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Professional Pension Plan Professional Pension Plan

Professional Pension Plan - PowerPoint Presentation

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Professional Pension Plan - PPT Presentation

0246058 Lakehead University Faculty Association Less CPP Progress update Aftertax cost per pay period RRSP Contribution Room Other things to consider Additional Voluntary Contributions Less CPP Process Update ID: 801716

cpp pension 2019 tax pension cpp tax 2019 rrsp pay contributions contribution plan deduction cost 000 limit additional income

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Slide1

Professional Pension Plan -0246058

Lakehead University Faculty Association

Less CPP

Progress update

After-tax cost per pay period

RRSP Contribution Room

Other things to consider

Additional Voluntary Contributions

Slide2

Slide3

‘Less CPP’ Process UpdateSteps taken

February 13, 2019 - Referendum held

March 20, 2019 - Memorandum of Agreement

signed

by Joint Committee

March 22, 2019 - Professional Pension Advisory Board motion approvedSteps to be takenApril 17, 2019 - Eckler to have completed new Pension textApril 18, 2019 - Finance Committee of the BoardApril 25, 2019 - Board of Governors meetingTBD - Financial Services Commission of Ontario

Slide4

Canada Pension PlanContribution Rates

Slide5

Slide6

CPP Contributions Rates to Come

Slide7

Source Withholdings ExplainedCPP Deductions at Source

Slide8

CPP Source WithholdingsRequired by law

Method of calculation and remittance is specified by CRA5.1% of CPP pensionable earningsThe higher the earnings, the greater the remittance (until maximum amount for the year has been remitted)

Slide9

2019 Amounts

5.1% of your ‘

pensionable

earnings’ per pay period

$375.06 deducted each pay period shall hit CPP maximum of $2,748.90 in 7.33 pay periods

Slide10

$180,000 salary – hit CPP ceiling in

8

pay periods

$100,000 salary – hit CPP ceiling in

14

pay periods

$70,000 salary – hit CPP ceiling in

20

pay periods

Slide11

Combined CPP + LU Pension deductions per pay cheque (before tax)

Once maximum CPP has been remitted, only Pension Contribution remains

Slide12

Impact on Take Home Pay‘Less CPP’ Impacts

Slide13

Net (after-tax cost) of CPP PremiumsThe net cost (after-tax) of CPP premiums is a function of the member’s ‘

marginal tax rate’The higher the tax rate, the lower the after-tax cost of this deductible expense.

Slide14

After-tax impact on LUFA members take home pay if ‘Less CPP’ is removed and CPP premiums are paid on top of 6.5% going in to the Pension Plan.

Observations

Paying CPP premiums on top of your 6.5% pension contribution reduces your taxable income

Assuming a CPP contribution rate of $2,564…after-tax cost per pay cheque varies with your marginal tax rate

Income Range

$70,000 $180,000

Drop in After-Tax Income per Pay Cheque $75.16 $55.59

Slide15

Pension Adjustment Understanding the PA +

RRSP Contribution Room

Slide16

Question

Will these changes cause me to over-contribute to may RRSP in 2019?

Slide17

PA

reduces your registered retirement savings plan (RRSP) deduction limit

for the following year

.

Slide18

Sample Notice of Assessment

RRSP Deduction Limit Statement for the next tax year

Slide19

RRSP Deduction Limit Statement

Slide20

Pension AdjustmentPA reduces your registered retirement savings plan (RRSP) deduction limit

for the following year.Increased RPP contributions in 2019 don’t affect 2019 RRSP contribution limits

Slide21

Pension Adjustment

PA = employee contributions + employer contributions + additional voluntary contributions

Slide22

Answer to the QuestionWill removal of Less CPP in 2019 cause me to over contribute to my RRSP in 2019?

ANSWER:

No.

Your available RRSP contribution room for 2019 was based on your 2018 pension adjustment.

Slide23

More Information on PA?

You can find your RRSP deduction limit and more by logging in My Account or by going to 

MyCRA

 on your mobile device.

Slide24

Slide25

Slide26

Additional Voluntary ContributionsSomething to Consider

Slide27

Page 3 – Professional Plan Handbook

https://www.lakeheadu.ca/sites/default/files/uploads/402/Professional%20Plan%20Handbook%20-%202019.pdf

Slide28

Additional Voluntary Contributions

Contact Clint Mason at Pension Services

You may wish to use regular payroll deduction

Accounted for separately from your regular contributions

Get to ‘enjoy’ rates of return earned in the pension plan

No additional fees or chargesThere is more flexibility with accumulated AVCs in your pension upon retirement than what you can do with your normal pension accumulations.

Slide29

Discussion

Slide30

Suggested Sources for Further Information:Taxtips.ca

Not the most elegant interface…but up-to-date and useful informationhttps://www.taxtips.ca/

If you want to know what the total marginal tax rates you face are….

https://

www.taxtips.ca/taxrates/on.htm

Tax Planning for You and Your Family 2019Available in the campus bookstore $30.00Found under ‘Business 4099 – Personal Financial Planning’https://home.kpmg/ca/en/home/insights/2018/11/tax-planning-for-you-and-your-family-2019.html

Slide31

https://

www.taxtips.ca/taxrates/on.htm

If you have taxable salary income of $146,668 in 2019…that extra $1.00 will be taxed in Ontario at a combined rate of 46.41%.

The governments take $0.46 and you keep $0.54