Notice to Pension Plan Members
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The amendment improving the coordination formula of the Public Service (PS), the Canadian Forces (CF), and the Royal Canadian Mounted Police (RCMP) pension plans with the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) was approved in June 2006 and will come into effect in 2008.
What is the coordination provision?
- Contributions to the three public sector pension plans are taken at a reduced rate on the portion of your salary up to the Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) yearly maximum earnings ($43,700 in 2007);
- Your pension is reduced by a standard formula at age 65 when you normally qualify for unreduced CPP or QPP (or earlier in case of disability).
What is the improvement?
- Starting January 1, 2008, the reduction factor used to calculate your pension at age 65 will be lowered from the current 0.7% to 0.625% by 2012. For plan members reaching age 65 in 2008 or later, the pension reduction at age 65 (or earlier in case of disability) will be smaller commencing in 2008. The year you reach age 65 will determine the reduction factor applied to your pension. It is important to remember that there are other factors used in the calculation of the reduction at age 65.
|
Age 65 |
2007 or earlier |
2008 |
2009 |
2010 |
2011 |
2012 or later |
|---|---|---|---|---|---|---|
|
Year of birth |
1942 or earlier |
1943 |
1944 |
1945 |
1946 |
1947 or later |
|
Reduction factor (in all 3 pension plans) |
0.700% |
0.685% |
0.670% |
0.655% |
0.640% |
0.625% |
What is the impact?
- If you are a member of one of the above-mentioned three federal public sector pension plans who will turn 65 in 2008 or later, the amendment to the coordination formula means that the reduction factor used at age 65 will be smaller. Even though your public sector pension will still be reduced at age 65 due to the coordination with the CPP or QPP, the reduction will not be as great.
- A greater benefit will generate an increased pension adjustment (PA), which is an annual amount calculated by your plan administrator based on pension benefits earned. This PA determines the amount of contributions you can make to a registered retirement savings plan (RRSP).
- Under the Income Tax Act rules for registered pension plans, your plan administrator has to calculate a Past Service Pension Adjustment (PSPA) when benefits relating to accrued pensionable service are improved. The PSPA represents the amount by which the PA amounts since 1990 have increased.
- The PSPA will be reported on a T215 slip issued to you in 2008. This PSPA will reduce your RRSP deduction limit for 2009. The amount of the PSPA will vary depending on how many years you were a member of the pension plan between 1990 and 2007 and on your pensionable earnings during those years.
- If you have made excess contributions in an RRSP, you may have to withdraw some of your RRSP contributions. This excess RRSP amount may be taxable.
- Fore more information, please refer to the Frequently Asked Questions (FAQ) or visit Your Public Service Pension and Benefits Portal at : www.pensionandbenefits.gc.ca
If you have more questions on this change to your pension plan, please contact the:
Call Centre – Superannuation Sector (PWGSC)
Monday to Thursday: 8:00 a.m. to 4:00 p.m. (your local time)
Friday: 8:00 a.m. to 5:00 p.m. (Atlantic Time)
1-888- 670-5454
If you have more questions about tax implications, please visit the:
Canada Revenue Agency (CRA) Web site Or call the tax office at: 1-800-959-8281
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