Superannuation administration manual: Special bulletin 2014-001

Subject: 2014 pension contribution rates, thresholds, indexation and calculations

March 14, 2014

  • Appendix A - Pension adjustment (PA) calculation for 2013

This Superannuation administration manual (SAM) special bulletin is the official document which supersedes all other communications received in relation to this subject. It is important to note that confirmation was received by the Treasury Board Secretariat that only two decimal points are to be used in the calculations described in this special bulletin.

1. Purpose

The purpose of this bulletin is to provide required information to separate employers and departments. Departments will use the information to respond to employee questions with respect to payroll deductions. Separate employers will use the information to program their payroll systems and ensure accurate calculation and remittance of both employer and employee Public Service Superannuation Act (PSSA) contributions:

  • the employee contribution rates to the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) and the change in average maximum pensionable earnings (AMPE) for the 2014 taxation year
  • the change to the Public Service Pension Fund (PSPF-Fund 2) and the Retirement Compensation Arrangement (RCA) employee contribution rates for the 2014 taxation year
  • the change to the PSPF-Fund 2 and RCA employer contribution rates for the government and the public service corporations for the 2014 taxation year
  • the PSSA salary threshold for the 2014 taxation year
  • the rate of pension indexing for the 2014 taxation year
  • examples of pension adjustment (PA) calculations for the 2013 taxation year

2. Policy

2.1. Canada Pension Plan and Quebec Pension Plan

Effective 2012 taxation year, the contribution rate for CPP and QPP are different.

For 2014 taxation year, the CPP remains set at 4.95% of contributory earnings. The contribution rate for the QPP has increased to 5.175% of contributory earnings.

The 2014 taxation year changes related to CPP and QPP are:

  • Yearly maximum CPP and QPP pensionable earnings (YMPE): $52,500.00
  • Yearly CPP and QPP basic exemption: $3,500.00
  • Yearly maximum CPP and QPP contributory earnings: $49,000.00
  • Yearly maximum CPP contributions: $2,425.50
  • Yearly maximum QPP contributions: $2,535.75

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 and QPP reduction in the benefit payable under the PSSA for individuals who retire in 2014 will be based on the lesser of the five-year average salary, or the AMPE at the earlier of the termination date, OR the date the employee reaches age 65, or the date the employee becomes entitled to receive CPP and QPP disability benefits.

  • Five-year AMPE for 2014 taxation year: $49,840

2.2. Public Service Pension Fund—Fund 2 employee contribution rate

In an attempt to achieve a more balanced cost-sharing ratio between plan members and the Government, the 2012 Federal Budget proposed that employee contribution rates be increased over time starting January 1, 2013. As a result, on October 19th, 2012, the Government introduced Bill C-45 in Parliament.

The 2012 Budget also announced that all new employees who become public service pension plan members on or after January 1, 2013 will contribute at a different rate than employees who became public service pension plan members prior to January 1, 2013.

Effective January 1, 2014, the employee contribution rates are:

  • For plan members who were participating in the plan prior to 2013
    • 7.50% on pensionable earnings up to the YMPE ($52,500)
    • 9.80% on pensionable earnings in excess of the YMPE ($52,500)
  • For new plan members on or after January 1, 2013
    • 6.62% on pensionable earnings up to the YMPE ($52,500)
    • 7.89% on pensionable earnings in excess of the YMPE ($52,500)

2.3. Salary threshold under the Public Service Superannuation Act

For 2014, employees whose annual salary rate is in excess of $155,000 will contribute to the PSPF-Fund 2 in respect of salaries below this limit and to the RCA account in respect of those salaries above the limit.

2.4. Retirement Compensation Arrangement employee contribution rate

The phased-in increase, mentioned in Section 2.2, will also apply to the RCA. For 2014, employees whose annual salary rate is in excess of $155,000 will contribute to the PSSA in respect of the portion below this limit and to the RCA in respect of the portion above limit.

Since salaries that exceed the threshold under the PSSA are also in excess of the YMPE, the contributions will be deducted at the same rate as those contributions payable under the PSSA.

