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Posted by Team AGA, novembre 14 2017
News
Quebec Pension Plan: Changes Are Confirmed

Quebec Pension Plan.jpg

In the summer of 2016, the Federal Finance Minister and nine provincial counterparts agreed to enhance the Canada Pension Plan (CPP). Quebec was the only province that did not sign the agreement.

The provincial government was seeking an alternate way of enhancing the Quebec Pension Plan (QPP) for the benefit of Quebecers, as it was concerned about the impact of the Canadian reform on low-income workers.

Further to Ottawa’s decision to enhance the Working income tax benefit (which will prevent low-income employees from being penalized), Quebec has reversed its position on this issue. Read on to learn more on the subject!

On November 2, 2017, after more than a year of reflection, the Quebec government tabled a bill proposing the enhancement of the Quebec Pension Plan (QPP) along similar lines to the Canada Pension Plan (CPP).

Base and additional plans

Under the proposed legislation, the current (base) plan would continue to apply until December 31, 2018. The additional plan would be phased in gradually beginning January 1st, 2019.

Increased benefits

The current plan provides a 25% income replacement rate during retirement. This rate would be increased to 33.33% under the new plan.

Increased contributions to the Quebec pension plan

To fund the pension enhancement, an additional Quebec Pension Plan (QPP) contribution rate would be introduced and would gradually increase over 2019-2023 until it reaches 2%, raising the total contribution rate from 10.8% to 12.8%. This contribution increase would be shared 50-50 between employees and employers.

As the contribution rate is split equally between the employer and the employee, they would each see their rate move up from 5.4% in 2019 to 6.4% in 2023.

Increased pensionable earnings

Starting January 1st, 2024, the maximum earnings on which an employee can make contributions to the Quebec Pension Plan (QPP) would increase by 14% compared with the 2017 level (from $55,300 to $63,000).

An additional 8% contribution applicable to the $55,300-$63,000 income band would be introduced and split equally between employees and employers.

Separate accounting

Separate accounting would be made for the contributions and benefits pertaining to the additional plan. The funds of the additional plan would be managed by the Caisse de dépôt et placement du Québec, separate from the funds pertaining to the base plan.

Other benefits

The Quebec Pension Plan (QPP) disability and survivor benefits would also be enhanced under the additional plan.

Next steps

As these enhancements would not be retroactive, it would take 40 years (until 2065) for their impact to be fully felt on the standard of living of retired Quebec workers.

Do you have any questions? Please do not hesitate to contact us or visit our website to learn more about pension plans for your business. 

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A leader in Québec in developing and administering tailor-made group insurance plans, AGA Benefit Solutions is always looking to add innovation to existing services, to better answer the needs of its clients. AGA serves over 1500 clients all over Québec with the help of some 90 employees located in either the Montréal or Québec offices.
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