Unit 2- GOVERNMENT sponsored retirement Income programs Flashcards
(49 cards)
CPP
-FEDERALLY ADMINISTERED PROGRAM
-monthly pensions in retirement to:
~contributors, disabled contributors + their kids + widows + orphaned kids of deceased
~Lump sum benefit
CPP VS QPP
-if contributor to one plan, becomes contributor to other plan:
~ earnings records merged + recorded under both plans
~1 combined pension rec’d
common law partner
- Lives w/taxpayer in relationship
- in relationship + living together min 1 yr OR parent of taxpayer
- terminated if they separate for 90 days
CPP premiums
[(Lesser of earnings and YMPE $50,100) - YBE $3500) X employee contribution rate
CPP basic eligibility
- worked + contributed to CPP
- Pensionable employment: employment in Canada not specifically exempt under CPP
CPP Exempt Workers
-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
CPP Contributory Period
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
CPP contributory Earnings
Specific % of contrinutory earnings:
-ALL pensionable employment earnings above exemption (YBE= $3500), up to yearly max pensiobale earnings (YMPE=$55,300)
CPP Contributory Earnings FORMULA
[(lesser of Pensionable emp vs YMPE) - YBE)]
for self employed:
[(lesser of net biz income vs YMPE)- YBE)]
Contributions rates
Employer/employee: 4.95%
self employed 9.9%
CPP retirement benefits Eligibility
- made 1 valid contribution
- age 60
- worked in canada
Post retirement benefits (PRB)
- working beneficiary must keep contributing till age 65
- age 65-70- can choose to keep contributing
Normal Retirement age
age 65
Retirement @ 65
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
CPP pensionable earnings formula (before age 65?)
YMPE last 5 yrs X (pens. earnings in yr being adj / YMPE of yr being adj)
General Low Earnings Dropout
- 25% avg career earnings over contributory period
- 17% of years when individual had no/low earnings dropped from benefit calclation
General Low earnings Dropout
Contribution Period X 17%
Retirement BEFORE age 65
- can choose to get CPP age 60
- reduces benefit by 0.6%/mth
Retirement before age 65 Benefit calculation
[(standard age- age when benefits start) x 12 mths) x monthly penalty)}
Retirement AFTER age 65
- can choose to delay
- incremental increases by 0.70%/month
Retirement AFTER age 65 benefit calculation
[(age when benefits start - standard age) x12 months in yr) x monthly premium%)]
assignment or pension sharing
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
Credit splitting
- when relationship ends, pension credits can be divided equally- even if 1 didn’t work
- can only split for time lived togather
Eligibility for CPP survivor benefits
- supplementary benefit
- includes:
1. CPP survivor benefits
2. CPP disability nbenefits
