Workers age 60 to 64 receiving CPP will have to contribute, those 65 to 70 can opt ou
he Canada Pension Plan is changing for people ages 60 to 70, so payroll will have a lot of communicating to do to ensure affected workers are aware of the changes and their options.
The new rules mean workers age 60 to 64 will have to contribute to the CPP if they are still working and receiving CPP — or benefits from the Quebec Pension Plan (QPP) — starting Jan. 1, 2012. Under the old rules, those individuals were exempt from making contributions.
“You have to establish who of your employees within this age group, between 60 and 70, who is going to be affected,” said Annie Chong, manager of payroll at Carswell, a Thomson Reuters business.
The changes, which are happening under Bill C51, mean some employees who have not been contributing to CPP will now have to contribute again, she said.
For example, an employee who is 62 and receiving CPP benefits is currently exempt from CPP contributions. But when the new legislation comes into force on Jan. 1, 2012, that employee will be contributing again even though she is still receiving benefits.
For the first pay of 2012, the company will have to restart CPP payments for that employee, said Chong.
Employees between the ages of 65 and 70 have the ability to opt out of paying CPP contributions. If employees in this category come to the payroll department asking for advice about whether or not they should pay, Chong suggests giving them contact information.
“I think my advice to payroll would be to maybe defer those questions to Service Canada,” said Chong. “Because payroll does not handle the benefits, we don’t know what formulas are used to calculate one’s benefit entitlement and that’s not really our area of expertise and we do not advise payroll to get involved.”
Companies with a self-service portal may want to attach a link to Service Canada as an information item to employees in that age bracket, she said.
Communications should be out to employees well before the changes are enacted on Jan. 1, 2012, said Chong.
“I think the communication needs to go out at least a month or two months before the legislation kicks in,” she said. “So maybe around October start to formulate your communication to your employees between the ages of 60 to 70, so all of these employees are aware, particularly those between 60 and 64. Because those people, if they are not currently paying, they are (not) going to expect that deduction come first pay of January.”
Employees who can opt in or out of CPP deductions need that lead time so they can make an informed decision and fill out the necessary paperwork if they don’t want the deduction.
The form employees are going to have to fill out to stop contributions is CPT 30, or the “Election to Stop Contributing to the Canada Pension Plan or Revocation of a Prior Election.”
If an employee has presented the employer with an election form, the person responsible for payroll will need to ensure CPP contributions are no longer deducted after the month shown in part C of the CPT 30 form, said Canada Revenue Agency (CRA) spokesperson Nicole Eva Pigeon.
Employers must be aware of any revocation the employee may have filed and complete all information slips in accordance with the employee’s status, said Pigeon.
The form was not available online as of press time.
When it is available, the back of the form will have filing instructions and the addresses to where it needs to be sent, said Chong.
Employees opting out must complete this form. And not only do they have to complete this and give a copy to payroll so payroll can process it, the original form must also be sent to CRA, she said.
It’s important for employees to be aware they can only make the election to contribute or not once each year, she said.
Employees should be advised to send in the form to the CRA and their payroll departments as early as possible, said Chong.
“Always keep in mind that paperwork needs to get to payroll within certain deadlines depending on what your pay period type is and what payroll deadlines are,” she said. “Especially for remote areas, if you‘re not working in the same office as your payroll department it’s not as easy as walking the paperwork to your payroll department.”
Bill C51 will not affect employees who are collecting CPP disability pension, said Chong.
Employers need to be aware that if payroll is not deducting properly, it is also not remitting the right amount. Penalties, interest and other consequences can apply if this is the case.
“There are penalties that could be levied against the employer if you fail to comply,” said Chong.
Employers have to keep in mind employees between the ages of 60 and 64 are going to be paying CPP again, which means companies are going to have to contribute the employer’s share for those employees again.
Every dollar the employee contributes has to be matched by the employer, Chong said.
“So from a budget perspective, employers will need to budget for those amounts as well moving forward in 2012,“ said Chong.
