Both workers and their employers will soon be on the hook for higher contributions to the Canada Pension Plan.
There’s a deal to revamp the program for the first time in nearly two decades.
The agreement-in-principle will see an increase in premiums phased in starting at seven-dollars a month in 2019 for a typical worker earning 55-thousand-dollars.
Once the plan is fully implemented, the maximum annual benefits will increase by about one-third to $17,478.
Mandatory matching contributions will also mean a jump in payroll expenses for employers
Here are the forthcoming changes to the Canada Pension Plan agreed to Monday by the federal government and most of the provinces and territories;
- Increasing the income replacement rate to one-third from one-quarter, meaning the maximum CPP benefit will be about $17,478 instead of about $13,000.
- Increasing premiums on employers and employees by one per cent, meaning an extra $408 a year coming off paycheques.
- Increased premiums will be phased in over seven years, starting in 2019.
- Increasing by 14 per cent to $82,700 the maximum amount of income subject to CPP.
- Expanding the refundable tax credit known as the federal working income tax benefit, to help low-income Canadians offset the increase in premiums.
- New portion of employee contributions to CPP will be tax deductible (not a tax credit).
Once the plan is fully implemented, the maximum annual benefits will increase by about one-third to 17-thousand, 478-dollars.
Federal Finance Minister Bill Morneau had given himself until the end of the year to finish up negotiations.
Only Manitoba and Quebec declined to agree to the terms, which include higher premiums to be paid by both workers and employers starting in 2019.
Manitoba’s new government said it needed more time to examine the deal, while Quebec has its own pension program.
(The Canadian Press)