Pensions Flashcards
What is the pension benefit calculation for defined benefit pension?
Annual pension benefit = Earnings × Benefit Rate × Years of Service
How do you determine how much CPP is splittable between spouses?
number of years together/ number of years contributing to CPP. This ratio is multiplied by CPP benefit $ to see what is sharable (they get half each of that benefit)
Pension adjustment calculation
9X (earnings x pension rate) -600
OR for pension based on avg earnings 9X(avg earnings X pension rate X years of service)-600
How much is CPP reduced by before age 65?
0.6% per month
How much does CPP increase between age 65 and 70?
0.7% per month
How much does OAS increase beyond age 65
0.6% per month
when can you take OAS
earliest at 65
Can you always commute the full value of a pension?
No, CRA allows a max to go to a LIRA/LIF. Anything above that max will be taxable at marginal tax rate
Where does someone find their expected CPP benefit at retirement?
Statement of Contributions
When should you apply for CPP if you want to start taking it?
Guideline is 6 months before you want it
How do you share and cancel CPP sharing
have to fill out a form and send to CRA. If cancelling sharing, must be within 4 years or starting sharing
Can you cancel CPP if already taking it?
Yes if you change your mind WITHIN 6 MONTHS OF STARTING IT
what happens to CPP and OAS received after someone dies
must be repaid
What is the time period of when CPP eligibility is calculated
starts later of either person is either 18 or 1966. Ends when you start receiving CPP, die or turn 70
What is the current Years Basic Exemption (YBE)
3,500. No CPP is payable for people earning up to this amount
What are CPP contribution rates for individuals
5.95% by individual, 5.95% by employer
What are CPP contribution rates for self employed people
11.90%
What income is CPP contributions based on for self employed people
Net business income before taxes. Still subject to YBE and YMPE amounts
What is 2025 YMPE
$71,300
What is the tax impact on individuals for CPP contributions
Get a non-refundable tax credit of 15% of contributions. **not deducted from income, it reduces tax owing
How is the employer portion of CPP contributions treated for the corporations’s taxes?
It is a deductible business expense. NOT a tax credit like it is for the employee portion
What is tax treatment of CPP benefits for self employed person on their individual tax return and business return?
Individual claims the 15% tax credit (same and non-self employed people) and business claims the business expense
What is the CPP general drop-out provision
drops 17% (or 8yrs if retiring at 65) years of low/no income years for calculation of benefit
What is the CPP child rearing provision
CPP benefit calculation drops yrs out of calculation for caring fro a child under 7 if low/no earnings
