Connolly and McNamara

Changes to the Canada Pension Plan (CPP) effective January 1, 2012

December 2011

Are you between 65 and 70 years of age and still employed or self-employed? If so, there are new rules for CPP that will affect you. The following provides instructions on what you may opt to do now, in advance of January 1, in order not to be affected by the change in CPP legislation.

For employees or sole proprietors who are at least age 65 but under age 70, new CPP rules come into effect that will require employers to withhold CPP premiums from your wages (or for you to remit CPP contributions on your self-employed earnings), regardless of whether or not you are receiving CPP pension income.

The advantage is that the additional CPP contributions will result in a new post-retirement benefit (PRB) paid to you beginning the following year. The PRB received would be approximately 0.8% of your pensionable employment earnings. For example, if your earnings are $40,000, your PRB would be approximately $340 per year. This benefit will increase over time as contributions are continued during the qualifying period.

However, it is important to consider how this new PRB may affect the clawback of your Old Age Security benefits (OAS), the Guaranteed Income Supplement (GIS) or other tax benefits and credits. As well, the PRB is taxable and not eligible for pension income splitting.

Employees can elect to opt out of these CPP contributions by completing Canada Revenue Agency's Form CPT30. A copy of the form must be signed and submitted to your employer in December 2011, and the original mailed to the Canada Revenue Agency to be effective January 1, 2012. It will remain in effect until the earliest date that it is revoked, employment (self-employment) ceases, or you reach age 70.

The above changes also apply to those contributing to the Quebec Pension Plan.

A copy of form CPT30 is available on our website under Resources. If you would like us to assist with your decision – whether to contribute or opt out - or if you need assistance completing the form, please contact us as soon as possible. You can also read more in this Service Canada fact sheet (PDF).

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