Budget 2016 included some changes to CPP, the OAS allowance, and Employment Insurance. Here’s what you need to know.
While the government has been in talks to enhance CPP since December 2015, no official changes were announced in Budget 2016. The government is asking provinces and territories for their input in the coming months.
Kevin Stienstra, senior manager, Tax Services, Grant Thornton says one of the possible enhancements could be increasing the amount of CPP contributions. He notes while there’s a benefit to having a forced retirement savings plan since people are living longer, it could negatively impact employers.
“If you increase CPP, you’re increasing the cost to the employer,” says Stienstra. “They’re funding 50% of all contributions to the CPP for their employees. And then the employees are having 50% of their portion held from their pay. So it would be an additional payroll tax for companies.
“It would also result in less money to individuals as well, because they’d be taking less money home. That’s less money to put into the economy to buy consumer goods, or put into [their own] TFSAs or RRSPs.”
The government had already announced it would reverse the OAS and GIS changes made by the conservatives, decreasing the age back to 65.
In Budget 2016, it also restored the OAS allowance benefit back to age 60, instead of increasing it from age 60 to 62 over the 2023 to 2029 period.
Key enhancements to EI include:
- reducing the EI waiting period from two weeks to one, effective January, 2017. This means EI claimants will be able to get their benefits faster;
- expanding access for new entrants and re-entrants to the job market. Many new workers, including young Canadians or immigrants, have a hard time accessing EI benefits. Under current rules, they must accumulate 910 hours of insurable employment in 52 weeks before they can benefit. They’ll now face the same criteria as other claimants in their regions;
- extending the Working While on Claim Pilot Project until August 2018;
- simplifying job search responsibilities. This reverses a change made in 2012, which specified the type of job unemployed workers had to search for; and
- extending EI benefits in certain regions where unemployment is highest — for instance, in Alberta due to the oil crisis.