Superannuation administration manual: Special bulletin 2017-001

Subject: 2017 pension contribution rates, thresholds, indexation and calculations

August 8, 2017

  • Appendix A - Pension adjustment calculation examples for 2016 taxation year

This superannuation administration manual 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 regarding the new contribution rates, thresholds, indexation and calculations for 2017. 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 changes discussed in this bulleting cover the following areas:

  • 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 2017 taxation year;
  • the Public Service Pension Fund (PSPF) and the Retirement Compensation Arrangement (RCA) employee contribution rates for the 2017 taxation year;
  • the PSPF and RCA employer contribution rates for the government and the public service corporations for the 2017 taxation year;
  • the PSSA salary threshold for the 2017 taxation year;
  • the rate of pension indexing for the 2017 taxation year; and
  • the pension adjustment (PA) calculations for the 2016 taxation year.

2. Pension contribution rates, thresholds, indexation and calculations

2.1. Canada Pension Plan and Quebec Pension Plan

For the 2017 taxation year, the contribution rate for the CPP remains set at 4.95% of contributory earnings. The contribution rate for the QPP has increased to 5.40% of contributory earnings.

The 2017 taxation year changes related to CPP and QPP are:

  • Yearly maximum CPP and QPP pensionable earnings (YMPE): $55,300.00
  • Yearly CPP and QPP basic exemption: $3,500.00
  • Yearly maximum CPP and QPP contributory earnings: $51,800.00
  • Yearly maximum CPP contributions: $2,564.10
  • Yearly maximum QPP contributions: $2,797.20
  • Five-year average maximum pensionable earnings (AMPE) for 2017 taxation year: $53,480.00

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 and QPP reduction in the benefit payable under the PSSA for individuals who retire in 2017 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.

2.2. Public Service Pension Fund employee contribution rate

All new employees who become public service pension plan members on or after January 1, 2013 must contribute at a different rate than employees who became public service pension plan members prior to January 1, 2013.

Effective January 1, 2017, the employee contribution rates are:

  • For plan members who were participating in the plan prior to 2013
    • 9.47% on pensionable earnings up to the YMPE ($55,300.00)
    • 11.68% on pensionable earnings in excess of the YMPE ($55,300.00).
  • For new plan members on or after January 1, 2013
    • 8.39% on pensionable earnings up to the YMPE ($55,300.00)
    • 9.94% on pensionable earnings in excess of the YMPE ($55,300.00).

2.3. Salary threshold under the Public Service Superannuation Act

For 2017, employees whose annual salary rate is in excess of $163,100.00 must contribute to the PSPF 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

For 2017, employees whose annual salary rate is in excess of $163,100.00 must contribute 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, 2017, the employee contribution rates are:

  • For plan members who were participating in the plan prior to 2013
    • 11.68% on pensionable earnings in excess of the salary threshold ($163,100.00).
  • For new plan members on or after January 1, 2013
    • 9.94% on pensionable earnings in excess of the salary threshold ($163,100.00).

2.5. Employer contribution rate

The Public Service Superannuation Act (PSSA) was amended effective January 1, 2013 to allow the contribution rates for all active PSSA members to continue to gradually increase over time to attain an employer to employee cost-sharing ratio of 50:50. This statute enabled the following pension contribution rates:

2.5.1. Public Service Pension Fund

The employer contribution rates, effective January 1, 2017, 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 service buybacks, the employer's rate is 1.01 times the employee's single rate of contributions.
    • For double rate LWOP and double rate service buybacks, the employer's rate is 0.01 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 service buybacks, the employer's rate is 1.00 times the employee's single rate of contributions.
    • For double rate LWOP and double rate service buybacks, there is no employer double rate of contribution for these types of service.

