Expanding the working income tax benefit to offset increased Canada Pension Plan premiums for low-income workers will cost the federal government $250 million per year, Finance Canada estimates.

Besides the CPP premium and benefit changes, the federal government offered to increase the tax benefit for the working poor as it sought to bring reluctant provinces onside with the deal reached this week in Vancouver.

Besides confirming the cost of the tax benefit, the federal government has also released more details on the timeline for the CPP premium changes. From 2019-23, employee and employer premiums will each increase to 5.95 per cent from 4.95 per cent on income below the yearly maximum pensionable earnings threshold, which is $54,900 this year.

Have your say in our poll: Do you support agreement to enhance the CPP?

In 2019, the contribution rate will increase to 5.1 per cent for both employees and employers; in 2020, it will rise to 5.25 per cent; in 2021, the premium will be 5.45 per cent with a further increase to 5.7 per cent in 2022; the rate will then reach 5.95 per cent in 2023.

CPP

The phasing of the two-year upper earnings limit begins in 2024. That year, the yearly maximum pensionable earnings threshold will be an estimated $70,100, while the upper earnings limit will be $74,900. The $4,800 difference will be subject to a separate contribution rate of four per cent for both employees and employers.

Read: Ottawa, Ontario review costs from CPP expansion

In 2025, the yearly maximum pensionable earnings threshold will be $72,500, and the upper earnings limit will move to $82,700. Again, the difference — $10,000 — will be subject to a four per cent contribution rate.

Both employee and employer contributions to the CPP enhancement will be tax-deductible.

The provinces and territories will be able to make their own changes to the working income tax benefit “to better harmonize with their own programs,” according to Finance Canada.

Read: 58% of Canadians favour CPP expansion: poll

Copyright © 2017 Transcontinental Media G.P. Originally published on benefitscanada.com
See all comments Recent Comments

Joe Nunes:

I no longer trust our Finance Departments to tell me the true cost of anything. Send me the actuarial report when the Chief Actuary reports on the ‘cost’ and then we will know something much closer to the truth.

Thursday, June 23 at 1:39 pm | Reply

Steve Wilson:

Do people not get that their pay checks will decrease by the same amount as this contribution. So what they are asking the government to do is take away my money now, manage it for X years and then hopefully give me more back. Does that sound likely?

Additionally, this is going to increase payroll costs significantly for all company’s. Somewhere in the neighborhood of $500-$1000 per employee depending on their salary. If you have 30 employees this is $15,000 to 30,000 more per year. Where do you think they are going to get that extra money. They will either have to increase prices or reduce payroll (i.e. eliminate jobs – higher lower skilled people, etc.). Again all for the risk that the government take away more of your money now for a promise to give you more later. How often does that work out?

Add to this the new carbon taxes and other items they are considering adding and we will all be bringing home much less money in the very near future! Sounds good to me. Sign me up! (kidding)

Thursday, June 23 at 2:59 pm | Reply

JayC:

Canadian Employers and employees during the first forty years of CPP Cost increases did not grovel and whine about it . They accepted that the money earmarked for their pension had instead gone to education and infrastructure which provided for their own or their children’s inexpensive Education and an essential foundation of roads and facilities not to mention jobs.
They understood that the long term good of employees and their spouses was best served by a system that provided everyone a basic pension more than the forty bucks their parents received. They and their parents understood that the good times come with serious setbacks that the majority of workers barely financially survive, a lesson that escaped most in our industry.
They were also aware of the greed in parts of our industry that fueled the sale of worthless financial planning products. Or ones so full of sales and other costs that the only one benefitting from our retirement fund was the industry. And now that over 50% of participants will split their CPP among two or more spouses, you bitch about a minor benefit plan cost increase of 1%
It is easy to see why it took almost 40 years to recover from the Great Depression. Looks like it will take that much again from the last financial debacle.
Trust as Joe has said is easily lost and hard to regain.
Choosing Among
a) the government finance department, who Joe doesn’t trust,or
b) the grovelling bitching complaining business association representing tens of thousands of businesses which have up to five employees and whose total CPP cost increase excluding themselves is less than their annual golf membership. They seem to think that meager increa$e can finance two additional employees. Or
c) the actuary and consultants Whose profession couldn’t get their head out of their clients ass long enough to see this financial disaster coming

I am not sure who to believe.
What I do see is the first clear improvement in life for the middle class worker since prime minister Pierre Elliot Trudeau started the inflation fight on the workers backs in those great speeches in 1979 and 1980. He said workers wages should not increase because profits increased or costs increased.
The opening was so big for industry as some CFL running backs say that you could Drive an Oil Sands big rig through it. After almost forty years of picking on workers we are seeing the eras first glow of hope.

Now if we can do something about Education loans and Costs and The big two real estate markets’ house prices, this government will find a hell of a place in Historians Heaven .

Tuesday, July 05 at 8:07 pm | Reply

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required