Q&A with payroll expert about upcoming amendments, employer requirements
Question: I understand there will be changes to the Canada Pension Plan (CPP) in 2012 that will affect employee and employer contributions. What are these changes?
Answer: Starting on Jan. 1, 2012, changes to the CPP will affect employees who are between the ages of 60 and 69.
It will be mandatory for employees with pensionable earnings who are at least 60 years of age, but not 65, to pay CPP contributions even if they receive a CPP or Quebec Pension Plan (QPP) retirement pension. This may involve restarting CPP deductions for employees who had previously stopped making contributions because they receive a CPP/QPP retirement pension. Employers will also have to pay their share of CPP contributions for these employees.
Employees who are at least 65 years of age but under the age of 70 and who are collecting a CPP or QPP retirement pension while working in pensionable employment will have the option to either pay CPP contributions or opt out of contributing by completing form CPT30.
Question: What is form CPT30?
Answer: The CPT30 form (Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election) is reserved for employees who are at least 65 years of age but under 70 and collecting a CPP or QPP retirement pension. These employees will be able to choose whether or not they want to contribute to CPP. Employees in this age bracket who do not want to pay CPP contributions starting in January 2012 will need to complete part C of the CPT30. They will have to send the original form to the Canada Revenue Agency (CRA), provide a copy to the payroll department for each of their employers and keep a copy for their records.
If an employee who has opted not to pay contributions later decides to contribute, he will have to complete the applicable sections on form CPT30.
The original form must go to the CRA and the employee will have to give a copy to each employer and keep a copy for his own records. It is important to note the opting in and out rules for CPP deductions can only be done once per year.
That means if an employee who has opted not to pay contributions in 2012 decides partway through the year she wants to restart CPP contributions, the earliest the employee will be able to make the request will be January 2013.
For example, if an employee files a CPT30 in January 2012 to opt out of paying CPP contributions, the opting back in to pay CPP again can only be done in January 2013. If the employee decides to opt out again, he will have to wait until January 2014.
The CPT30 form should be available on the CRA’s website in November.
Question: What is the earliest date employees can file a CPT30 form if they do not want CPP deductions taken off their pay in January 2012?
Answer: Eligible employees must complete the CPT30 form and send it to the CRA (original) and the payroll department (a copy of the original) by December 2011.
Question: With the changes in 2012, do we have to start CPP deductions for employees who are collecting a disability pension under the CPP/QPP?
Answer: No, employees collecting a disability pension under the CPP/QPP will not be affected by the changes and will continue to be exempt from CPP deductions.
Question: One of our employees started to collect her 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, 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. With the changes, it will be mandatory for all employees who are at least 60 years of age and under 65 and who are collecting CPP/QPP retirement pension to start paying CPP again even if they were exempt before the change in legislation.
You will have to restart the employee’s CPP contributions effective with the first pay of January 2012. Employees who are 65 years old, but under age 70, can choose whether or not to pay CPP contributions.
Question: We have an employee who is 66 and not collecting CPP or QPP retirement pension. He has informed us he does not want to pay CPP in 2012.
Can we stop his CPP deductions?
Answer: The upcoming changes to the CPP legislation in 2012 do 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/QPP retirement benefits and files a CPT30 form to stop his deductions or until he reaches 70 years of age.
Question: What happens if an employee forgets to provide us with the CPT30 form to revoke a prior election that was made in the previous year and we have been deducting CPP?
Answer: If an employee wants to restart her CPP contributions and revoke a prior election but forgets to notify the employer by the end of the month when the form was signed, she can still have the CPP deductions taken off that month’s pensionable earnings, but this can be done when the employee files her personal income tax return by completing form CPT20, Election to Pay Canada Pension Plan Contributions and pay the required amounts.
Question: Do these changes affect the QPP contributions?
Answer: No, the changes only apply to CPP contributions.
Question: Are there any plans to grandfather employees under the age of 65 who have already stopped paying CPP contributions?
Answer: There will be no grandfathering of employees who were already receiving a CPP/QPP retirement benefit before January 2012. All employees who are at least 60 years of age, but under age 65, who are collecting CPP/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.
Annie Chong is manager of the Payroll Consulting Group at Carswell, a Thomson Reuters business. For more information, visit www.carswell.com.