Order Fixing the Day After the Day on Which this Order is Made as the Day on Which Certain Provisions of Those Acts Come into Force: SI/2020-21

Canada Gazette, Part II, Volume 154, Number 6

Registration

SI/2020-21 March 18, 2020

BUDGET IMPLEMENTATION ACT, 2018, NO. 2

BUDGET IMPLEMENTATION ACT, 2019, NO. 1

Order Fixing the Day After the Day on Which this Order is Made as the Day on Which Certain Provisions of Those Acts Come into Force

P.C. 2020-75 February 29, 2020

Whereas subsection 114(4) footnote a of the Canada Pension Plan footnote b provides that where any enactment of Parliament contains any provision that alters, or the effect of which is to alter, either directly or indirectly and either immediately or in the future, any of the matters referred to in that subsection, the provision shall come into force only on a day to be fixed by order of the Governor in Council, which order may not be made and shall not in any case have any force or effect unless the lieutenant governor in council of each of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to the enactment;

Whereas Division 2 of Part 4 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, contains provisions that alter, or have the effect of altering, either directly or indirectly and either immediately or in the future, the matters referred to in paragraphs 114(4)(a) and (d) of the Canada Pension Plan footnote b;

Whereas sections 45 and 46 of the Budget Implementation Act, 2019, No. 1, chapter 29 of the Statutes of Canada, 2019, alter, or have the effect of altering, either directly or indirectly and either immediately or in the future, the matter referred to in paragraph 114(4)(a) of the Canada Pension Plan footnote b;

And whereas the lieutenant governor in council of each of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to those enactments;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance,

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

Pursuant to subsection 129(2) of the Budget Implementation Act, 2018, No. 2 (2018 BIA2) and subsection 47(2) of the Budget Implementation Act, 2019, No. 1 (2019 BIA1), this Order brings Division 2 of Part 4 of the 2018 BIA2 and sections 45 and 46 of the 2019 BIA1 into force on the day after the day on which this Order is made.

Objectives

Background

Budget Implementation Act, 2018, No. 2 — Child-rearing drop-in

The child-rearing drop-in is a new provision that increases the benefits from the enhancement component of the CPP for parents who stop working or reduce their earnings to be the primary caregiver for their children under the age of seven. It complements a similar provision in the base (or original) CPP known as the “child-rearing drop-out.”

The provision “drops in” an amount equal to the parent’s average earnings during the five years before the child’s birth or adoption, if that amount is higher than their actual earnings during this child-rearing period.

The drop-in is expected to increase the future CPP benefits of about 125 000 people per year, mostly women. The child-rearing drop-in provision first came into force on December 15, 2018, but only applies after January 1, 2019.

The amendment in the 2018 BIA2 makes a minor modification to the formula used to calculate the child-rearing drop-in to prorate the value of the drop-in in the small number of cases where an individual’s contributory period begins or ends during a year in which the drop-in is being applied.

Budget Implementation Act, 2019, No. 1 — Overpayment of Salaries

The CPP requires an employer paying remuneration to an employee to withhold and remit employee CPP contributions and provides that amounts deducted are deemed to have been received by the employee.

Under current rules, an employee in receipt of an excess payment of salary made in error in a previous year is required to repay their employer the CPP contributions withheld from that excess payment and remitted to the Canada Revenue Agency (CRA). This may require employees to make repayments to their employer that are larger than the amount they received in error and recover the difference from the CRA, creating uncertainty and potential financial hardship.

On January 15, 2019, the Department of Finance Canada began a public consultation on draft legislation that would enable employees overpaid in a previous year to repay their employer the net overpayment amount (after income tax, employment insurance premiums, and CPP contributions). This measure would apply to amounts withheld on excess payments made after 2015, due to a clerical, administrative, or system error, subject to specified conditions.

For these rules to apply, within three years following the year in which the excess payment was made, the employer must elect for the provision to apply, and the employee must have repaid, or made an arrangement to repay, the employer. In addition, the employer must not have filed an information return correcting for the excess payment before making the election.

The amendments in sections 45 and 46 of the 2019 BIA1 implement these new rules with respect to CPP contributions.

CPP Legislation

Under the federal legislation governing the CPP, an enactment that has the effect of altering benefits, contributions, management and operation of the CPP, and/or the Canada Pension Plan Investment Board Act, requires that seven provinces representing two thirds of the population provide formal consent through the issuance of orders in council. Given that the changes outlined in Division 2 of Part 4 of the 2018 BIA2 and in sections 45 and 46 of the 2019 BIA1 meet these criteria, formal provincial consent is required. The legislation also requires that a federal order in council be issued to bring these amendments into force.

Implications

The contributory period begins when an individual reaches age 18. It ends when an individual starts receiving the CPP retirement pension, reaches age 70 or dies. The amendment in the 2018 BIA2 addresses the small number of cases where one of these developments occurs during a year in which the drop-in is being applied (e.g. in cases where the parent has a child in the year they turn 18).

The drop-in formula needs to be prorated in years where this situation occurs because, otherwise, the drop-in’s value would be too large since it would be applied to the full year. The amendment coming into force through this Order will prevent such distortions.

With regards to the amendments in the 2019 BIA1, the current treatment of employee CPP contributions deducted from an excess payment of salary and remitted to the CRA can place an undue burden on employees. The legislation coming into force through this Order will help alleviate this burden by allowing employees to repay to their employer only the net amount of a qualifying excess payment received in a previous year. As a result, affected employees will no longer be responsible for recovering these amounts from the CRA and repaying the gross amount to their employer.

The legislation coming into force through this Order parallels rules already in force for deductions under the Income Tax Act and Employment Insurance Act, ensuring consistent treatment of payroll deductions under these acts.

Consultation

Pursuant to subsection 114(4) of the CPP, the legislative amendments in Division 2 of Part 4 of the 2018 BIA2 and sections 45 and 46 of the 2019 BIA1 require the formal consent of at least two thirds of the provinces, representing at least two thirds of the population, in order to come into effect. The necessary formal consent from provinces has been obtained.

Departmental contact

Maxime Beaupré
Director
Income Security
Federal-Provincial Relations Division
Department of Finance Canada