CD 2011-027

Subject: Changes to the Canada Pension Plan (CPP) and Information Regarding the Quebec Pension Plan (QPP)

November 30, 2011 Updated December 16, 2011

1. Purpose

1.1. The purpose of this directive is to provide you with information on the Canada Pension Plan (CPP) changes that will come into effect on January 1, 2012, and the existing Quebec Pension Plan (QPP) rules with regards to employees who are at least 60 years of age and who are receiving a retirement pension under the CPP or QPP.

1.2. A notice of information to employees has been included with this Compensation Directive.

2. Cancellation

2.1. This directive cancels Compensation Directive 1994-011 "Cessation of Canada Pension (CPP) Contributions for Persons Still Employed After Age 65 and in Receipt of CPP and Quebec Pension Plan (QPP) Benefits", dated March 9, 1994 (revised June 16, 2010).

This directive incorporates the information contained in Compensation Directive 1998-009 "Change to the Quebec Pension Plan Effective January 1, 1998", dated March 30, 1998. Please note that the policies related to this directive have not changed.

3. Background

3.1. Under the current CPP rules (before January 1, 2012), employees between the ages of 60 and 70 who are in receipt of CPP/QPP benefits do not contribute to the CPP.

A change to the CPP legislation declares that, effective January 1, 2012, employees who are at least 60 years of age, but under 70, must contribute to the CPP, even if these employees are in receipt of a CPP or QPP retirement pension.

3.2. QPP rules introduced in January 1, 1998, stipulate that employees working in Quebec who are 60 years of age or older and in receipt of a retirement pension under the QPP or CPP, or who have reached age 70, must contribute to the QPP. Prior to this reform of the QPP (before January 1, 1998), these employees were exempt from QPP contributions.

4. Policy

4.1. CPP Contribution Rules

Effective January 1, 2012, employees in receipt of a CPP or QPP retirement pension are subject to CPP contributions if they are:

  • 60 to 65 years of age;
  • at least 65 years of age, but under 70, unless an election to stop contributing to CPP has been filed by the employee;
  • at least 65 years of age, but under 70, if the employee has revoked his or her election to stop paying contributions in 2013 or later.

Employees who have reached 70 years of age, and employees who are considered to be disabled under the CPP or QPP, will continue to be exempt from CPP contributions. Please note that employees who are subject to QPP contributions (i.e. employees working in Quebec) are not affected by these rules.

4.2. QPP Contribution Rules

Since January 1, 1998, employees working in Quebec who are at least 60 years of age and in receipt of a QPP or CPP retirement pension must contribute to the QPP.

Quebec employees who are under 18 years of age, and those who are in receipt of a disability pension under the QPP or CPP, are exempt from QPP contributions.

5. Procedures and Instructions

5.1. On December 20, 2011 (December 19, 2011 for Pay Offices 03 and 22 only), the Regional Pay System (RPS) will automatically change the CPP/QPP status code (FIELD 38) from a 2 (non-contributor) to a 1 (contributor) for all employees who on January 1, 2012, are at least 60 years of age but under 70, except those who work in Quebec, in order to commence CPP deductions at source effective for the first pay of 2012 (Pay Period [PP] 01).

5.2. Form CPT30 "Election to stop contributing to the Canada Pension Plan, or revocation of a prior election"

Employees working anywhere except Quebec who are at least 65, but under 70, and who are in receipt of a CPP or QPP retirement pension, can opt to stop contributing to the CPP by completing the "Election to stop contributing to the Canada Pension Plan, or revocation of a prior election" CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election form.

Before stopping the deduction of CPP contributions from an employee's pensionable earnings, compensation advisors have to make sure the employee is at least 65 years of age but under 70, is receiving a retirement pension from CPP or QPP and has not already completed Form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election during the current calendar year. Employees cannot revoke an election in the same calendar year that they elected to start contributing to the CPP.

5.3. Compensation advisors should ask employees to provide all of the following:

Note: Employees who want to elect to stop contributing to the CPP will have to complete Parts A, B, and C of form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election and give a copy of the election form to their compensation advisor. This form will need to be kept in the employee's personnel file. In addition, employees will have to send the original election form to the CRA using the address shown on the back of the form.

Updated Compensation advisors will be required to change the CPP/QPP status code back to 2 (non-contributor) for the employees who are in receipt of a CPP/QPP disability pension and for those who have elected not to contribute to the CPP by completing the Form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. Compensation advisors will stop the CPP deductions by processing a status change (STP field 38 (see PPIM 14-9-1) or PPIM 4-4-12 (PAC 12F38)) transaction effective the first day of the first pay period in the month following the month the employee signed and dated Part C of the election form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. Any overdeducted contributions will be refunded by the pay office (PO).

Updated Compensation advisors will also be responsible to stop CPP deductions for employees who turn age 70 on or after January 2, 2012, by processing an STC field 38 (see PPIM 14-9-1 or PPIM 4-4-12 (PAC 12F38)) transaction to change the CPP/QPP status code to a 2. Any overdeducted contributions will be refunded by the PO.

5.4. RPS Reports

The following reports will be produced for client organizations showing the following information:

  • "Bulk Transaction Report - CPP/QPP status change":
    • All employees who on January 1, 2012 will be at least 60 years of age but under 70 and will start contributing to CPP in PP01/2012.
  • "Employees reaching 70 years of age in 2012":
    • All employees (excluding those working in Quebec) who will turn 70 years of age between January 2, 2012 and December 31, 2012. This report will be provided to ensure that CPP deductions are being stopped once the employee reaches age 70, as required by the legislation. Client organizations will be responsible to create their own B.F. system for employees who turn 70 years of age beyond December 31, 2012.

6. Inquiries

6.1. Any inquiries on the information contained in this document should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.

Original Signed by
Carrie E. Roussin

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

Reference(s):

Information Notice to Employees

Change to the Canada Pension Plan (CPP) Contribution Rules for Employees between 60 and 70 Years of Age

The purpose of this notice is to provide you with information on the changes to the Canada Pension Plan (CPP) contribution rules with regards to employees who are at least 60 years of age, but under 70, and who are receiving a CPP or Quebec Pension Plan (QPP) retirement pension.

Effective January 1, 2012, employees who are at least 60 years of age, but under 70, and who are in receipt of a CPP or QPP retirement pension are subject to contribute to the CPP.

Under the new rules, CPP contributions will be deducted from the pensionable earnings paid to employees who are:

  • 60 to 65 years of age;
  • at least 65 years of age, but under 70, unless the employee has filed an election to stop contributing to the CPP (Employees will need to complete CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election form "Election to stop contributing to the Canada Pension Plan, or revocation of a prior election", and forward it to their compensation advisor);
  • at least 65 years of age, but under 70, if the employee revoked his or her election to stop paying CPP contributions in 2013 or later.

Employees who are in receipt of a disability pension under the CPP or QPP, and those who have reached age 70, continue to be exempt from making CPP contributions.

Those who are not subject to the CPP (i.e. employees working in Quebec) are not affected by these rules.

Therefore, starting January 1, 2012, CPP contributions will be deducted from the regular pay for all affected employees.

If you work anywhere except Quebec, are at least 65 years of age, but under 70, and are receiving a CPP or QPP retirement pension, you can opt to stop contributing to the CPP by completing the CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election form. This form is available on the Canada Revenue Agency (CRA) Website.

In order to stop contributing to the CPP, you will need to provide your compensation advisor with all of the following:

CPP payroll deductions will stop as of the first pay in the month following the month you provided the required information to your compensation advisor.

Any request for information regarding the foregoing should be addressed to your compensation advisor.