Effective January 1, 2014, the employee contribution rates are:

  • For plan members who were participating in the plan prior to 2013
    • 9.80% on pensionable earnings in excess of the salary threshold ($155,000)
  • For new plan members on or after January 1, 2013
    • 7.89% on pensionable earnings in excess of the salary threshold ($155,000)

2.5. Employer contribution rate

The announced changes mentioned in Section 2.2, will also affect the PSPF Fund 2 and RCA employer contribution rates.

On December 14, 2012, Bill C-45, the Jobs and Growth Act, 2012 was enacted in Parliament. This statute enables the following pension changes:

2.5.1. Public Service Pension Fund—Fund 2

The employer contribution rates, effective January 1, 2014, are as follows:

  • For plan members who were participating in the plan prior to 2013
    • For current contributions, single rate leave without pay (LWOP) and single rate elective service, the employer's rate is 1.45 times the employee's single rate of contributions
    • For double rate LWOP and double rate elective service, the employer's rate is 0.23 times the employee's double rate of contributions
  • For new plan members on or after January 1, 2013
    • For current contributions, single rate leave without pay (LWOP) and single rate elective service, the employer's rate is 1.43 times the employee's single rate of contributions
    • For double rate LWOP and double rate elective service, the employer's rate is 0.21 times the employee's double rate of contributions

2.5.2. Retirement Compensation Arrangement account

The employer contribution rates, effective January 1, 2014, are as follows:

  • For plan members who were participating in the plan prior to 2013
    • For current contributions, single rate leave without pay (LWOP) and single rate elective service, the employer's rate is 7.59 times the employee's single rate of contributions
    • For double rate LWOP and double rate elective service, the employer's rate is 3.29 times the employee's double rate of contributions
  • For new plan members on or after January 1, 2013
    • For current contributions, single rate leave without pay (LWOP) and single rate elective service, the employer's rate is 7.59 times the employee's single rate of contributions
    • For double rate LWOP and double rate elective service, the employer's rate is 3.29 times the employee's double rate of contributions
Past service contribution rates

Employer contribution rates to be applied for past service, for which the contributions are made to either the PSPF-Fund 2 or the RCA account, are based on when the plan members remit their contributions, regardless of when the service was elected or the LWOP occurred.

For example, if plan members remit their contributions in 2013, apply the employer contribution rate for 2013, and so on.

2.5.3. Supplementary Death Benefit

Public service (Crown) corporations

The employer's monthly contribution rate for Supplementary Death Benefit (SDB) premiums continues to be $0.01 per $250 of the basic benefit of each employee, based on the PSSA, subsection 47(1) and section 53.

2.6. Pension increase under the Supplementary Retirement Benefits provision of the Public Service Superannuation Act

Part III of the PSSA provides for annual pension increases based on the cost of living index, for all pensions payable to former public servants or their survivors.

The pension increase authorized under Part III of the PSSA is 0.9% effective January 1, 2014.

2.7. Pension adjustment calculations

The following are the various maximums related to the PA for 2013 and 2014 taxation years:

  • The maximum PA for the 2013 taxation year is $23,670
  • The maximum PA for the 2014 taxation year is $24,330
  • The YMPE for the 2013 taxation year is $51,100
  • The YMPE for the 2014 taxation year is $52,500
  • The maximum salary used in the PA calculation for the 2013 taxation year is $150,900
  • The maximum salary used in the PA calculation for the 2014 taxation year is $155,000
  • The maximum benefit entitlement accrued for the 2013 taxation year is $2,696.67
  • The maximum benefit entitlement accrued for the 2014 taxation year is $2,770.00

The PA calculation will be based on the benefit entitlement (for PA purposes) multiplied by the factor 9, less $600 prorated, if necessary, by the number of pensionable pay periods in the year.

Appendix A of this bulletin contains examples of PA calculations for 2013 and a worksheet 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.