Payroll professionals and employees are advised to keep checking the CRA’s website as the changes approach. The CRA’s web site is updated on a regular basis, said Pigeon.
The new rules mean workers age 60 to 64 will have to contribute to the CPP if they are still working and receiving CPP — or benefits from the Quebec Pension Plan (QPP) — starting Jan. 1, 2012. Under the old rules, those individuals were exempt from making contributions.
“You have to establish who of your employees within this age group, between 60 and 70, who is going to be affected,” said Annie Chong, manager of payroll at Carswell, a Thomson Reuters business.
The changes, which are happening under Bill C51, mean some employees who have not been contributing to CPP will now have to contribute again, she said.
For example, an employee who is 62 and receiving CPP benefits is currently exempt from CPP contributions. But when the new legislation comes into force on Jan. 1, 2012, that employee will be contributing again even though she is still receiving benefits.
For the first pay of 2012, the company will have to restart CPP payments for that employee, said Chong.
Employees between the ages of 65 and 70 have the ability to opt out of paying CPP contributions. If employees in this category come to the payroll department asking for advice about whether or not they should pay, Chong suggests giving them contact information.
“I think my advice to payroll would be to maybe defer those questions to Service Canada,” said Chong. “Because payroll does not handle the benefits, we don’t know what formulas are used to calculate one’s benefit entitlement and that’s not really our area of expertise and we do not advise payroll to get involved.”
Companies with a self-service portal may want to attach a link to Service Canada as an information item to employees in that age bracket, she said.
Communications should be out to employees well before the changes are enacted on Jan. 1, 2012, said Chong.
“I think the communication needs to go out at least a month or two months before the legislation kicks in,” she said. “So maybe around October start to formulate your communication to your employees between the ages of 60 to 70, so all of these employees are aware, particularly those between 60 and 64. Because those people, if they are not currently paying, they are (not) going to expect that deduction come first pay of January.”
Employees who can opt in or out of CPP deductions need that lead time so they can make an informed decision and fill out the necessary paperwork if they don’t want the deduction.
The form employees are going to have to fill out to stop contributions is CPT 30, or the “Election to Stop Contributing to the Canada Pension Plan or Revocation of a Prior Election.”
If an employee has presented the employer with an election form, the person responsible for payroll will need to ensure CPP contributions are no longer deducted after the month shown in part C of the CPT 30 form, said Canada Revenue Agency (CRA) spokesperson Nicole Eva Pigeon.
Employers must be aware of any revocation the employee may have filed and complete all information slips in accordance with the employee’s status, said Pigeon.
The form was not available online as of press time.
When it is available, the back of the form will have filing instructions and the addresses to where it needs to be sent, said Chong.
Employees opting out must complete this form. And not only do they have to complete this and give a copy to payroll so payroll can process it, the original form must also be sent to CRA, she said.
It’s important for employees to be aware they can only make the election to contribute or not once each year, she said.
Employees should be advised to send in the form to the CRA and their payroll departments as early as possible, said Chong.
“Always keep in mind that paperwork needs to get to payroll within certain deadlines depending on what your pay period type is and what payroll deadlines are,” she said. “Especially for remote areas, if you‘re not working in the same office as your payroll department it’s not as easy as walking the paperwork to your payroll department.”
Bill C51 will not affect employees who are collecting CPP disability pension, said Chong.
Employers need to be aware that if payroll is not deducting properly, it is also not remitting the right amount. Penalties, interest and other consequences can apply if this is the case.
“There are penalties that could be levied against the employer if you fail to comply,” said Chong.
Employers have to keep in mind employees between the ages of 60 and 64 are going to be paying CPP again, which means companies are going to have to contribute the employer’s share for those employees again.
Every dollar the employee contributes has to be matched by the employer, Chong said.
“So from a budget perspective, employers will need to budget for those amounts as well moving forward in 2012,“ said Chong.
Payroll professionals and employees are advised to keep checking the CRA’s website as the changes approach. The CRA’s web site is updated on a regular basis, said Pigeon.
