From pension “drop outs” to being kicked out

Mark Janson | CUPE Research

Last year, Canada’s federal and provincial governments made a historic deal to modestly expand the benefits provided by the Canada Pension Plan (CPP). This agreement is good news and something CUPE strongly supports.

Yet, when the government tabled the legislative changes needed to implement the deal, we discovered a shortcoming that, if left unchanged, would result in CPP penalties for Canadians with disabilities and workers who spend time raising young children.

CPP benefits are a function of a workers’ earnings over their entire career. Lower earnings produce lower CPP benefits and vice versa. Time away from the workforce can negatively impact CPP benefits.

Previously, the federal government recognized that the CPP formula can produce inequities. To compensate, it built “drop out provisions” into the CPP. After all, it wouldn’t be fair that a worker should see their CPP benefits reduced if they had a disability and were unable to work for a period of time, so the CPP rules allowed for this time of low (or zero) earnings to be “dropped out” of a worker’s CPP calculation so it does not pull their CPP retirement benefits down.

There are similar provisions for time spent away from work while raising a young child. This “child rearing drop out” primarily benefits women, who continue to do most of the child rearing work in Canada.

These “drop out” provisions have existed for decades in the CPP and they’ve helped reduce inequities within the plan.

But the Trudeau government shockingly wrote new legislation that does not include these “drop out” provisions for the new, expanded portion of CPP.

When CUPE discovered this change, we assumed it must have been an oversight, and we informed the government of this problem. The government, however, passed the legislation unchanged, with the consent of the provinces (changes to the CPP need joint federal-provincial agreement). These governments said they will study the omission of the “drop out” provisions in the next triennial review of CPP, which is currently underway.

CUPE is extremely disappointed that the Trudeau Liberals did not make the simple changes needed to ensure that all CPP benefits would include these important “drop out” provisions. Workers with disabilities and workers spending time raising young children should not face pension penalties.

The Trudeau government spends a lot of time talking about how it is concerned for gender equality and equal rights for all Canadians. Yet their talk does not match their action on this issue.

Take action

Write to your provincial and federal politicians now and urge them to fix this problem during the ongoing CPP review process.

Visit cupe.ca/pensions to find out more.


Source: CUPE National