2.7.1. Terminated employees who receive a lump sum benefit payment

The form PWGSC-TPSGC 4242 (page available on Government of Canada network only) (Termination/Retirement Information) must be used to indicate PA figures from 1990 to the year of termination when a termination payment (transfer value (TV), cash termination allowance (CTA) or transfer of funds to another pension plan under a reciprocal transfer agreement (RTA) or a pension transfer agreement (PTA) is made to a member after December 31, 1996.

2.7.2. Leave without pay

It is important that an employee proceeding on LWOP be informed of the effect of PA reporting when he or she elects not to count the LWOP as pensionable service.

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.

A PA reported for any calendar year previous to the year in which the employee elects not to count a period of LWOP as pensionable service cannot be cancelled. This rule applies even if the employee terminated immediately following the LWOP and received a return of superannuation contributions.

Please refer to Compensation directives (CD) ARCHIVED CD 1995-010 dated March 6, 1995, for additional details on situations where an employee opts not to count a period of LWOP as pensionable.

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 Government of Canada Pension Centre (Pension Centre) is notified in writing that the employee has ceased to be employed (refer to SAM 2-2-3 (page available on Government of Canada network only)). There are instances where the employee is terminated for pay purposes, but because the Pension Centre 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.

2.7.3. Employees on Leave without pay to serve as full-time paid officials of bargaining agents

In cases where a plan member, 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 primary 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 bargaining agent. Please refer to SAM 2-4-8 (page available on Government of Canada network only) for additional details.

2.7.4. Clients serviced by the Regional Pay System

It is the responsibility of departmental personnel to advise the pay office (PO) of the required information concerning specific situations, such as dual employment (employee on pensionable LWOP and occupying a term position where he or she contributes to PSSA; for example relocation of spouse) and situations where the employee is on pensionable LWOP for educational leave. Please refer to Compensation directives (CD) ARCHIVED CD 1994-012 dated March 23, 1994, for additional information.

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 that leave period, departments must report to the PO, 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 Regional Pay System (RPS). Please note that this period will be from the date on which the code 62 was input into the RPS, and not from the effective date of the rehabilitation leave.

On receipt of the department's written notice of any employee on rehabilitation leave with pension type code 62 in field 39, the PO will credit the 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.

3. Inquiries

Any inquiries on the information contained in this document should be addressed to the Employer Support Services at the Government of Canada Pension Centre.

 

Original Signed by
Carrie E. Roussin

Carrie E. Roussin
Director General
Compensation Sector
Accounting, Banking and Compensation

Reference(s): CJA 9006-12, 9006-24, 9007-7-8, 9007-10-8, 9207-2-37

Appendix A

Pension adjustment calculation for 2013

Example 1 - Annual pensionable salary: $78,500

Step 1: Determine the annual benefit:

  • (1.375% x $51,100) + (2% x ($78,500 − $51,100))
    = $702.63 + $548.00
    = $1,250.63 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,696.67,

  • Impose $2,696.67
    (In this case, the benefit entitlement does not exceed $2,696.67.)

Step 3: Prorate the benefit entitlement by the number of pensionable pay periods.

  1. Full year $1,250.63 x 26/26 = $1,250.63
  2. Partial year $1,250.63 x 13/26 = $625.32

Step 4: Multiply the result of step 3 by a factor of 9.

  1. Full year $1,250.63 x 9 = $11,255.67
  2. Partial year $625.32 x 9 = $5,627.88

Step 5: Prorate $600 by the number of pensionable pay periods.

  1. Full year $600.00 x 26/26 = $600.00
  2. Partial year $600.00 x 13/26 = $300.00

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 the 2013 taxation year.

  1. Full year $11,255.67 − $600.00 = $10,656
  2. Partial year $5,627.88 − $300.00 = $5,328

Step 7: If the result is greater than $23,670

  • Impose $23,670
    (In this case, the result is less than $23,670)

Example 2 - Annual pensionable salary: $110,000

Step 1: Determine the annual benefit:

  • (1.375% x $51,100) + (2% x ($110,000 − $51,100))
    = $702.63 + $1,178.00
    = $1,880.63 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,696.67

  • Impose $2,696.67
    (In this case, the benefit entitlement does not exceed $2,696.67.)

