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
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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
Slide2Slide3‘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
Slide4Canada Pension PlanContribution Rates
Slide5Slide6CPP Contributions Rates to Come
Slide7Source Withholdings ExplainedCPP Deductions at Source
Slide8CPP 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)
Slide92019 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
Slide11Combined CPP + LU Pension deductions per pay cheque (before tax)
Once maximum CPP has been remitted, only Pension Contribution remains
Slide12Impact on Take Home Pay‘Less CPP’ Impacts
Slide13Net (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.
Slide14After-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
Slide15Pension Adjustment Understanding the PA +
RRSP Contribution Room
Slide16Question
Will these changes cause me to over-contribute to may RRSP in 2019?
Slide17PA
reduces your registered retirement savings plan (RRSP) deduction limit
for the following year
.
Slide18Sample Notice of Assessment
RRSP Deduction Limit Statement for the next tax year
Slide19RRSP Deduction Limit Statement
Slide20Pension 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
Slide21Pension Adjustment
PA = employee contributions + employer contributions + additional voluntary contributions
Slide22Answer 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.
Slide23More 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.
Slide24Slide25Slide26Additional Voluntary ContributionsSomething to Consider
Slide27Page 3 – Professional Plan Handbook
https://www.lakeheadu.ca/sites/default/files/uploads/402/Professional%20Plan%20Handbook%20-%202019.pdf
Slide28Additional 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.
Slide29Discussion
Slide30Suggested 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
Slide31https://
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