Ottawa wants to ease the rules on qualifying for Canada Pension Plan disability benefits for Canadians with long work records. Proposed amendments to the CPP Act would make individuals who have contributed to the plan for 25 years or more eligible for disability benefits if they contributed to the plan in three of the past six years, instead of the current four of the past six years. They would also need to meet existing medical criteria to qualify.

This would be the first time CPP benefits have been improved since funding of the plan was overhauled in 1998. At that time, the federal, provincial and territorial finance ministers, who administer the CPP, agreed that all future benefit improvements must be fully funded. This provision requires that benefit enrichments or new benefits be paid for in full so that their costs will not be passed on to future generations.

Changes to disability benefits were recommended by the finance ministers in their regular triennial review of the CPP, completed in June 2006. Although the CPP is an act of the federal Parliament, changes to the plan require the approval of two-thirds of the provinces, including Quebec, that together have two-thirds of the Canadian population.

Proposed amendments to the act were set out in Bill C-36, given first reading in the House of Commons on Nov. 27, 2006. The bill makes other changes to the CPP to modernize service delivery and also proposes changes to the Old Age Security Act to simplify access to and delivery of benefits. This includes making access to theGuaranteed Income Supplement automatic so recipients who file tax returns will never have to reapply.

The CPP amendments also establish guidelines to give specific direction to the chief actuary for calculating costs related to enhanced benefits. By law, the chief actuary is required to produce an actuarial report whenever a proposed amendment would materially affect previous cost estimates.

The report on the proposed changes, tabled at the end of November, estimates that the minimum contribution rate required to sustain the current plan and the proposed disability amendment financially is 9.79% for years 2007 and thereafter. (Chief actuary Jean-Claude Ménard had assumed the proposed changes would come into effect on Jan. 1, 2007.)

But the legislated joint employer/employee contribution rate is actually 9.9% of covered earnings. On this basis and under an amended plan, Ménard says that by 2050 the plan’s assets would be $29 billion lower than projected in a previous report. By 2050, he says, assets would cover 6.15 years, compared with 6.28 years, of annual plan expenditures. Assets are expected to be $1.525 trillion in 2050.

It’s worth noting that earnings on the investment fund will not be used to supplement contribution revenue and pay benefits until 2021. And, even by 2050, only 32% of the funds required to pay benefits will come from the CPP investment fund’s earnings. The majority of funds needed will still come from contribution revenue.

Marla Israel, acting senior director of seniors’ policy for Human Resources and Social Development Canada, says that because the government had to make amendments to the CPP to implement the agreed-upon changes to disability rules, it decided to take the opportunity to proceed with other changes that had been pending for some time.

One proposed change, for example, would allow Canadians to access their CPP contribution information online.

“With so many of the baby-boom generation being computer literate,” Israel says, “we want to ensure the legislation matches the needs of the present and future generation of seniors.”

Another change would amend the CPP to allow former common-law partners to apply for a credit split more than four years after the date of separation if the former partners agree in writing.

Heather Bordeleau, director of CPP policy and legislation at HRSDC, says the legislation has already been changed to lift a time limit preventing divorced partners from applying for a division of CPP credits. The change proposed in Bill C-36 would extend that flexibility to common-law partners.

Several other changes proposed in the bill apply both to OAS and CPP benefits. For example, as Athos Sani, director of OAS policy at HRSDC, explains, provisions for electronic services currently don’t exist for OAS and CPP. Bill C-36 proposes to amend the legislation to provide the necessary authority for electronic service delivery and transactions and simplify access to and delivery of benefits.

@page_break@Sani says HRSDC is “quite excited” about the changes and believes they will make access to benefits easier and more transparent.

The most important change is the way in which the GIS would be delivered. The changes are clearly a response to the controversy a few years ago over people who did not receive the GIS even though their tax returns indicated they were eligible.

Under current rules, eligibility for the GIS is based on the individual’s tax return, and is renewed automatically as long as the person’s income is below the relevant threshold. If, however, income increases and the individual is no longer eligible, he or she would have to reapply if income falls again.

Bill C-36 would make renewal automatic so recipients who file tax returns would never have to reapply.

Essentially, says Sani, there would be a one-time lifetime GIS application. The intent, he says, is eventually to combine the OAS and GIS applications instead of having two separate applications, which is the case under the present system.

Other changes include a proposal to expand the group of third parties to whom a contributor’s personal information may be provided. Sani says that under current legislation, this information can only be given to a legal representative who has power of attorney. The changes would make it more flexible so information could be shared with a contributor’s adult children, for example, or a friend who is helping the senior make decisions, if the contributor authorizes it.

At this point, it is not clear how long it will take for Bill C-36 to become law. The House of Commons was to reconvene at the end of January, at which point the House leader was to assess when the bill would proceed to second reading and then to the standing committee on human resources. As Israel notes, where the bill fits into the schedule will depend on the federal government’s legislative agenda, but HRSDC hopes it will be “sooner rather than later.”

Seniors have been asking for many of these amendments, she adds.

“It’s a ‘good news’ package,” Sani says. “We hope all parties will endorse it.” IE