Status of QPP ‘frustrating for everybody’ one year after CPP deal

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While today marks the one-year anniversary of Ottawa reaching an agreement with most of the provinces to expand the Canada Pension Plan, the future of the Quebec Pension Plan remains up in the air.

While the enhanced CPP will take effect in 2019, there’s still uncertainty around what Quebec will do with the QPP. The province has finished consulting the public and the industry about reforming the plan, but Finance Minister Carlos Leitao has yet to reveal the government’s response.

“Right now, at this point, we’re still waiting,” says Guy Leclair, the Parti Québécois critic for pension plans. “I don’t know what [the government’s] waiting for. The rest of Canada is celebrating its first year, and we’ve done nothing yet.”

The government will likely make an announcement this fall, but the delay has been “frustrating for everybody,” says Michel St-Germain, vice-chair of the Association of Canadian Pension Management’s national policy committee.

There are many reasons why Quebec is at a standstill, says Hubert Tremblay, a Montreal-based principal and actuary at Mercer. He notes Leitao was initially hesitant to enhance the QPP because of concerns it would increase employer and employee contributions in the province while reducing the federal government’s guaranteed income supplement benefits to low-income earners. “The minister was a bit afraid there would be a transfer of retirement responsibilities from the federal government to the Quebec government for low-income earners.”

But the federal government has since shared more details about the enhanced CPP, including the fact that it will provide additional tax credits for low-income earners to compensate them for the additional contributions they’ll have to make to the expanded plan, says Tremblay. “So that issue’s explained a bit better in Quebec.”

Quebec may also have lagged on the issue because of several circumstances unique to the province, says St-Germain. For example, with Quebec levying higher payroll taxes than other provinces, employers, especially smaller ones, have expressed concern about having to pay more. They’ve suggested that if the government moves to increase premiums to provide for an enhanced QPP, it should offset the change by lowering other taxes paid by employers, says St-Germain.

As well, the QPP contribution rate is already one per cent higher than the CPP, making the plan more expensive, he says. “If you look at the numbers, you can see the QPP rate is more risky than the rest of Canada in actuarial reports. The margin is much smaller in Quebec, [which means] higher costs that are more difficult to manage.”

But the Quebec government isn’t just considering enhancing the QPP. It’s also looking at what needs to change when it comes to the existing plan, says Serge Charbonneau, a partner in the pension consulting practice at Morneau Shepell Ltd. in Montreal. He notes provincial law requires the Quebec government to consult the public every few years on how it would like to fine-tune the QPP.

Some of the proposed changes are significant, such as whether the government should increase the retirement age, says Charbonneau. Currently, people can retire as early as age 60 if they make adjustments to their pension, he says, noting there’s a question around whether that’s realistic in light of increased longevity and other countries increasing their retirement age.

“I wouldn’t say they’re dragging their feet. I’m impressed with how quickly they’re doing it,” says Charbonneau, noting the government is trying to address multiple issues on the agenda.

But as St-Germain notes, “time is running out” with the enhanced CPP taking effect in less than two years. “Lots of people have to organize their payroll system to be ready as of that date,” he says. “So the minister doesn’t have much time if he wants Quebec to do something like the rest of Canada. He needs to make his announcement very quickly.”

Transcontinental Media G.P.