Understanding the 2012 changes to CPP

There are a lot of changes coming down the pipe for CPP next year, including new contribution requirements; here’s how to process the changes properly
By Annie Chong
|Canadian Payroll Reporter|Last Updated: 09/30/2011

Question: I understand there will be changes to the Canada Pension Plan (CPP) next year that will could affect employee and employer contributions. What are these changes?

Answer: Starting Jan. 1, 2012, legislative changes to the CPP will affect employees who are between the ages of 60 and under 70.

It will be mandatory for employees with pensionable earnings who are at least 60 years of age but under 65 to pay CPP contributions, even if they are receiving a CPP or Quebec Pension Plan (QPP) retirement pension.

This may involve re-starting CPP deductions for employees who had previously stopped making contributions because they receive a C/QPP retirement pension. Employers will also have to pay their share of CPP contributions for these employees.

Employees who are at least 65 years of age, but under the age of 70 and who are collecting a CPP or QPP retirement pension while working in pensionable employment, will have the option to either pay CPP contributions or opt out of contributing by completing form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election.

Question: What is form CPT30?

Answer: The CPT30 form (Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election) is reserved for employees who are at least 65 but under 70 and collecting a CPP or QPP retirement pension.

As noted earlier, these employees will be able to choose whether or not they want to contribute to the CPP as of Jan. 1, 2012. If they choose not to, they will need to complete part C of the CPT30, sign it, send the original form to the Canada Revenue Agency (CRA), provide a copy to the payroll department (for each of their employers) and keep a copy for their records.

If an employee who has opted not to pay contributions later decides to contribute, the employee will have to complete the applicable sections on form CPT30 for revoking the election to stop contributions.

The original must go to the CRA and the employee will have to give a copy to each employer and keep a copy for his own records.

It is important to note the opting in and out rules for CPP deductions can only be done once a year.

That means if an employee who has opted not to pay contributions in 2012 decides part way through the year that he wants to restart CPP contributions, the earliest the employee will be able to make the request will be in January 2013.

For example, if the employee files a CPT30 in January 2012 to opt out of paying CPP contributions, the opting back in to pay CPP again can only be done in January, 2013.

If the employee decides to opt out again, he or she will have to wait until January 2014.

The CPT30 form should be available on the CRA’s website in November.

Question: What is the earliest date employees can file a CPT30 form if they do not want CPP deductions taken off their pay in January 2012?