Prince Edward Island is taking the lead in the case for Canada Pension Plan (CPP) expansion.

Minister of Finance, Energy and Municipal Affairs Wesley Sheridan is proposing to boost the payroll contribution rate and double the maximum threshold of pensionable earnings.

“The group that we’re most concerned with are those that are earning $30,000 and $100,000,” he said in an interview with Benefits Canada. “They are not putting away the money they will need to have any kind of respectful retirement.”

P.E.I. is proposing that the payroll contribution rate increase to 13% from the current 9.9%, which would still be shared equally by employers and employees. For those earning between $51,100 and $102,200, this new contribution level would go from zero to 3.1%, which would also be shared equally. Those earning less than $25,000 will be excluded as they are protected by old age security (OAS) and the Guaranteed Income Supplement (GIS).

There would be a two-year notice period beginning in 2014, and increases would be phased in over three years starting in January 2016.

The Canadian Federation of Independent Business (CFIB) is against the proposal.

“What our members do tell us is, there is no more money in the kitty to pay for higher taxes or for any purpose,” the organization’s president, Dan Kelly, told Benefits Canada. “Whether or not the firm is profitable, payroll taxes like EI, CPP, workers’ compensation premiums [and] provincial payroll taxes have to be paid.”

Sheridan said that CPP payments are not a payroll tax and expansion will not kill jobs. He added that businesses would be able to afford the additional cost.

“Over a five-year period, would you not be considering a 1.5% raise for employees, whether it’s for pay, whether it’s in a benefits package?” he said. “I think that it’s quite reachable and palatable for all.”

Kelly thinks that pooled registered pension plans (PRPPs), which haven’t been tried yet, are a better solution. And one-third of CFIB members would consider offering a PRPP to their employees.

He added that group RRSPs are also expensive because employers are responsible for payroll taxes on the amount they contribute into employees’ RRSPs.

“And the PRPP is payroll tax exempt. There’s a 20% potential savings on the tax side, and on the management fee side, the expectation is that it would be half of what the management fees would be for RRSPs.”

Sheridan believes CPP expansion is a benefits program enhancement for employees. “The employers have to look at it as an increase to the entire benefits package that you’re giving to your employees.”

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Mike Murphy:

Good for PEI. I hope all the provinces get on board for improvements to CPP.

As for the Canadian Federation of Independent Business being against any improvement to CPP. That’s not surprising as they don’t really care if workers have retirement security. They fail to point out the downside of PRPP’s: it’s not mandatory and the employer does not have to contribute if they chose not to.

Mike Murphy

Tuesday, October 08 at 8:16 am | Reply

Amin Purshottam:

It is a good idea and something all provinces should be supporting. 95% of people don’t have a clue about how to invest or save for retirement. In the end it will cost everyone money through our taxes as the Feds will end up supporting all these people.
PRPPs are a joke.

Wednesday, October 09 at 11:57 am | Reply

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