Chapter 3 - Canada Pension Plan and Employment Insurance Requirements

Question 1

The purpose of the act is to protect contributors and their families against the loss of income due to retirement, disability and death.

Answer 1

Canada Pension Plan Act

Question 2

social insurance program legislated under the federal Canada Pension Plan Act

Answer 2

Canada Pension Plan (CPP)

Question 3

social insurance program legislated under the federal Employment Insurance Act

Answer 3

Employment Insurance (EI)

Question 4

The program provides temporary income support to unemployed workers while looking for employment or upgrading their skills

Answer 4

Employment Insurance Act.

Question 5

provides special benefits to workers who take time off work due to specific life events. Special benefits are available for illness, pregnancy, caring for a newborn or newly adopted child, a critically ill or injured person, or a family member who is seriously ill with a significant risk of death.

Answer 5

EI program

Question 6

membership or participation to __________ and ________ is compulsory for certain types of employment.

Answer 6

Canada Pension Plan (CPP) and Employment Insurance Plan (EI)

Question 7

Employers are responsible for deducting ________ contributions, instead of CPP contributions, from their Québec employees and remitting those contributions to ___________.

Answer 7

Québec Pension Plan (QPP) | Revenu Québec (RQ)

Question 8

TRUE OR FALSE: As a payroll professional, you will need to know which employees must participate in these plans, what amounts to withhold from employees and how much the employer will have to remit or send to the Canada Revenue Agency (CRA)

Answer 8

TRUE

Question 9

The form used by Service Canada to determine an individual’s eligibility to collect Employment Insurance benefits when their employment is interrupted, how much the benefit will be and how long they will collect it

Answer 9

The Record of Employment (ROE)

Question 10

Was designed as an income replacement program for individuals who have been in pensionable employment during their working life

Answer 10

The Canada Pension Plan (CPP)

Question 11

Individuals can apply for their CPP retirement pension when they turn ______.

Answer 11

60

Question 12

The pension was originally designed to replace about ___ percent of the earnings on which a person’s contributions were based. As a result of enhancements introduced in 2019, future pension benefits may increase to ___ percent of contributory earnings.

Answer 12

25 | 33

Question 13

There are three Canada Pension Plan benefits:

Answer 13

• retirement pension
• disability benefits (for contributors with a disability and their dependent children)
• survivor benefits (including the death benefit, the survivor’s pension and the children’s benefit)

Question 14

Canada Pension Plan contributions must be withheld from employees who:

Answer 14

CPP contributions must be withheld from employees who have reached the age of 18 but are under 70
CPP contributions must be withheld from employees who are in pensionable employment.
CPP contributions must be withheld from employees in pensionable employment who are not considered disabled by either Service Canada or Retraite Québec.
CPP contributions must be withheld from employees who are 65 years of age but are under the age of 70 and are in receipt of Canada or Québec Pension Plan retirement pension but have not filed an election to stop paying CPP contributions (form CPT30).

Question 15

When to stop and start CPP Contributions?

Answer 15

Employee turning 18 years of age
Employee turning 70 years of age
Employee between 65 and 70 submits form CPT 30

Question 16

TRUE OR FALSE: Pensionable employment includes most employment in Canada under a contract of service (where an employee-employer relationship exists)

Answer 16

TRUE

Question 17

The following types of employment are excluded by legislation and do not constitute pensionable employment

Answer 17

• employment in agriculture, or an agricultural enterprise, horticulture, fishing, hunting, trapping, forestry, logging, or lumbering,
• employment of a casual nature other than for the purpose of the employer’s usual trade or business
• employment of a person, other than as an entertainer, in connection with a circus, fair, parade, carnival, exposition, exhibition, or other similar activity if that person is:
  o not regularly employed by that employer and
  o employed by that employer for less than seven days in a year
• employment of a person by a government body as an election worker if that person
  o is not a regular employee of the government body and
  o works for less than 35 hours in a calendar year
• employment as a teacher on exchange from a foreign country
• employment of a spouse or common-law partner if the employer cannot deduct the remuneration paid as an expense under the Income Tax Act
• employment of a member of a religious order who has taken a vow of perpetual poverty. This applies whether the remuneration is paid directly to the order or paid by the member to the order.
• employment for which no cash remuneration is paid, where the employee is the child of or is maintained by, the employer
• employment of a person who helps the employer in a disaster or a rescue operation if the employee is not regularly employed by the employer

Question 18

The payments and benefits subject to CPP contributions generally fall into the following categories:

Answer 18

1. Income from employment
2. Taxable benefits and allowances
3. Certain fees and honorariums
4. Controlled tips
5. Paid leaves
6. Benefits under certain wage-loss replacement plans

Question 19

Includes, but is not limited to, salary and wages or other remuneration, commissions, wages in lieu of termination notice, bonuses, and the value of board and lodging (other than an exempt allowance paid to an employee at a special work site or remote work location)

Answer 19

Income from employment

Question 20

Rent-free and low-rent housing, car allowances, interest-free and low-interest loans, personal use of an automobile that an employer owns or leases, certain gifts, prizes and awards, holiday trips, subsidized meals, employer contributions to an employee’s Registered Retirement Savings Plan (RRSP), and employer-paid group term life and accidental death and dismemberment insurance premiums. It also includes any taxable benefits paid in cash.