2.5.2. Retirement Compensation Arrangement account

Effective January 1, 2017 for the RCA, the employer contribution rates are as follow:

  • For plan members who were participating in the plan prior to 2013
    • For current contributions, single rate leave without pay (LWOP) and single rate service buybacks, the employer's rate is 7.74 times the employee's single rate of contributions.
    • For double rate LWOP and double rate service buybacks, the employer's rate is 3.37 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 service buybacks, the employer's rate is 7.74 times the employee's single rate of contributions.
    • For double rate LWOP and double rate service buybacks, the employer's rate is 3.37 times the employee's double rate of contributions.

Note: Rates are now the same.

2.5.2.1 Past service contribution rates

Employer contribution rates to be applied for past service, for which the contributions are made to either the PSPF or the RCA account, are based on when the plan members remit their contributions, regardless of when the service was purchased (bought back) or the LWOP occurred.

For example, if plan members remit their contributions in 2017, apply the employer contribution rate for 2017, and so on.

2.5.3. Supplementary death benefit

Public service (Crown) corporations

The employer's monthly contribution rate for SDB premiums continues to be $0.01 per $250.00 of the basic benefit of each employee, based on the Supplementary Death Benefit Regulations, section 28.

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 1.3% effective January 1, 2017 - no change from prior year 2016

2.7. Pension adjustment calculations

The following are the various maximums related to the PA for 2016 and 2017 taxation years:

  • The maximum PA for the 2016 taxation year is $25,410.00
  • The maximum PA for the 2017 taxation year is $25,630.00
  • The YMPE for the 2016 taxation year is $54,900.00
  • The YMPE for the 2017 taxation year is $55,300.00
  • The maximum salary used in the PA calculation for the 2016 taxation year is $161,700.00
  • The maximum salary used in the PA calculation for the 2017 taxation year is $163,100.00
  • The maximum benefit entitlement accrued for the 2016 taxation year is $2,890.00
  • The maximum benefit entitlement accrued for the 2017 taxation year is $2,914.44

The PA calculation will be based on the benefit entitlement (for PA purposes) multiplied by the factor 9, less $600.00 prorated, if necessary, by the number of pensionable pay periods in the year.

Appendix A of this bulletin contains examples of PA calculations for 2016 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

There is a requirement to add the PA amounts to the PWGSC-TPSGC 4242 (page available on Government of Canada network only) as part of the termination/retirement process for employees paying into the pension plan. 

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 pension contributions.

Please refer to Compensation Directives (CD) ARCHIVED CD 1995-010 dated March 6, 1995, to clarify the PA reporting when the employee opts not to count his/her period of leave without pay (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. Tax slips adjustment/PA reporting for specific situations

The compensation process for tax slips adjustment concerning specific situations such as: dual employment (employee on pensionable leave without pay (LWOP) occupying a term employment where he contributes to the Public Service Pension Plan, such as relocation of spouse cases), when the employee is on pensionable educational LWOP, and when the employee is on LWOP to serve as a full-time paid official of a bargaining agent (union) will be communicated at a later date.

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
Jeff Marcantonio

A/Director General
Compensation Sector (Pension)
Accounting, Banking and Compensation Branch

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

Appendix A

Pension adjustment calculation examples for 2016 taxation year

Example 1 - Annual pensionable salary: $78,500.00

Step 1: Determine the annual benefit:

  • (1.375% × $54,900.00) + (2% × ($78,500.00 − $54,900.00))
    = $754.88 + $472.00
    = $1,226.88 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,890.00:

  • Impose $2,890.00
    (In this case, the benefit entitlement does not exceed $2,890.00.)

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

  • Full year $1,226.88 × 26/26 = $1,226.88
  • Partial year $1,226.88 × 13/26 = $613.44

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

  • Full year $1,226.88 × 9 = $11,041.92
  • Partial year $613.44 × 9 = $5,520.96

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

  • Full year $600.00 × 26/26 = $600.00
  • Partial year $600.00 × 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 2016 taxation year:

  • Full year $11,041.92 − $600.00 = $10,441.92
  • Partial year $5,520.96 − $300.00 = $5,220.96

Step 7: If the result is greater than $25,410.00:

