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CANADIAN HR REPORTER February 20, 2017 14 NEWS Quebec considers QPP reforms Longer life expectancy, changing retirement patterns among province's challenges BY SHEILA BRAWN EMPLOYERS with Quebec pay- rolls could soon learn whether the provincial government will make changes to the Quebec Pension Plan (QPP). In December, Quebec Finance Minister Carlos Leitão released a discussion paper outlining pos- sible options for enhancing the plan's retirement benefits. In Jan- uary, a National Assembly finance committee held consultations on the issue. e discussion paper, Strength- ening the Plan to Promote Greater Intergenerational Fairness, asked for public input on whether the Quebec government should adopt changes that the federal govern- ment is making to the Canada Pension Plan (CPP), implement its own QPP proposals or leave the plan as is. Last year, the federal govern- ment and all provinces but Que- bec signed an agreement to raise the CPP's income replacement level for retirement benefits from one-quarter of pensionable earn- ings to one-third. e higher ben- efits will accumulate gradually as individuals pay into the enhanced CPP. is means young workers just entering the workforce will see the largest increase in benefits. To pay for the benefit improve- ments, the CPP contribution rate will gradually rise between 2019 and 2023 from 4.95 per cent to 5.95 per cent for earnings up to the yearly maximum pensionable earnings (YMPE). The rate in- crease will apply to both employ- ers and employees. In addition, beginning in 2024, the government will implement a separate contribution rate of four per cent for pensionable earnings between the YMPE and a new upper earnings limit. In 2024, the new upper earnings limit will be 107 per cent of the YMPE. In 2025, it will rise to 114 per cent (or about $82,700). Last year, Leitão said Quebec did not sign the agreement be- cause he was concerned it would not do enough to help low-income earners and the contribution rate increases could hurt Quebec's economy. Leitão also said any QPP chang- es must address Quebec-specific issues affecting the plan's long- term sustainability. For instance, the province's population is aging more quickly than in other parts of the country, putting more pres- sure on the QPP. In addition, raising contribu- tion rates in Quebec is more chal- lenging because the QPP rate is already higher than the CPP rate. "e objective of the consulta- tion is clear: Establish a plan con- tribution rate compatible with the workers' and employers' ability to pay, and fund the plan to ensure its sustainability, which is insepa- rable from the security that the system must provide," said Leitão. e Quebec government's QPP proposal, like the CPP enhance- ment, would increase the income replacement level for the plan from 25 per cent to 33 per cent and gradually raise contribution rates over seven years, beginning in 2019; however, the changes would only apply to those whose YMPE exceeded $27,450. e Quebec proposal also calls for the federal government to implement an additional income exemption for calculating benefits under the Guaranteed Income Supplement. is change could help low- income seniors today, said Leitão. Since the Quebec enhancement proposal would only apply to pen- sionable earnings above $27,450, the discussion paper states that overall QPP retirement benefits would be lower than they would be under the enhanced CPP, but Quebec workers would benefit from having to pay less in QPP contributions over their working lives. Limiting the rate increases for benefit improvements to earnings over $27,450 would also be better for employers in the province, said the paper: "Payroll deductions by Quebec employers are already the highest in Canada." When comparing the QPP's and CPP's "effective contribution rate" for a worker whose earnings are equal to the YMPE, the rate for Quebec employers is 15.13 per cent, compared with an average of 9.67 per cent in the rest of Cana- da, according to Quebec Finance Ministry data. e "effective" rate is the actual contribution in per- centage of salary, given the cur- rent annual basic exemption of $3,500. If the government implement- ed the Quebec proposal, the rate would rise to 15.63 per cent, com- pared to 16.07 per cent if it went with the CPP enhancement, said the paper. And employer rates will rise with both options, while "(the) CPP scenario would result in a greater increase to payroll deductions." e discussion paper also asked for feedback on possible measures to ensure the QPP remains sus- tainable and contribution rates are stable. While the plan's fi- nances are healthy, "it is still faced with many demographic and eco- nomic challenges that could affect its future." ese include a longer life ex- pectancy and changing retire- ment patterns. Discussion paper documents show that life expec- tancy at birth in Quebec was 82 years in 2013, up from 71 years in the mid-1960s. is means retire- ment pensions are being paid for a longer time. AGING > pg. 15 e proposal, like the CPP enhancement, would increase the income replacement level from 25 per cent to 33 per cent.