Answer 20

Taxable benefits and allowances

Question 20

Honorariums by virtue of employment or office, incentive payments, directors’ fees, fees paid to board or committee members, executor’s and administrator’s fees earned by an executor or administrator to administer an estate as long as the person does not act in this capacity in the regular course of business.

Answer 20

Certain fees and honorariums

Question 21

Tips and gratuities are received for services performed, such as tips received by someone working in a restaurant. Controlled gratuities are tips that the employer, not the customer, control, for example when a certain percentage is added to the bill by the restaurant.

Answer 21

Controlled Tips

Question 22

Remuneration received while on furlough or sabbatical. Examples include vacation, sick leave, or lost time pay from a union. Also included are payments received under a supplementary unemployment benefit plan (SUB), which does not qualify as a SUB plan under the Income Tax Act, such as maternity or parental top-up payments and sick leave credits.

Answer 22

Paid leaves

Question 23

A salary continuance paid before or after a Workers’ Compensation Board (WC) claim is decided, as well as:
a. any advance or loan that is more than the WC award
b. any advance or loan not repaid or
c. a top-up amount paid by the employer

Answer 23

Paid leaves

Question 24

a) Benefits paid directly by employers to employees from a wage-loss replacement plan (WLRP)
b) WLRP benefits paid by an insurance company, trustee or independent organization on behalf of the employer where the employer:
* funds part or all of the plan
* exercises a degree of control over the terms of the plan and
* determines eligibility for benefits.

Answer 24

Benefits under certain wage-loss replacement plans

Question 25

TRUE OR FALSE: When an employer provides employees with non-cash taxable benefits, the CRA requires that the value of the benefit be included in the employee’s earnings as it is earned or enjoyed.

Answer 25

TRUE

Question 26

One of the most common non-cash taxable benefits is _____________

Answer 26

employer-paid group term life insurance.

Question 27

Canada Pension Plan (CPP) contributions are calculated on an _____________

Answer 27

employee’s pensionable earnings (PE).

Question 27

Payments and Benefits Not Subject to Canada Pension Plan Contributions

Answer 27

• Death benefits
• Pension benefits
• A payment at the end of employment that is not considered employment income, for example, severance payments or retiring allowances
• Wage-loss replacement plan (WLRP) benefits paid under a contract of insurance
• Workers’ compensation advances or loans
• Payments linked to special conditions under the Income Tax Act

Question 28

All employees in pensionable employment will have the first CPP contribution withheld based on:

Answer 28

• a yearly maximum amount of pensionable earnings from which employers deduct CPP contributions up to an annual maximum contribution.
• an annual basic exemption, an amount employees are allowed to earn before CPP is required to be deducted.
• a contribution rate employers use to calculate the amount of CPP to deduct from employees.

Question 29

an amount employees are allowed to earn before CPP is required to be deducted

Answer 29

an annual basic exemption,

Question 30

withheld from employees with pensionable earnings greater than the current year YMPE (subject to the first CPP contribution) up to a limit called the year’s additional maximum pensionable earnings (YAMPE).

Answer 30

second CPP contribution

Question 31

All employees in pensionable employment will have the first CPP contribution withheld based on:

Answer 31

• a yearly maximum amount of pensionable earnings from which employers deduct CPP contributions up to an annual maximum contribution.
• an annual basic exemption, an amount employees are allowed to earn before CPP is required to be deducted.
• a contribution rate employers use to calculate the amount of CPP to deduct from employees.

Question 32

TRUE OR FALSE: Once an employer has deducted the annual maximum for the second CPP contribution from an employee, no further CPP deductions are withheld from the employee for that year.

Answer 32

TRUE

Question 33

TRUE OR FALSE: Employers are required to match employee CPP contributions. Employers match their employees’ first and second CPP contributions dollar for dollar and remit both portions to the CRA.

Answer 33

TRUE

Question 34

maintain by CRA and can be used to calculate the withholding for a single payment

Answer 34

Payroll Deductions Online Calculator (PDOC)

Question 35

How much is the yearly basic exemption for CPP one?

