Payroll expert Annie Chong answers questions about the upcoming changes to the CPP
Question: One of our employees started to collect her Canada Pension Plan (CPP) retirement pension in August 2010, and we stopped her CPP deductions in September 2010, with proof (an award letter issued by Service Canada). With the changes to the CPP in 2012, can we continue to not deduct CPP if she advises us in writing she does not want to contribute?
Answer: It will depend on the employee’s age.
The changes to the CPP being implemented in 2012 will make it mandatory for all employees in pensionable employment who are at least 60 but under 65 and who are collecting a C/QPP retirement pension to start paying CPP contributions again even if they were exempt before the change in legislation.
If the employee is in this age group, you will have to restart her CPP contributions effective with the first pay of January 2012.
Employees in pensionable employment who are 65 years old, but under age 70, can opt out of paying CPP contributions by completing part C of a CPT30 form, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election.
Employees must sign the form, send the original to the Canada Revenue Agency, provide a copy to the payroll department (for each of their employers) and keep a copy for their records.
Employees who are at least 70 are not affected by the legislative changes.
If an employee who has opted not to pay contributions later decides to contribute, the employee will have to complete the applicable sections on form CPT30 for revoking the election to stop contributions.
It is important to note the opting in and out rules for CPP deductions can only be done once a year.
That means if an employee who has opted not to pay contributions in 2012 decides part way through the year that she wants to restart CPP contributions, the earliest the employee will be able to make the request will be in January 2013.
CPP contributions for non-pensioners
Question: We have a 66-year-old employee who is not collecting a CPP or QPP retirement pension. He has informed us he does not want to pay CPP contributions in 2012. Can we stop his CPP deductions?
Answer: The changes to the CPP legislation will not affect this employee. Since he is not collecting CPP or QPP retirement benefits, he will have to continue paying CPP until he starts collecting CPP or QPP retirement benefits and files a CPT30 form to stop his deductions or until he reaches age 70.
CPP overpayments
Question: What happens if payroll accidentally deducts CPP contributions from an employee who has provided us with a CPT30 to elect not to pay contributions? Do we have to reimburse the deduction?
Answer: If you deduct CPP contributions on earnings you pay to an employee after the employee’s CPT30 election takes effect, the deduction will be considered an overpayment.
You should reimburse the employee for the deduction and adjust your payroll records.
The amount you reimburse the employee should not be reported on the employee’s T4.
Since the reimbursement will mean you remitted more to the Canada Revenue Agency (CRA) than required, the CRA will allow you to reduce a future remittance in the same calendar year by the overpayment amount.
If it is not possible to reimburse the employee, report the total CPP contributions you deducted and the correct pensionable earnings on the employee’s T4.
The employee may request a refund of the over contribution from the CRA when filing his or her personal income tax return.
The employer may request a refund of its over contribution by completing and submitting to the CRA a PD24 form, Application For a Refund of Overdeducted CPP Contributions and/or EI Premiums.
The employer must make the request for a refund no later than four years from the end of the year in which the overpayment happened.
CPP for employees aged 60-64
Question: With the changes to the CPP coming in 2012, are there any plans to “grandfather” employees who are at least 60 years old, but under the age of 65 who have already stopped paying CPP contributions?
Answer: There will be no grandfathering for employees who were already receiving a C/QPP retirement benefit before January 2012.
All employees who are at least 60, but under age 65 and who are collecting C/QPP retirement benefits while working in pensionable employment will be required to pay CPP contributions effective with the first pay period with a pay date falling in January 2012.
