Government Benefits Plans - CPP

Question 1

What has the CPP contribution rate been over history?

Answer 1

Began in 1965 at 1.8%. Was increased to 4.95% from 2003 - 2018. Currently 5.45% (in 2021), will be increasing to 5.95% by 2023.

Question 2

On what type of income are CPP premiums paid first?

Answer 2

On employment income before any self-employment income.

Question 3

Who administers CPP?

Answer 3

CRA collects premiums, the program is administered by Employment & Social Development Canada through their outreach arm, Service Canada.

Question 4

How do you currently calculate the maximum CPP benefit?

Answer 4

The average of the previous 5 years’ (including current year) YMPE x 25%.

Question 5

Why are the maximum CPP benefits and actual benefits indexed differently?

Answer 5

Maximum benefits are indexed to YMPE while actual benefits are indexed to CPI.

Question 6

What is the 2021 & 2023 maximum CPP benefit?

Answer 6

$1203.75 & $1306.57

Question 7

What is the difference between drop-out and drop-in years?

Answer 7

Drop-out: drop out years from calculations.

Drop-in: apply average level of earnings based on 5 years prior to the period of disability/child-rearing years etc.

Question 8

When is drop-in more favourable than drop-out?

Answer 8

When a person’s highest income years were just prior to either disability/child rearing years.

Question 9

How do you have years dropped in or out from a CPP calculation?

Answer 9

Periods of disability are automatically calculated and either dropped in or out. Must elect to have child rearing years removed. CPP automatically removes 17% lowest years.

Question 10

What can cause people to underestimate their mortality?

Answer 10

Recency bias

Question 11

At what mortality is the break-even point for the decision to take CPP early or delay?

Answer 11

Mortality in mid-to-late 70s - may want to take early

If living past age 80 - may want to delay

Question 12

What should you focus on instead of the break-even age of taking CPP?

Answer 12

Lifetime loss

Question 13

What two situations create the PRB?

Answer 13

1. If CPP is taken early and you continue working, must continue contributing which creates PRB
2. If CPP is taken at 65 and you continue working, you have the option to continue contributing which creates the PRB

Question 14

How much does the PRB increase CPP benefits by?

Answer 14

1/40th of the max (2.5%) actuarily adjusted for actual contributions

Question 15

How much income can a CPP disability recipient earn without losing benefits?

Answer 15

$6,600/year (was $5,000)

Question 16

What is the elimination period for CPP DI?

Answer 16

4 months

Question 17

How much is the benefit for the child of a disabled CPP contributor?

Answer 17

$257.58 (2021)

Question 18

How much is the benefit for the spouse of a disabled CPP contributor?

Answer 18

No benefit for a spouse

Question 19

How much is the CPP disability benefit?

Answer 19

Flat $510.85 + 75% of maximum retirement benefit (actuarily adjusted). Maximum in 2021 is $1413.66, ($1538 in 2023) which is higher than the retirement benefit.

Question 20

If a survivor is 65+ and collecting CPP, how much would they receive in CPP survivor benefits at the death of their spouse?

Answer 20

Own CPP + 60% of deceased’s benefits up to the maximum

Question 21

If a survivor is 65+ and NOT collecting CPP, how much would they receive in CPP survivor benefits?

Answer 21

60% of deceased’s benefit

Question 22

If a survivor is 60-65 and collecting CPP, how much would they receive in CPP survivor benefits?

Answer 22

Flat $199.31 + 37.5% of deceased’s benefit up to CPP max based on when the survivor started (reductions apply)

Question 23

If a surviving spouse is under 60 or 60-65 and not collecting CPP, how much would they receive in CPP survivor benefits?

Answer 23

Flat $199.31 + 37.5% of deceased’s benefit

Question 24

If a surviving spouse is disabled, how much would they receive in CPP survivor benefits?

Answer 24

Flat $199.31 + 37.5% of deceased’s benefit + own CPP DI up to maximum CPP DI benefit

Question 25

What is required to collect OAS?

Answer 25

Minimum 10 years residency