Answer 35

$3500

Question 36

TRUE OR FALSE: When dividing the annual exemption by the number of pay periods in the year, regular rounding rules do not apply, per the CRA’s instructions. Rounding would result in a yearly basic exemption greater than $3,500

Answer 36

TRUE

Question 37

TRUE OR FALSE: If an employee’s pay period pensionable earnings are less than the pay period exemption, then no CPP contribution is required for that pay.

Answer 37

TRUE

Question 38

TRUE OR FALSE: There may be situations where an employee receives more than one payment in a single pay period. For instance, an employee may receive their regular pay as well as a bonus processed as a separate payment. When calculating the first CPP contribution, only one exemption applies.

Answer 38

TRUE

Question 39

How much is the annual maximum limit of the first CPP contribution?

Answer 39

$3867.50

Question 40

TRUE OR FALSE: Once an employee reaches the maximum first CPP contribution for the year the second contribution will begin.

Answer 40

TRUE

Question 41

TRUE OR FALSE: Once the maximum second contribution for the year has been withheld from the employee, no further CPP contributions will be required for the current year.

Answer 41

TRUE

Question 42

Three situations require special consideration when calculating an employee’s CPP contributions:

Answer 42

• pro-rating the annual CPP maximum contribution
• employees hired during the year
• mergers and acquisitions

Question 43

the process required to calculate CPP contributions based on pensionable employment for only part of the year.

Answer 43

Prorating

Question 44

The annual CPP maximum contribution for the year must be pro-rated when the employee:

Answer 44

• turns age 18
• turns age 70
• is considered to be disabled by Service Canada
• is at least 65 years of age and under the age of 70, in receipt of C/QPP retirement pension, and files an election to stop CPP contributions
• dies

Question 45

TRUE OR FALSE: When an employee leaves one employer to start work with another employer during the year, the new employer must deduct CPP contributions without considering what the employee’s previous employer had withheld.

Answer 45

TRUE

Question 46

TRUE OR FALSE: Employers are not required to re-start the employees’ CPP contributions in the case of a merger or an acquisition.

Answer 46

TRUE

Question 47

provides temporary income benefits to individuals who have lost their employment through no fault of their own

Answer 47

Employment Insurance program

Question 48

Employment Insurance program also provides special benefits to individuals taking certain types of leaves from employment, such as:

Answer 48

• Maternity or parental leave
• Illness or injury leave
• Caregiving leave

Question 49

TRUE OR FALSE: Unlike CPP contributions, there are no age restrictions on the withholding of EI premiums.

Answer 49

TRUE

Question 50

are withheld on all insurable earnings earned through insurable employment, regardless of an employee’s age.

Answer 50

EI premiums

Question 51

Types of Employment Not Subject to Employment Insurance Premiums

Answer 51

• casual employment, if it is for a purpose other than the employer’s usual trade or business
• employment where the employer and the employee are not dealing with each other at arm’s length. Essentially, this covers family connections (blood relationship,marriage, common-law relationship or adoption); however, if the terms and conditions of employment of a related person are such that a similar contract would have been negotiated with any other person, the related person will be considered to be dealing at arm’s length. Rulings can be requested where an employer is not sure whether or not to deduct EI premiums in this situation.
• employment by a corporation of a person who controls more than 40% of the corporation’s voting shares
• employment that constitutes an exchange of work or service
• employment in Canada under an exchange program if the employee is not remunerated by a Canadian employer
• employment of a member of a religious order who has taken a vow of perpetual poverty and whose remuneration is paid either directly to the order or by the member to that order
• employment of a person in a rescue operation, as long as that person is not regularly employed by that employer

Question 52

Employment Insurance (EI) premiums are calculated on and deducted from an employee’s insurable earnings, which are insurable salary, wages, cash allowances and other remuneration paid to an employee up to their ________________

Answer 52

maximum insurable earnings (MIE).

Question 53

Payments and Benefits Not Subject to Employment Insurance Premiums

Answer 53

• all non-cash taxable benefits, except the value of board and lodging, received in a period if paid cash for the pay period
• employer contributions to an employee’s RRSP where the employee cannot withdraw amounts from the plan until they retire or cease to be employed
• a retiring allowance or severance pay
• director’s fees (unless paid to a director of a crown corporation listed in Schedule III of the Financial Administration Act)
• monies earned (salary, banked overtime, bonus, vacation, etc.) before the death of an employee and not yet paid at the time of death
• a supplement for any part of an Employment Insurance maternity, parental or compassionate care benefit period
• WLRP benefits paid under a contract of insurance
• a payment by an employer under a Supplementary Unemployment Benefit plan (SUBP)
• an advance or loan, equal to the workers’ compensation award, paid to employees before or after the workers’ compensation board claim is decided
• a top-up amount you pay to an employee in addition to the workers’ compensation award paid by a workers’ compensation board if you pay it after the claim is accepted by the workers’ compensation board

Question 54

The default employer multiplier is ___ times the employees’ premiums.

