Amendments to the Public Service Superannuation Regulations
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Two amendments to the Public Service Superannuation Regulations (PSSR) will come into force on January 1, 2008 as a result of two separate Budget Implementation Acts. The first regulatory amendment will change the formula used to determine the maximum pensionable salary under the Public Service Superannuation Act (PSSA). The second regulatory amendment will increase the maximum age for entitlement to earn additional pension benefits from age 69 to age 71.
Maximum pensionable salary
- The Budget Implementation Act, 2006 amended the Public Service (PSSA), Canadian Forces (CFSA) and the Royal Canadian Mounted Police (RCMPSA) Superannuation Acts by changing the reduction factor for plan members reaching age 65 on January 1, 2008 or later. Since these three pension plans are coordinated with the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP), a retired plan member's pension is reduced once the individual reaches age 65 or immediately if the member is entitled to a CPP/QPP disability pension.
- Starting in January 2008, the reduction factor will be gradually lowered from the current 0.7% to 0.625% over a 5 year period. After 2012, the reduction factor will remain unchanged. As a result, the pension reduction at age 65 (or earlier in the case of disability) will be smaller beginning in 2008. Since the formula for determining the maximum salary is tied to the pension reduction factor, the change in the factor requires an amendment to the maximum pensionable salary in the PSSR for 2008 and beyond.
- It is important to note that this regulatory amendment will have no impact on the total amount of the pension payable to a plan member but will have a bearing on whether plan member contributions and benefits will be directed to, or payable from, the Public Service Pension Fund or the Superannuation Account or the Retirement Compensation Arrangements Account.
Maximum age for pension accrual
- The Income Tax Act (ITA) and its Regulations place limitations on benefits that can be provided on a tax-sheltered basis under a registered pension plan such as the pension plan under the PSSA. Recent changes to the ITA and its Regulations have increased the maximum age for entitlement to earn additional pension benefits from age 69 to age 71, beginning in 2007. Currently, PSSA plan members must stop contributing to the pension plan by the end of the calendar year they reach age 69. In order to allow PSSA contributors to accrue pensionable service between age 69 and 71, the PSSR need to be updated to bring them in line with the ITA provisions.
- The amendment to the PSSR will allow members attaining age 69 in 2007 and later to accrue pensionable service to the end of the calendar year in which these individuals reach age 71. This amendment potentially impacts all members age 69 and younger who may choose to continue working past age 69.
- For individuals who reach either age 70 or 71 in 2007, the Treasury Board Secretariat is reviewing possible amendments to the PSSR.
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