  • Impose $25,410.00
    (In this case, the result is less than $25,410.00)

Example 2 - Annual pensionable salary: $110,000.00

Step 1: Determine the annual benefit:

  • (1.375% × $54,900.00) + (2% × ($110,000.00 − $54,900.00))
    = $754.88 + $1,102.00
    = $1,856.88 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,890.00:

  • Impose $2,890.00
    (In this case, the benefit entitlement does not exceed $2,890.00)

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

  • Full year $ 1,856.88 × 26/26 = $1,856.88
  • Partial year $1,856.88 × 22/26 = $1,571.21

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

  • Full year $ 1,856.88 × 9 = $16,711.92
  • Partial year $1,571.21 × 9 = $14,140.89

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

  • Full year $600.00 × 26/26 = $600.00
  • Partial year $600.00 × 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 2016 taxation year:

  • Full year $16,711.92 − $600.00 = $16,111.92
  • Partial year $14,140.89 − $507.69 = $13,633.20

Step 7: If the result is greater than $25,410.00:

  • Impose $25,410.00
    (In this case, the result is less than $25,410.00)

Example 3 - Annual pensionable salary: $183,900.00

Step 1: Determine the annual benefit:

  • (1.375% × $54,900.00) + (2% × ($183,900.00 − $54,900.00))
    = $754.88 + $2,580.00
    = $3,334.88 (annual benefit entitlement)

Step 2: If the annual benefit entitlement is greater than $2,890.00:

  • Impose $2,890.00
    (In this case, the benefit entitlement exceeds $2,890.00)

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

  • Full year $2,890.00 × 26/26 = $2,890.00
  • Partial year $2,890.00 × 13/26 = $1,445.00
  • Partial year $2,890.00 × 22/26 = $2,445.38

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

  • Full year $2,890.00 × 9 = $26,010.00
  • Partial year $1,445.00 × 9 = $13,005.00
  • Partial year $2,445.38 × 9 = $22,008.42

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

  • Full year $600.00 × 26/26 = $600.00
  • Partial year $600.00 × 13/26 = $300.00
  • Partial year $600.00 × 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 2015 taxation year:

  • Full year $26,010.00 − $600.00 = $25,410.00
  • Partial year $13,005.00 − $300.00 = $12,705.00
  • Partial year $22,008.42 − $507.69 = $21,500.73

Step 7: If the result is greater than $25,410.00:

  • Impose $25,410.00
    (In this case, the result is less than $25,410.00)

Pension adjustment worksheet

Employee identification

  • Name:
  • Personal Record Identifier (PRI):
  • Date of Birth:

Pension Adjustment calculation for year

(Pension adjustment calculator) (page available on Government of Canada network only)

Information required to calculate the Pension Adjustment:

  1. Yearly Maximum Pensionable Earnings (YMPE) for this year: $
  2. Pensionable earnings: $
  3. Number of pensionable pay periods 
  4. Total number of pay periods in the year (biweekly)
  5. Annualized pensionable earnings: (B ÷ C) × D: $

Calculation

Step 1: Annual benefit entitlement (maximum $2,890.00 for 2016 and $2,914.44 for 2017):

If E is equal to or lesser than the YMPE

0.01375Footnote 1 × E
0.01375Footnote 1 × (______) = $ _________

If E is greater than the YMPE

(0.01375Footnote 1 × YMPE) + (0.02 × (E − YMPE))
(0.01375Footnote 1 × ______) + (0.02 × (______ − _____)) = $ ______Footnote 2

Step 2: Benefit entitlement accrued

(Annual benefit entitlement ÷ D) × C
(__Step 1__ ÷ __ (D) __) × __(C) __ = $ ____Footnote 2

Step 3: Pension adjustment

(maximum $25,410.00 for 2016 and $25,630.00 for 2017):
(9 × benefit entitlement accrued) − ($600.00 ÷ D × C)
(9 × __Step 2__) − ($600.00 ÷ __ (D) __ × __(C) ___) = $ _____Footnote 2

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