Vol. 144, No. 17 — August 18, 2010

Registration

SI/2010-57 August 18, 2010

ECONOMIC RECOVERY ACT (STIMULUS)

Order Fixing September 1, 2010 and January 1, 2012 as the Days on which certain Sections of that Act come into force

P.C. 2010-1003 August 4, 2010

Whereas subsection 114(4) (see footnote a) of the Canada Pension Plan (see footnote b) provides that if any enactment of Parliament contains any provision that alters, or the effect of which is to alter, either directly or indirectly and either immediately or in the future, any of the matters referred to in that subsection, it shall be deemed to be a term of that enactment, whether or not it is expressly stated in the enactment, that the provision shall come into force only on a day to be fixed by order of the Governor in Council, which order may not be made and shall not in any case have any force or effect unless the lieutenant governor in council of each of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to the enactment;

Whereas, by the Economic Recovery Act (stimulus), chapter 31 of the Statutes of Canada, 2009, the Canada Pension Plan (see footnote c) was amended with respect to the matters referred to in subsection 114(4) (see footnote d) of the Canada Pension Plan (see footnote e);

And whereas the lieutenant governor in council of each of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to those amendments;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 43(2) of the Economic Recovery Act (stimulus), chapter 31 of the Statutes of Canada, 2009, hereby fixes

(a) September 1, 2010 as the day on which sections 30 and 31, subsection 32(2) and sections 33, 34, 41 and 42 of that Act come into force and

(b) January 1, 2012 as the day on which sections 25 to 29, subsection 32(1) and sections 35 to 40 of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

This Order brings into force amendments to the Canada Pension Plan that were recommended by federal, provincial and territorial ministers of finance on May 25, 2009.

The Order fixes September 1, 2010, as the day on which sections 30 and 31, subsection 32(2), and sections 33, 34, 41 and 42 of the Economic Recovery Act (stimulus) [the Act] come into force and January 1, 2012, as the day on which sections 25 to 29, subsection 32(1), and sections 35 to 40 of the Act come into force.

Objective

The amendments modernize the Canada Pension Plan to better reflect the way Canadians live, work and retire.

Background

As joint stewards of the Canada Pension Plan, federal, provincial and territorial ministers of finance review the Plan every three years and make recommendations as to whether benefits and/or contribution rates should be changed. They base their recommendations on a number of factors, including the results of an examination of the Plan by the Chief Actuary. The Chief Actuary is required, under the legislation, to produce an actuarial report on the Canada Pension Plan every three years.

Pursuant to subsection 114(4) of the Canada Pension Plan, the amendments require the consent of at least two thirds of the included provinces, representing at least two thirds of the population, in order to come into effect. The necessary consents have been obtained.

Implications

Taken together, sections 25 to 42 of the Act amend the Canada Pension Plan to

(i) remove the work cessation test in 2012 so that a person may take their retirement pension as early as age 60 without the requirement of a work interruption or earnings reduction;

(ii) increase the general drop-out from 15% to 16% in 2012, allowing a maximum of almost seven and a half years of low or zero earning to be dropped from the contributory period, and to 17% in 2014, allowing a maximum of eight years to be dropped;

(iii) require a person under the age of 65 who receives a retirement pension and continues working to contribute to the Canada Pension Plan and thereby create eligibility for a post-retirement benefit;

(iv) permit a person aged 65 to 70 who receives a retirement pension to elect not to contribute to the Canada Pension Plan; and

(v) have the adjustment factors that apply to early or late take-up of retirement pensions fixed by regulation after December 31, 2010, and have the Minister of Finance and the ministers of the included provinces review the adjustment factors and make recommendations as to whether the factors should be changed.

These changes will provide greater flexibility for older workers to combine pension and work income if they so wish, modestly expand pension coverage, and improve fairness in the Plan’s flexible retirement provisions. The package is affordable within the current Canada Pension Plan contribution rate of 9.9% on earnings up to average wages, and could improve the long-term sustainability of the Plan.

Consultations

These amendments were developed with extensive consultation with provincial and territorial governments, Human Resources and Skills Development Canada and the Office of the Superintendent of Financial Institutions (OSFI) over a period of two years.

Following the agreement by ministers in May 2009, an Information Paper on Proposed Changes to the Canada Pension Plan was released. The purpose of the paper was to explain the impact of the changes. Questions and comments were invited, and about 150 submissions were received. Most of the submissions sought clarification and further details about the changes.

The amendments were also part of the Parliamentary process as they were included in the Economic Recovery Act. Concerns about the changes were not raised during the Parliamentary process.

Departmental contact

Bruno Rodrigue
Chief
Income Security Section
Social Policy Division
Department of Finance

Footnote a
S.C. 2003, c. 5, s. 10

Footnote b
R.S., c. C-8

Footnote c
R.S., c. C-8

Footnote d
S.C. 2003, c. 5, s. 10

Footnote e
R.S., c. C-8

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