Answer 54

1.4

Question 55

Some employers have applied for and been granted a reduced employer multiplier of less than 1.4 times the employee’s premium. To qualify for a reduced rate, an employer must maintain a __________, which reduces employment insurance benefits payable to individuals by Service Canada under certain circumstances.

Answer 55

short-term disability plan (STD)

Question 56

TRUE OR FALSE: Once the maximum premium for the year has been withheld from the employee, no further EI premium deductions would be required for the current year.

Answer 56

TRUE

Question 57

TRUE OR FALSE: Once an employer has deducted the maximum premiums for the year, no further EI premiums should be withheld for that year.

Answer 57

TRUE

Question 58

TRUE OR FALSE: Employers are not required to re-start EI premiums if the organizational structure changes due to mergers or acquisitions, provided the employees’ work is continuous.

Answer 58

TRUE

Question 59

Employers must return ___ of the savings from the premium reduction to all employees to whom the reduced rate applies.

Answer 59

5/12

Question 60

form employers must complete for each employee who has an interruption of insurable employment, according to Employment and Social Development Canada (ESDC) and Service Canada criteria

Answer 60

The Record of Employment (ROE)

Question 61

single most important document produced by payroll as it uses the employment history information

Answer 61

The Record of Employment (ROE)

Question 62

Service Canada uses the employment history information on the ROE to decide:

Answer 62

• if a person qualifies for Employment Insurance (EI) benefits
• what the benefit amount should be
• how long a person is eligible for these benefits

Question 63

There are two ROE formats available –

Answer 63

electronic and paper

Question 64

Electronic ROEs are submitted to Service Canada using one of these methods:

Answer 64

• through ROE Web using compatible payroll software to upload ROEs from the organization’s payroll system
• through ROE Web manually entering data online through Service Canada’s website
• through Secure Automated Transfer (SAT), which may be performed by a payroll service provider using bulk transfer technology

Question 65

The paper ROE is a three-part form: the original and the second and third are copies. The copies are distributed as follows:

Answer 65

• copy 1 is given to the employee to submit to Service Canada if they file for EI benefits
• copy 2 is sent to Service Canada
• copy 3 is kept by the employer for their records; to comply with records retention legislation, the ROE must be securely stored for six years after the year to which the information relates

Question 66

Paper ROE forms are identified by ______, and employers should maintain control of the ROE forms by recording the serial numbers of all blank forms and keeping a log of deleted or distributed forms.

Answer 66

serial numbers

Question 67

Whether or not the employee intends to file a claim for EI benefits, the ROE must be issued:

Answer 67

• each time an employee experiences an interruption of earnings or
• when Service Canada requests one

Question 68

An interruption of earnings occurs in the following situations:

Answer 68

• An employee has had or is anticipated to have seven (7) consecutive calendar days with no work and no insurable earnings from the employer. This is called the seven-day rule.
• When an employee’s salary falls below 60% of regular weekly earnings because of illness, injury, quarantine, pregnancy, the need to care for a newborn or a child placed for adoption, the need to provide care or support of a family member who is gravely ill with a significant risk of death or the need to provide care or support for a critically ill or injured child or adult.

Question 69

If filing electronically, employers with a weekly, bi-weekly or semi-monthly pay cycle have ___ calendar days after the end of the pay period in which there was an interruption of earnings to issue the electronic ROE.

Answer 69

five

Question 70

If the pay cycle is monthly or every four weeks, employers must issue electronic ROE forms on the earlier of:

Answer 70

• five (5) calendar days after the end of the pay period when the interruption of earnings begins, and
• 15 calendar days after the first day of the interruption of earnings

Question 71

When filing a paper ROE, an employer must issue the ROE within ___ calendar days of the first day of an interruption of earnings or the date the employer becomes aware of the interruption.

Answer 71

five

Question 72

Hours of work are used to determine:

Answer 72

• if individuals are entitled to EI benefits and, if so,
• how long they may collect EI benefits

Question 73

considered an hour worked and paid within insurable employment even though the hour of work may have been paid at a higher pay rate.

Answer 73

insurable hour

Question 74

TRUE OR FALSE: Employers must track all insurable earnings for employees, even those whose earnings are over the annual maximum.

Answer 74

TRUE