# CANADIAN FORCES SUPERANNUATION ACT - MEMBER CONTRIBUTION RATES AND CPP INTEGRATI



## Gunner (8 Jul 2005)

CANFORGEN 122/05 ADM(HR-MIL) 055 071601Z JUL 05
CANADIAN FORCES SUPERANNUATION ACT - MEMBER CONTRIBUTION RATES AND CPP INTEGRATION
UNCLASSIFIED

MINISTER REG ALCOCK, PRESIDENT OF THE TREASURY BOARD, HAS ANNOUNCED THAT PENSION CONTRIBUTION RATES UNDER THE PENSION PLANS FOR PUBLIC SERVICE EMPLOYEES, MEMBERS OF THE CANADIAN FORCES AND THE ROYAL CANADIAN MOUNTED POLICE, WILL BE INCREASED FOR YEARS 2006 AND BEYOND. THE MINISTER ALSO ANNOUNCED THAT PARLIAMENT S APPROVAL WILL BE SOUGHT FOR AN AMENDMENT TO THESE PLANS TO CHANGE THE FORMULA BY WHICH PLAN BENEFITS ARE COORDINATED WITH THE CANADA PENSION PLAN BENEFITS IN PLAN MEMBERS FAVOUR 

PENSION CONTRIBUTIONS FOR MEMBERS OF THE THREE PENSION PLANS HAVE HISTORICALLY BEEN SPECIFIED IN LEGISLATION, NAMELY, THE PUBLIC SERVICE SUPERANNUATION ACT, THE CANADIAN FORCES SUPERANNUATION ACT AND THE ROYAL CANADIAN MOUNTED POLICE SUPERANNUATION ACT. THE RATES HAVE BEEN IDENTICAL FOR MANY YEARS AND THIS WILL CONTINUE 

IN 1999, PUBLIC SECTOR REFORM LEGISLATION WAS INTRODUCED WITH A FOCUS ON THE FINANCIAL MANAGEMENT OF THE THREE MAJOR PUBLIC SECTOR PLANS. ONE OF THE CONSEQUENCES OF THE LEGISLATION WAS TO FREEZE MEMBER CONTRIBUTION RATES FOR THE YEARS 2000-2003, NAMELY, 4 (PERCENT) ON THE BAND OF SALARY SUBJECT TO CANADA PENSION PLAN COVERAGE AND 7.5 (PERCENT) ON ANNUAL SALARY OVER THE MAXIMUM EARNINGS COVERED UNDER THE CANADA PENSION PLAN. MEMBER CONTRIBUTION RATES REMAINED UNCHANGED FOR 2004 AND 2005 TO ALLOW FOR CONSULTATION AND REVIEW IN REGARDS TO THE RATES THAT WOULD APPLY FOR THE PERIOD BEGINNING IN 2006 

BEGINNING IN JANUARY 2006, MEMBER CONTRIBUTION RATES WILL INCREASE BY 0.3 (PERCENT) PER YEAR UNTIL 2008 ON SALARIES ABOVE THE MAXIMUM EARNINGS COVERED BY THE CANADA PENSION PLAN AND UNTIL 2013 ON SALARIES BELOW THAT LIMIT (THE CANADA PENSION PLAN EARNINGS CEILING, REFERRED TO AS THE YEAR S MAXIMUM PENSIONABLE EARNINGS, IS 41,100 DOLLARS IN 2005). TO BETTER ALIGN PLAN MEMBER CONTRIBUTIONS AND THE COST OF PLAN BENEFITS, THE TREASURY BOARD MINISTERS HAVE APPROVED CONTRIBUTION RATE INCREASES IN ORDER TO ACHIEVE MORE BALANCED COST SHARING FOR THE THREE PENSION PLANS. ONCE THE RATE CHANGES ARE FULLY IMPLEMENTED THE COST-SHARING RATIO BETWEEN GOVERNMENT AND PLAN MEMBERS UNDER THE PUBLIC SERVICE PLAN WILL BE ABOUT 60/40 (COMPARED TO 72/28 NOW), WHILE UNDER THE CANADIAN FORCES PENSION PLAN, IT WILL BE APPROXIMATELY 66/34 (COMPARED TO 78/22 AT PRESENT) 

