Ch 12 - Government Pension Programs

Question 1

year’s basic exemption (YBE).

Answer 1

Minimum amount after which participation CPP is compulsory

The YBE in 2020 is $3,500.

Question 2

Contribution rates for CPP and QPP 2020 Self employed and employed

Answer 2

CPP
Self employed: 10.5
Employed: 5.25

QPP
Sel employed: 11.40
QPP: 5.70

Question 3

Contributors to the CPP/QPP program are eligible for four main benefits:

Answer 3

• Retirement pension benefits
• Disability benefits
• Survivors’ benefits
• Death benefit

Question 4

CALCULATING THE RETIREMENT PENSION BENEFIT

Answer 4

In general, the CPP retirement pension replaces approximately 25% of the maximum pensionable earnings on which
people have made contributions.

Question 5

CPP STATEMENT OF CONTRIBUTIONS

Answer 5

estimate of how much that person’s monthly retirement pension could be at age 65 based on average earnings since age 18

Question 6

impact of collecting QPP benefits before or after 65 (formula)

Answer 6

0. 6% less for every month they retire before age 65. starting age 60
1. 7% more for every additional after age 65. as late as 70. capped to 42%

Question 7

post-retirement benefit

Answer 7

CPP benefit paid to people who continue to work and make CPP contributions
while already receiving a CPP retirement pension.
Income exceeds YBE

Question 8

DIVISION OF CPP AND QPP CREDITS AFTER DIVORCE, SEPARATION, OR ANNULMENT

Answer 8

pension credits earned during a marriage or common-law relationship are to be split between two spouses after divorce or separation.

Question 9

disability benefit

Answer 9

May apply when a contributor to the CPP program is disabled during the contributory period, before the person is eligible
to collect the CPP retirement pension.

Question 10

ELIGIBILITY for disability benefit

Answer 10

• They are considered disabled according to CPP legislation.
• They have earned a specified minimum amount and contributed to the CPP in four of the last six years.
• They are under age 65.

Question 11

DISABILITY BENEFIT PAYMENTS Structure

Answer 11

Both the CPP and QPP disability pensions consist of a flat-rate component and an earnings-related component.
The latter is equal to 75% of a retirement pension

Question 12

DEATH BENEFITS of a qualified CPP or QPP contributor

Answer 12

The amount payable under the CPP is equal to six months’ worth of a person’s calculated CPP retirement pension
The maximum amount payable is a $2,500 lump sum

Question 13

what can a spouse apply for following the death of a CPP contributor?

Answer 13

CPP SURVIVOR BENEFITS

Question 14

CPP Benefit: The amount a surviving spouse or common-law partner may receive depends on the following factors:

Answer 14

• Whether the spouse or common-law partner is also receiving a CPP or QPP disability or retirement pension
• How much, and for how long, the contributor has paid into the plan
• The spouse or common-law partner’s age when the contributor dies

Question 15

CPP - CHILDREN’S BENEFIT

Answer 15

If a qualified contributor to the CPP or QPP dies leaving unmarried, dependent children, monthly benefits are payable to each child.

The child must be under 18—or, for CPP, between 18 and 25 and a full-time student attending a recognized school or university.

Question 16

CPP - When helping your clients decide when to begin collecting benefits, you should consider the following factors:

Answer 16

Cash flow needs
Health
other income sources
Nature of other income sources
Attitude toward the CPP program
Tax position

Question 17

Old Age Security Program - The OAS program consists of four benefits:

Answer 17

• Old Age Security
• Guaranteed Income Supplement
• Allowance
• Allowance for the Survivor

Question 18

OAS is based on

Answer 18

Residency - does not depend on contributions

Question 19

OAS Eligibility

Answer 19

• They must be Canadian citizens or legal residents of Canada on the day preceding the application’s approval.
• If no longer living in Canada, they must have been Canadian citizens or a legal residents of Canada on the day
preceding the day they stopped living in Canada.

Question 20

OAS conditions in and outside Canada

Answer 20

To receive a pension in Canada, applicants must have lived in Canada for at least 10 years of after reaching age 18.

To receive a pension outside of Canada, applicants must have lived in Canada for at least 20 years after age 18.

Question 21

FULL OAS PENSION requirement

Answer 21

lived in Canada after reaching age 18 for periods that total at least 40 years

Question 22

PARTIAL OAS PENSION

Answer 22

A person who cannot meet the requirements for the full OAS pension may qualify for a partial pension.
A partial pension is earned at the rate of 1/40th of the full OAS pension for each full year lived in Canada after the applicant’s
18th birthday.

Question 23

OAS BENEFITS AND THE PENSION CLAWBACK (formula)

Answer 23

15% of the amount by which net income
exceeds the threshold figure)

2020 threshold –> $79,054

Question 24

THE GUARANTEED INCOME SUPPLEMENT

Answer 24

The Guaranteed Income Supplement (GIS) provides a monthly non-taxable benefit to OAS pension recipients who have a low income and are living in Canada.

Question 25

two basic categories of rates of payment for the GIS: (guaranteed income supplements)

Answer 25

• Single pensioners, including widowed, divorced, or separated persons, and to
married pensioners whose spouses or common-law partners do not receive either the basic OAS pension

• both to legally married couples and couples living in common-law relationships, where both spouses and common-law partners are pensioners.

Question 26

ALLOWANCE

Answer 26

The Allowance provides money for low-income seniors who meet the following qualifications:

• They have a spouse or common-law partner who receives an OAS pension and is
eligible for the GIS.
• They are between 60 and 64 years old.
• They are Canadian citizens or legal residents at the time the Allowance is approved
• They have an annual combined income less than the maximum allowable annual threshold.
• They lived in Canada since age 18 for at least 10 years.

Question 27

Allowance for the Survivor

Answer 27

Provides money for low-income seniors who have a deceased spouse or common-law
partner and whose sole annual income is less than the maximum annual threshold.