Canada Pension Plan Basics
The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. It ensures a measure of protection to a contributor and his or her family caused by the loss of income due to retirement, disability and death.
There are three types of CPP benefits:
• Disability benefits (which include
benefits for disabled contributors and for their dependent children);
• Retirement pension;
• Survivor benefits (which include the death benefit, the survivor’s benefit pension and the children’s benefit).
The CPP operates across Canada, although the province of Quebec has its own similar program, the Quebec Pension Plan (QPP). The CPP and the QPP work together to ensure that all contributors are protected. With very few exceptions, every person inCanada over the age of 18 who earns a salary or a wage must pay into the CPP.
You and your employer each pay 50% of the contributions. However, if you are self-employed you pay both portions.
You do not make contributions if you are receiving a CPP disability or retirement pension. At age 70, you stop contributing even if you are still working.
Employment Insurance Benefits for Self-Employed People
Since January 2011, self-employed Canadians have been able to voluntarily access Employment Insurance (EI) special benefits.
There are four types of EI special benefits:
• Maternity benefits (15 weeks maximum) available to
birth mothers. It covers the periods surrounding
birth. A claim can be submitted up to 8 weeks before
the expected date of birth;
• Parental / adoptive benefits (35 weeks maximum)
available to adoptive or biological parents while
they are caring for a newly adopted or newborn
child. It may be taken by either parent or shared between them;
• Sickness benefits (15 weeks maximum) which may be paid to a person who cannot work because of injury, sickness, or quarantine; and
• Compassionate care benefits (6 weeks maximum), that may be paid to persons who have to be away from work temporarily to provide support or care to a family member who is gravely ill with a significant risk of death.
You may be eligible to access the EI special benefits effective in January 2011 if you:
• Are a self-employed person; and
• Are a Canadian citizen or a permanent resident of Canada; and
• Have voluntarily entered into an agreement with the Canada Employment Insurance Commission through Service Canada.
Self-employed Canadians will be required to voluntarily opt into the Program at least one year prior to claiming benefits. They will make premium payments beginning in the tax year in which they enrolled in the EI Program. The program had a start date of January 1, 2010. Claims could be made beginning January 1, 2011.
Self-employed individuals need to have earned a minimum of $6,000 in self-employed earnings during the previous year to access the EI special benefits. Self-employed persons can opt out of the EI Program at the end of any tax year, provided they have never claimed any benefits. If a claim for benefits was made they have to continue to contribute to the EI Program on their self-employed earnings for as long as they are self-employed.
Self-employed Canadians that opt into the EI Program will pay the same EI premium as salaried employees (maximum of $787 in 2011). She or he will not be required to pay the employer’s portion of the EI premiums. Self-employed residents of Quebec continue to receive maternity and paternal payments under the Quebec Parental Insurance Program. Self-employed Quebec residents could also choose to apply for the federal program mentioned above.