Chapter 12 Flashcards
Meaning they are financed through contributions from employees, employers, and self-employed persons, as well as returns on the pension fund
Contributory Plans
The Canada Pension Plan Investment Board’s (CPPIB) role?
to invest contributions not needed to pay current benefits
_______ ________ delivers the CPP program benefits, the ________ _______ _______ collects the contributions, and the _______ manages the investment of funds.
Service Canada
Canada Revenue Agency (CRA)
CPPIB
Participation in CPP is mandatory for Canadians between ____ and ____ years old, who have earned income in excess of the minimum income amount, called the…..
18 to 65 years old
Year’s Basic Exemption (YBE) which is $3,500
Earnings on which contributions must be paid are those above the year’s basic exemption (YBE) and up to the…
year’s maximum pensionable earnings (YMPE).
What was the year’s basic exemption for 2021?
$3,500
If you were employed in 2021, what was the CPP contribution rate?
5.45% each (10.9% total) up to YMPE.
Employee pays 5.45% and Employer pays 5.45%
To calculate CPP contributions, you must deduct the _____ from your salary and then apply the contribution rate.
Ex: ($61,000 - $3500) *5.45% = $3,166.45 each
Year’s Basic Exemption
Contributors to the CPP/QPP program are eligible for four main benefits:
- Retirement pension benefits
- Disability benefits
- Survivors’ benefits
- Death benefit
(Regarding funding CPP) In 2024, employees and employers will begin contributing 4% each on an additional range of earnings called
Yearly Additional Maximum Pensionable Earnings (YAMPE)
The CPP contributory period begins
on January 1, 1966 or the day a contributor turns 18
The CPP contributory period ends..
the month before the pension begins (the month before the contributor’s 70th birthday), or the month the contributor dies, whichever comes first.
Those who choose to begin collecting before they turn 65 will receive a permanently reduced pension, which is adjusted by ____% for every month they retire before age 65.
0.6%
If they begin receiving payments at age 60 (the earliest possible date), the monthly payment will be _____% lower than if they had waited until they turned 65.
- 0%
0. 6 * 60months = 36%
For contributors who start collecting after age 65, the base amount of the pension increases by ____% for each month in which the recipient is over 65, to a maximum of 42.0%.
0.7%
60 months * 0.7= 42%
The CPP benefit paid to people who continue to work and make CPP contributions while already receiving a CPP retirement pension.
Post-retirement benefit (PRB) or (retirement pension supplement)
Starting at age, ____ employees and self-employed persons may choose to stop contributing to the CPP.
65
Disability pensions begin _____ months after the month in which the person became disabled, and they are payable every month until the beneficiary recovers from the disability, reaches age 65, or dies (whichever comes first).
four
With a disability pension, The four-month waiting period is waived if the disability occurs within _____ years of a previous disability.
five
Both the CPP and QPP disability pensions consist of a flat-rate component and an earnings-related component. The latter is equal to _____% of a retirement pension, calculated as if the contributor had reached 65 in the month when the disability pension became payable.
75%
This benefit 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.
Disability Benefit
Regarding the death benefit, the amount payable under the CPP is equal to six months’ worth of a person’s calculated CPP retirement pension, or what this amount would have been had the person been age 65 at the time of death. The maximum amount payable is…
$2,500 total
Following the death of a qualified CPP or QPP contributor, a lump-sum death benefit is payable to his or her ________.
estate
Regarding the death benefit, to qualify, the deceased must have contributed to the relevant program for at least ______ years. If the contributory period
was longer than nine years, the contributor must have made contributions in_______ of the calendar years in the contributory period, or 10 calendar years, whichever is less.
three
1/3 (a third)
To be eligible for the Children’s Benefit when the contributor dies, the child must be under ____ or, for CPP, between ____ and ___ and a full-time student attending a recognized school or university.
18 years old
18 and 25
If the client is likely to live past 75, it makes mathematical sense to start drawing the full amount at age _____, rather than the reduced amount at age 60.
65
You can contribute to CPP up to the month you turn ___
70
A social assistance program payable to all Canadians or legal residents (including landed immigrants) of age 65 and older who meet certain residence requirements.
Old Age Security (OAS)
How is OAS financed?
Through federal tax revenues and the benefits are adjusted upward four times a year to reflect increases in the CPI.
The OAS program consists of four benefits:
- OAS pension
- Guaranteed Income Supplement (GIS)
- Allowance
- Allowance for the Survivor
Eligibility for OAS pension amount does not depend on contributions to the program; it is based on ________
residency
To qualify for an OAS pension, individuals must be ____ years of age or over and must fulfill one of the following qualifications:
65 years
- 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 legal residents of Canada on the day preceding the day they stopped living in Canada
To receive OAS pension in Canada, applicants must have lived in Canada for at least ____ years of after reaching age 18.
10 years
To receive a pension outside of Canada, applicants must have lived in Canada for at least ____years after age 18.
20 years
A person who has lived in Canada after reaching age 18 for periods that total at least _____years, may qualify for a full OAS pension.
