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Retirement Planning- FIP > Unit 2- GOVERNMENT sponsored retirement Income programs > Flashcards

Unit 2- GOVERNMENT sponsored retirement Income programs Flashcards

1
Q

CPP

A

-FEDERALLY ADMINISTERED PROGRAM

-monthly pensions in retirement to:
~contributors, disabled contributors + their kids + widows + orphaned kids of deceased
~Lump sum benefit

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2
Q

CPP VS QPP

A

-if contributor to one plan, becomes contributor to other plan:
~ earnings records merged + recorded under both plans
~1 combined pension rec’d

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3
Q

common law partner

A
  • Lives w/taxpayer in relationship
  • in relationship + living together min 1 yr OR parent of taxpayer
  • terminated if they separate for 90 days
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4
Q

CPP premiums

A

[(Lesser of earnings and YMPE $50,100) - YBE $3500) X employee contribution rate

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5
Q

CPP basic eligibility

A
  • worked + contributed to CPP

- Pensionable employment: employment in Canada not specifically exempt under CPP

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6
Q

CPP Exempt Workers

A

-Individuals exempt from making contributions + not eligible to receive

includes those who:

  • earn less than exempt amt $3500 YBE
  • Migratory workers - work less than 25 days a year + make less than $250 a yr from same job
  • casual work other than usual trade/biz
  • members of religious order who’s entire income given to order
  • government body election
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7
Q

CPP Contributory Period

A

must contribute if:
-over 18yrs old in Canada + earn more than YBE $3500
-starts: later of Jan 1 1996 or 18th bday
-Ends: earliest of:
~ when get retirement pension
~70 yrs old
~ death

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8
Q

CPP contributory Earnings

A

Specific % of contrinutory earnings:

-ALL pensionable employment earnings above exemption (YBE= $3500), up to yearly max pensiobale earnings (YMPE=$55,300)

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9
Q

CPP Contributory Earnings FORMULA

A

[(lesser of Pensionable emp vs YMPE) - YBE)]

for self employed:
[(lesser of net biz income vs YMPE)- YBE)]

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10
Q

Contributions rates

A

Employer/employee: 4.95%

self employed 9.9%

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11
Q

CPP retirement benefits Eligibility

A
  • made 1 valid contribution
  • age 60
  • worked in canada
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12
Q

Post retirement benefits (PRB)

A
  • working beneficiary must keep contributing till age 65

- age 65-70- can choose to keep contributing

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13
Q

Normal Retirement age

A

age 65

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14
Q

Retirement @ 65

A

CPP= max monthly benefit 1/12 of 25% YMPE

  • max monthly benefit based on avg YMPE of 5yrs before age 65
  • max CPP /mth= $1114.47
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15
Q

CPP pensionable earnings formula (before age 65?)

A

YMPE last 5 yrs X (pens. earnings in yr being adj / YMPE of yr being adj)

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16
Q

General Low Earnings Dropout

A
  • 25% avg career earnings over contributory period

- 17% of years when individual had no/low earnings dropped from benefit calclation

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17
Q

General Low earnings Dropout

A

Contribution Period X 17%

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18
Q

Retirement BEFORE age 65

A
  • can choose to get CPP age 60

- reduces benefit by 0.6%/mth

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19
Q

Retirement before age 65 Benefit calculation

A

[(standard age- age when benefits start) x 12 mths) x monthly penalty)}

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20
Q

Retirement AFTER age 65

A
  • can choose to delay

- incremental increases by 0.70%/month

21
Q

Retirement AFTER age 65 benefit calculation

A

[(age when benefits start - standard age) x12 months in yr) x monthly premium%)]

22
Q

assignment or pension sharing

A

can share CPP pensions as long as still together + both age 60

  • reduces tax payable
  • BOTH pensions must be shared
  • Calculated as yrs of marriage/ yrs of contribution
23
Q

Credit splitting

A
  • when relationship ends, pension credits can be divided equally- even if 1 didn’t work
  • can only split for time lived togather
24
Q

Eligibility for CPP survivor benefits

A
  • supplementary benefit
  • includes:
    1. CPP survivor benefits
    2. CPP disability nbenefits
25
Q

CPP survivor benefits overview

A
  • death benefit + survivor benefit + orphans/childrens benefit
  • payable to survivors of deceased if made CPP contribution for min qualifying period:
    -lessor of:
    ~1/3 total years incl in contributory period (not incl onths in yr after reach age 65)
    + pensipnable earnigs equal to/less than basic exemption

~or 10 calendar years

26
Q

CPP survivor death benefit

A
  • Benefit amt is deceased CPP retirement pension that is/would be if reached age 65
  • DB= 6 mth retirement pension (MAX $2500)
27
Q

