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Important Notice – RE: CHANGES TO THE CPP AFFECTING EMPLOYERS, EMPLOYEES, AND THE SELF-EMPLOYED
This letter is to remind you of changes to the Canada Pension Plan (CPP) that become effective January 1, 2012 as mentioned in our previous letter of October 8, 2010.
The changes were included in Bill C-51 – Economic Recovery Act which received Royal Assent on December 15, 2009 and a summarized version of how those changes will affect your organization’s payroll is laid out below.
Current Legislation (2011 and Prior)
For all employees aged 18 to under 70 CPP withholdings are mandatory and matched by the employer until such time as the employee begins collecting a CPP pension or reaches age 70. In either case the employee becomes exempt from further CPP withholdings and the employer portion stops as well.
New Legislation (effective Jan. 1, 2012)
Note: The new legislation DOES NOT affect individuals who are considered disabled under CPP legislation or those who are 70 years of age or older.
Employees aged 60 to 65
For employees in this age bracket CPP withholdings are mandatory and matched by the employer regardless of whether or not the employee is collecting a CPP retirement pension. The exemption no long exists.
This means all employees aged 60 to 65 who are currently exempt because they are collecting CPP lose their exemption January 1, 2012 and the employer must begin deducting CPP from their payroll again. CRA has stated there will be no grandfathering.
Employees aged 65 to 70
Under the new legislation CPP withholdings are also mandatory for all employees between the ages of 65 and 70 even if they are collecting CPP unless they choose to opt out. In order for employees in this age group to opt out of having CPP withheld from their payroll they are required to send CRA a signed and completed form CPT30 – Election to Stop Contributing to the Canada Pension Plan and to provide a copy of that form to any and all of their employers.
Before you stop withholding CPP from qualifying staff’s pay you need to have all of the following documentation on file:
- Proof of age (employee’s must be aged 65 to under 70)
- Copy of the employee’s CPP “Award Letter”
- Copy of the completed and signed CPT30 election form that was filed with CRA.
The information we’ve received lists the following as acceptable proof of age:
- Signed TD1 form
- Driver’s Licence
- Passport or other photo I.D. that indicates date of birth.
Employees who have elected to stop contributing to CPP can later revoke that election and restart their contributions which employers must match.
Form CPT30 – Election to Stop Contributing to the Canada Pension Plan
Note: If your only income is from self-employment do not complete form CPT30 use Schedule 8 and file it with your tax return.
The election is effective the first day of the month following the month the employee signs the form. For example, if you receive a form from one of your staff dated in January 1, 2012 you would not stop withholding CPP until the first pay period in February 2012.
Employees between 65 and 70 who are collecting a CPP retirement pension and DO NOT want to start contributing to the plan again in January 2012 MUST file their CPT30 form in December 2011 and MUST give their employer(s) a copy as well prior to January 1, 2012. Please be aware that CRA WILL NOT accept forms dated prior to December 1st, 2011.
Important – Employees can only make one election per calendar year. So if an employee changes his/her mind within the same calendar year in which they first filed an election you CANNOT change whether or not you are withholding CPP.
You can download the forms and find further information at the links below
Schedule 8 http://www.cra-arc.gc.ca/E/pbg/tf/5000-s8-9/5000-s8-9-10e.pdf please note this link is to the 2010 form, CRA has not posted the 2011 version yet.
Form CPT30 http://www.cra-arc.gc.ca/E/pbg/tf/cpt30/cpt30-11e.pdf
Further Information http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/cpp-rpc/cppchng-eng.html
Planning Suggestions
We recommend that you begin reviewing your employee records now to identify any staff members who will be affected by these changes and go over the information with them to avoid any confusion come 2012. To assist you with discussing this information with your staff we have enclosed a sample memo that you are more than welcome to copy and hand out, form CPT30, and a chart to help you determine whether or not your employees’ pensionable earnings are subject to CPP. All of these items are also available on our website
Due to the volume of information regarding the new CPP legislation please do not hesitate to contact our office with any questions you may have (250) 758-5557.
Sincerely,
Douglas K. Parkhurst, CA and staff
Gary Ruffle Ltd.
Chartered Accountants