Step 3: Prorate the benefit entitlement by the number of pensionable pay periods.

  1. Full year $1,880.63 x 26/26 = $1,880.63
  2. Partial year $1,880.63 x 22/26 = $1,591.30

Step 4: Multiply the result of step 3 by a factor of 9.

  1. Full year $1,880.63 x 9 = $16,925.67
  2. Partial year $1,591.30 x 9 = $14,321.70

Step 5: Prorate $600.00 by the number of pensionable pay periods.

  1. Full year $600.00 x 26/26 = $600.00
  2. Partial year $600.00 x 22/26 = $507.69

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 the 2013 taxation year.

  1. Full year $16,925.67 − $600.00 = $16,326
  2. Partial year $14,321.70 − $507.69 = $13,814

Step 7: If the result is greater than $23,670

  • Impose $23,670
    (In this case, the result is less than $23,670.)

Example 3 - Annual pensionable salary: $145,500

Step 1: Determine the annual benefit:

  • (1.375% x $51,100) + (2% x ($145,500Footnote 1 − $51,100))
    = $702.63 + $1,888.00
    = $2,590.63 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,696.67

  • Impose $2,696.67
    (In this case, the benefit entitlement does not exceed $2,696.67.)

Step 3: Prorate the annual benefit entitlement by the number of pensionable pay periods.

  1. Full year $2,590.63 x 26/26 = $2,590.63
  2. Partial year $2,590.63 x 13/26 = $1,295.32
  3. Partial year $2,590.63 x 22/26 = $2,192.07

Step 4: Multiply the result of step 3 by a factor of 9.

  1. Full year $2,590.63 x 9 = $23,315.67
  2. Partial year $1,295.32 x 9 = $11,657.88
  3. Partial year $2,192.07 x 9 = $19,728.63

Step 5: Prorate $600 by the number of pensionable pay periods.

  1. Full year $600.00 x 26/26 = $600.00
  2. Partial year $600.00 x 13/26 = $300.00
  3. Partial year $600.00 x 22/26 = $507.69

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 the 2013 taxation year.

  1. Full year $23,315.67 − $600.00 = $22,716
  2. Partial year $11,657.88 − $300.00 = $11,358
  3. Partial year $19,728.63 − $507.69 = $19,221

Step 7: If the result is greater than $23,670

  • Impose $23,670
    (In this case, the result is less than $23,670.)

Pension adjustment worksheet

Employee identification

  • Name:
  • Personal record identifier (PRI):
  • Date of birth:

Pension adjustment calculation for year

Information required to calculate the pension adjustment:

  1. YMPE for this year: $
  2. Pensionable earnings (element 734Footnote 2): $
  3. Number of pensionable pay periods (element 118Footnote 2)
  4. Total number of pay periods in the year (biweekly)
  5. Annualized pensionable earnings: (B ÷ C) x D: $

Calculation

Step 1: Annual benefit entitlement (maximum $2,696.67 for 2013 and $2,770.00 for 2014):

If E is equal to or lesser than the YMPE

0.01375Footnote 3 x EFootnote 1
0.01375Footnote 3 x ( ______ ) = $ _________

If E is greater than the YMPE

(0.01375Footnote 3 x YMPE) + (0.02 x (E − YMPE))
(0.01375Footnote 3 x ______ ) + (0.02 x ( ______ − _____ )) = $ ______Footnote 4

Step 2: Benefit entitlement accrued

(Annual benefit entitlement ÷ D) x C
(__Step 1__ ÷ __(D)__) x __(C)__ = $ ____Footnote 4

Step 3: Pension adjustment

(maximum $23,670 for 2013 and $24,330 for 2014):
(9 x benefit entitlement accrued) − ($600 ÷ D x C)
(9 x __Step 2__ ) − ($600.00 ÷ __(D)__ x __(C)___) = $ _____Footnote 4

Date modified: