the rates for plan member contributions will increase each year by 0.3%. Contributions based on pensionable earnings up to the YMPE will increase until 2013 while contributions on those pensionable earnings over the YMPE will increase until 2008. Regardless, employees with 35 years of pensionable service will continue to contribute at a rate of 1%.

3.3. The increase in the pension contribution rates will raise the cost of pensionable service that occurs after December 31, 2005. Since the contribution rates are contingent on the dates of service, there is a requirement to identify what rate applies to which period as it relates to current service and leave without pay (LWOP) deficiencies.

4. PROCEDURES/INSTRUCTIONS

4.1. The increase in contribution rates will be effective January 1st of each affected calendar year, starting in 2006.

4.2. Contribution rates that will apply.

The following table sets out the contribution rates that will apply

	Current	2006	2007	2008	2009	2010	2011	2012	2013
Pensionable earnings up to the YMPE	4.0%	4.3%	4.6%	4.9%	5.2%	5.5%	5.8%	6.1%	6.4%
Pensionable earnings over the YMPE, including earnings above the RCA threshold	7.5%	7.8%	8.1%	8.4%	8.4%	8.4%	8.4%	8.4%	8.4%

4.3. There is no change required to the current business processes as this is an amendment to the pension contribution rates only. Other than having to use one contribution rate until December 31st and another from January 1st for the first part of a new pay year, the calculation method remains the same.

4.4. Current contributions

4.4.1. Every plan member is required to contribute to the Public Service Pension Fund (PSPF) and the Retirement Compensation Arrangements Account at the revised contribution rate for service that occurs after December 31, 2005. As the increase in the rate of contribution is tied to the calendar year, the change will not correspond to the beginning of a particular pay period or the effective date of the new year's YMPE. As the YMPE starts accumulating as of the first pay of the new year, it will be necessary to use the 2005 rates of contributions (PSPP low rate and RCA high rate) for services rendered in December 2005 that will be included in the first regular pay period of 2006. This process will need to be repeated yearly over the eight forthcoming years.

4.4.2. When issuing adjustments or retroactive payments (as a result of collective agreements, promotions, etc.), it will be important to apply the rates of contributions in effect when the service occurred, not when the salary was actually paid (pay periods).

4.4.3. Crown corporations are responsible for making the necessary changes to their source payroll and/or human resources systems to reflect the increase in plan member contribution rates.

4.5. Leave without pay

4.5.1. The amount of contributions required to be paid for periods of LWOP is the amount the contributor would have paid if he had not been absent. It should be noted that the single or double contribution rate factor, depending on the LWOP reason, has not changed.

4.5.2. Accordingly, the new contribution rates must be utilized for the applicable periods. Changes to the retaken on strength (RE-Take-on-Strength TOS) application will be made to reflect the new contribution rates.

4.6. Employer contribution

4.6.1. Any corresponding changes in the rates of employer contribution will be communicated through the annual year-end Superannuation Administration Manual (SAM) Special Bulletin.

4.6.2. The Crown Process Improvement Workbook (CPI) will be amended to reflect any changes in the employer annual contribution rates.

4.6.3. The contribution rates that the Public Service corporations will be required to make will continue to be the rates applicable at the time the employees'contributions are deducted from their pensionable earnings.

5. INQUIRIES

5.1. Any inquiries on the information contained in this document should be addressed to:

Diane Belliveau
Pension Policy and Advisory Services
Pension Services Directorate
Compensation Sector
P.O. Box 5010
Shediac NB E4P 9B4
506-533-5713

Original Signed by
Brigitte Fortin

Brigitte Fortin
Acting Director General
Compensation Sector
Accounting, Banking and Compensation