CPP survivor Pension formula

A

lesser of:

  • max CPP pension for surviving spouse over 65
  • Deceased contribution monthly retirement pension x 60%)
28
Q

CPP orphans benefit

A
  • Orphan gets monthly to age 18 or 25 if in FT school
  • Child: natural/adopted child in care and control of deceased at time died
  • not affected by marriage
29
Q

CPP disability Benefits

A

if contributor becomes disabled:
- child gets “disabled contributor child pension”’

child gets:

  • monthly benefit to age 18 or 25 if in FT school
  • flat rate
  • same as orphan benefit

-Taxable

30
Q

CPP disability benefit Eligibility

A
  • suffers from prolonged + severe medical impairments (physical/mental)
  • can’t work
  • payable only if contributed in at least 4 of 6 last calendar years
  • at 65 disability pensin converts to retirement benefits- can’t get both
  • CAN get survivors benefit + disability benefit
31
Q

CPP disability pension formula

A

flat rate X 75% retirement pension

32
Q

OAS

A
  • PUBLIC ASSISTANCE PROGRAM
  • Recipients don’t contribute- society bears responsibility
  • age 65- FLAT RATE monthly OAS
  • if apply after 65– retroactive to age 65 (no greater than 11 month)
33
Q

OAS benefits

A

flat rate monthly @65

  • can choose to defert OAS for MAX 5 YEARS past yr eligible
  • enhanced monthly nbenefoit increase- 0.6%/mth (max 7.2% for year)

-benefits are taxable

34
Q

OAS eligibility

A
  • old rues and new rules
  • old rues ???

-New rules: ??
~AS OF JULY 1 1977- qualify for full pension after 40 yrs residency once 18 yrs old
~if DON’T qualify- get partial/prorated pension after min 10 yrs residency

-if 25 yrs old July 1 1977- can choose old or new rules

35
Q

OAS absence Canada

A

after OAS pension starts:
-if lived in Canada at least 20 rs after age 18:
~OAS pmts continue
~IF NOT: if leave for 6 mths, pmts suspended, start again when com back

36
Q

OAS recovery tax (CLAEBACK)

A
  • Clawback threshold: net income above which recipient must start repaying benefits
  • clawback @ $74,788
  • clawback rate 15%: 0.15 for every $1

-INCOME LEVEL CUT OFF: $121,071

37
Q

OAS clawback formula

A

(Income - OAS threshold) X 15%

38
Q

recovery tax

A

Income level cut off -OAS threshold X 15%

approx. income level cut off: [ (monthly OAS benefit X 12) / 15% clawback) + OAS threshold]

39
Q

GIS

A

–monthly benefit payable to low income seniors on top of OAS

-if leave country for 6 tmhs– pmts suspended till come back

40
Q

GIS BENEFITS Eligibility

A

-cdn residen getting OAS
-APPLY ANNUALY
??

41
Q

CLAWBACK FOR SINGLES

A

$1 for every $2 of base income

  • base income incl OAS + earnings exemption $3500
  • Income evel cutoff $17,544
42
Q

CLAWBACK FOR SPOUSES

A

$1 for every $4 COMBINED base income

  • Income level cut off $23,184 COMBINED
  • If spouse receiving allowance, cut off = $42,048
43
Q

Allowance/Allowance for survivors

A
  • helps low income ppl meet lifestyle expectations till get OAS (age 65) + OAS
  • income tested
44
Q

Allowance Eligibility

A
  • between age 60-64
  • Canadian citizen, legal resident
  • lived in cda min 10 yrs after age 18
  • net income not exceeding threshold-
  • never divorced/separated more than 3 mths
45
Q

Allowance max and clawback for couples (?)

A
  • MAX OAS BENEFIT: $578.33/mth
  • under age 65- max per month $1098.70
  • Allowance clawback $3 for every $4 couples base income up to 4/3 OAS
  • above that amount $1 for every $4
46
Q

Allowance for SURVIVOR

A
  • for senior who spouse died and never remarried/new relationship more than 12 mths
  • same sex couples- if died after Jan 1 1998
  • ends before survivor turns 65 or remarries
47
Q

allowance for survivor clawback

A

$3/nth for every $4 up to 4/3 OAS pension

-above this amt clawback $1 for every $2

48
Q

Tax treatment of GIS and allowance

A

GIS and allowance reported as income but NOT TAXED

49
Q

Working beneficiaries

A
  • working while getting CPP

- Working beneficiaries under 65 required to keep making CPP premiums till age 65

Retirement Planning- FIP (5 decks)

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