PENSIONS PAYABLE UNDER THE CANADIAN FORCES SUPERANNUATION ACT ARE ADJUSTED WHEN THE ANNUITANT BECOMES ENTITLED TO A PENSION UNDER THE CANADA PENSION PLAN AT AGE 65 OR EARLIER, IN CASE OF DISABILITY. THIS REDUCTION RESULTS FROM THE FACT THAT THE CANADIAN FORCES SUPERANNUATION ACT IS COORDINATED WITH THE CANADA PENSION PLAN, A FEATURE COMMON TO ALL FEDERAL PUBLIC SECTOR PENSION PLANS AS WELL AS MANY PRIVATE SECTOR PLANS 

WHEN THE CANADA PENSION PLAN WAS INTRODUCED IN 1966, THE FEDERAL GOVERNMENT DECIDED TO COORDINATE IT WITH THE PENSION PLANS THAT IT PROVIDED TO MEMBERS OF THE FEDERAL PUBLIC SECTOR WORKFORCE RATHER THAN REQUIRING PLAN MEMBERS TO PAY ADDITIONAL CONTRIBUTIONS FOR THE CANADA PENSION PLAN. AS A RESULT, THE BENEFITS OF THE CANADA PENSION PLAN BECAME AVAILABLE TO THE PARTICIPANTS UNDER THE CANADIAN FORCES SUPERANNUATION ACT WITHOUT ANY INCREASE IN THEIR MONTHLY PENSION CONTRIBUTIONS. WHILE THE OVERALL CONTRIBUTION AMOUNT REMAINED THE SAME, A PORTION WENT TO THE CANADA PENSION PLAN AND THE REMAINING SERVED TO PAY FOR MODIFIED COVERAGE UNDER THE CANADIAN FORCES SUPERANNUATION ACT. SINCE CONTRIBUTIONS TO THE CANADIAN FORCES SUPERANNUATION ACCOUNT WERE REDUCED, IT WAS NECESSARY TO HAVE A CORRESPONDING ADJUSTMENT TO PAYABLE BENEFITS. AS A RESULT, ALL PENSIONS PAYABLE UNDER THE CANADIAN FORCES SUPERANNUATION ACT ARE ADJUSTED ONCE A CONTRIBUTOR BECOMES ELIGIBLE TO RECEIVE CANADA PENSION PLAN BENEFITS AT AGE 65 OR EARLIER, UPON RECEIPT OF CANADA PENSION PLAN DISABILITY BENEFITS 

WHEN THE EXISTING REDUCTION FORMULA WAS ADOPTED IN 1966, IT WAS RECOGNIZED THAT AT SOME POINT IN THE FUTURE, THE REDUCTION FACTOR IN THE THREE MAJOR PENSION PLANS WOULD HAVE TO BE REVISITED AS THE PENSION PLANS AND THE CANADA PENSION PLAN EVOLVED. PARLIAMENT WILL BE ASKED TO APPROVE AN ADJUSTMENT OF THE REDUCTION FACTOR APPLIED TO PENSION BENEFITS, IN THE MEMBERS FAVOUR. THIS WILL BE ACHIEVED THROUGH A PHASED-IN APPROACH BEGINNING IN 2008 

ADDITIONAL INFORMATION WILL BE AVAILABLE ON THE DPSP INTERNET AND INTRANET WEBSITES LOCATED AT HTTP://WWW.FORCES.GC.CA/DGCB/DPSP/ AND HTTP://HR.OTTAWA-HULL.MIL.CA/DGCB/DPSP RESPECTIVELY


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