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By Molly Ward
June 21—Canada is to implement a new, separate tier for the Canadian Pension Plan (CPP) that would increase the existing upper earnings limit to C$82,700 ($64,580) from C$54,900 ($42,870) by 2025, according to an agreement reached by Canada's Ministers of Finance and published by the government June 20.
The current CPP contribution rate also is expected to increase by 1 percent for employers and employees to 5.95 percent from 4.95 percent over five years beginning Jan. 1, 2019, for those already in the existing annual pension earnings range, Canada's Finance Department spokesperson David Barnabe told Bloomberg BNA June 21. Actuarial assessments are to be used to determine final tax increase amounts.
Beginning implementation in 2024, earnings greater than the existing annual pension earnings range will be subject to a new tax for both employers and employees that is expected to be 4 percent, Barnabe said.
Under the two tier system effective 2025, the rates and ranges would be:
“We believe this is a positive move by the federal government. The plan is to make incremental changes and we are very supportive,” said Steven Van Astine, Vice President of Education at the Canadian Payroll Association.
The agreement was signed by eight provinces. Quebec and Manitoba withheld their signatures.
The federal government has asked the provinces to finalize the agreement by July 15.
Ontario Finance Minister Charles Sousa has told Canadian media that the proposed adjustments to the CPP would allow the province to not continue pursuing the implementation of its own provincial pension plan, which was scheduled to go into effect on certain companies beginning January 2018.
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