40
A person who has not lived in Canada for 40 years after age 18 may still qualify for a full pension if, on
July 1, 1977, he or she was 25 years of age or older, and met one of the following conditions:
- Lived in Canada on July 1, 1977
- Had lived in Canada before July 1, 1977, after reaching age 18
- Held a valid immigration visa on July 1, 1977`
Similar to the CPP retirement pension, one can increase one’s OAS entitlement by deferring the start date beyond age 65. The OAS entitlement increases by _____% per month for each month past age 65 during which collection is deferred.
0.6%
Once a full or partial OAS pension has been approved, it may be paid indefinitely to pensioners living outside
Canada who have lived in Canada for at least ___ years since age 18.
20
Once their income exceeds a set threshold, they must
repay all or part of the social benefits they receive in any year. This provision is properly known as the OAS Recovery Tax, but is often referred to as the
OAS Clawback
The total amount of OAS pension a person must repay is ___% of the amount by which that person’s net income (including OAS) exceeds the CRA’s annual stipulated t[[hreshold of $__________.
15%
$79,845
CRA Clawback threshold for 2021 was $79,845, so 15% of any amount above that must be “clawed back”
To avoid OAS clawback, consider taking funds from this account to keep your taxable income low.
TFSA
Service Canada implemented a process to ___________ enroll seniors who are eligible to receive the OAS pension. In December 2017, it was expanded to include GIS
automatically
The third and fourth components of the OAS program
Allowance and Allowance for the Survivor.
The Allowance provides money for low-income seniors who meet the following qualifications:
- They have a spouse 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, or when they last lived here.
- 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.
Once a full or partial OAS pension has been approved, it may be paid indefinitely outside Canada, if the pensioner has lived in Canada for at least ___ years after reaching 18 years of age.
20
GIS must be applied for and qualified for every ______
year, but the gov’t has a system where they automatically apply for you if you are eligible.
Which pension benefit is not taxable?
GIS is not a taxable benefit, whereas CPP/QPP, OAS and company pension benefits are taxable.
The maximum amount of earnings on which CPP/QPP contributions must be made.
year’s maximum pensionable earnings (YMPE)
A pension offered to the widowed spouse of a qualified contributor to CPP/QPP. Following the death of the contributor, the spouse ) may apply for this pension.
survivor benefit
A lump-sum benefit payable upon the death of a qualified CPP/QPP contributor. It may be paid to the deceased’s estate, to a person responsible for funeral expenses, or to a surviving spouse or other next of kin
death benefit
A benefit provided to low-income seniors who have a deceased spouse and whose sole annual income is less than the maximum annual threshold.
Allowance for the Survivor
The amount of employer-employee contributions to CPP that will have to be made on an additional range of earnings, beyond the original earnings limit, that will apply starting in 2024.
yearly additional maximum pensionable earnings (YAMPE)
A monthly, non-taxable benefit to OAS pension recipients who have a low income and are living in Canada.
Guaranteed Income Supplement
A benefit provided to a low-income senior with a spouse who receives OAS, who is eligible for the GIS, and who meets certain age and residence requirements
The Allowance
A benefit that may apply if a contributor to CPP is unable to work before being eligible to collect the retirement pension due to severe physical or mental impairment during the contributory period.
disability benefit
The CPP benefit paid to people who continue to work and make CPP contributions while already receiving a CPP retirement pension.
post-retirement benefit (PRB)
The government-mandated minimum income amount above which employees must participate in the CPP/QPP program.
year’s basic exemption (YBE)
A benefit that provides support for dependent children of a deceased CPP/QPP contributor. If a qualified contributor to the CPP/QPP dies leaving unmarried, dependent children of a certain age, they become eligible for this benefit.
children’s benefit
To collect OAS if you are living outside of Canada, you must:
- Be 65
- Have been a Canadian Citizen or Legal Resident the day before you left.
- Have lived in Canada for 20 years
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 ______ of the full OAS pension for each full year lived in Canada after the applicant’s 18th birthday.
1/40th
Amount at which point OAS benefits are fully clawed back
Maximum Threshold, which was $129,260 in 2022
two basic categories of rates of payment for the GIS:
- The first category applies to single pensioners, including widowed, divorced, or separated persons, and to married pensioners whose spouses do not receive either the basic OAS pension or the Allowance
- The second applies both to legally married couples and couples living in common-law relationships, where both spouses are pensioners.
OAS clawback starts at the minimum threshold of…
$79,845 (2021)
OAS benefits are adjusted upward ____ times a year to reflect increases in _____.
four times a year (once a quarter)
Consumer Price Index (CPI)
Benefits from both CPP and QPP, except for death
benefits, are recalculated annually to reflect increases in the
Consumer Price Index (CPI).
Old age security recipients with low amounts of income that qualifies as “other income” may be eligible for the GIS if the other income is lower than the maximum annual threshold established by CRA.
The 2019 budget announced a new partial exemption of ___% that will apply up to $10,000 of additional employment and self-employment income (beyond the initial $______).
50%
$5,000
