DISABILITY BENEFITS
To qualify for a
disability benefit under the Canada Pension Plan you must have contributed for
at least five of the last ten calendar years, and in total the contributions
to the plan must have been for the lesser of 10 years or 1/3 of the calendar
years between your 18th birthday or January 1, 1966 and the third month after
becoming disabled. The important thing to note is that the term "calendar
year" is used, so that if in one of these years you had paid for only one
month, that year would count as a full year. To be eligible, the contributors
must also be disabled and unable to work at any occupation. The disability
must be of a prolonged and lasting nature and must be expected to last longer
than one year from the date of application.
You can see that
it is necessary to apply promptly upon becoming disabled. If disqualified at
the time because the disability is expected to last less than a year, you
would have a good claim if the disability did, in fact, last longer than one
year.
The maximum
disability benefit in 1988 was $660.84 per month and in 1989 it was $681.23
per month. It goes to $709.52 a month for 1990 and about $730 a month for
1991. In addition, there was $107.96 benefit per month in 1990 and $113.14 per
month for each child of the disabled or deceased contributor. In order for the
child to qualify, he or she must be unmarried and under 18 or, if between 18
and 25, must have been continuously in full-time attendance at a recognized
college, university, or trade school since his 18th birthday or since the date
of the contributor becoming disabled. The child's portion is paid to the
disabled contributor if the child is under 18. After the age of 18, the child
receives the pension in his or her own right. From this you can see that a
disabled contributor with three children could receive up to about $1070.00
per month.
Prior to January
1, 1975, it was almost impossible for the children of a disabled female
contributor to qualify for these benefits. As of Jan 1, 1975, the
qualification application became retroactive, but the benefits did not. It is
imperative, therefore, that any disabled woman with children under 18 or
eligible children over 18 to make her application at once.
DEATH BENEFITS
To be eligible for
death benefits a person must have contributed for at least 10 calendar years,
or the greater of 3 calendar years and 1/3 of the calendar years since he
turned 18 or January 1, 1966. The maximum death benefit was $2,340.00 for
1985, and for 1988 the maximum was $2,650.00. The maximum was $2,770 in 1989
and will be about $2,890 for 1990. For 1991, the death benefit is $3,050. Even
partial payments to C.P.P. would qualify the contributor's estate for
something.
Note: The death
benefit is the only benefit that is retroactive for more than one year. So
even if executors or administrators had overlooked this fact five years ago,
they could put in applications today. Far fetched? No. Many people simply
don't know in the first place or forget or, what's worse, because of their
isolated condition, can't get to see a Canada Pension Plan representative. In
many cases, we have learned of deaths out of the country and advised the
survivors of the benefits.
SURVIVING SPOUSE'S AND ORPHAN'S
BENEFITS
In 1988 the
maximum survivor's pension per month was $302.61 for a spouse under 65 and
$325.84 for a spouse over 65. In 1991, it has risen to $339.96 for a spouse
under 65 and $362.92 for a spouse over 65. To be eligible for this maximum
amount, the surviving spouse must be disabled or age 45 or over or have
unmarried children under the age of 18. If the children are between the ages
of 18 and 25, and have been disabled or attending college, school, or
university on a full-time basis since their 18th birthday or since the
contributor's death, the surviving spouse would also qualify. To be eligible
for a widow's benefit or an orphan's benefit the same contribution
requirements must have been fulfilled as for a death benefit.
If the surviving
spouse became 36 in the month of the contributor's death and has no children,
the pension is 10% of what it would be at age 45. This does not mean that the
pension escalates at 10% a year from age 35 to 45. It simply means that a
36-year-old spouse would receive a 10% pension forever. If 38, he or she would
receive a 30% pension forever, or until re-marriage.
It is interesting
to note that, although the surviving spouse's pension ceases upon re-marriage,
if the new marriage ends in divorce, annulment, or death, the original
surviving spouse now has the right to claim either the first pension or the
second, whichever is greater.
The children of
deceased contributors receive the same pension as the children of disabled
contributors. For 1991, that is $113.14 per month at maximum contribution
levels.
Again, I must
mention that prior to January 1, 1975, it was almost impossible for a male
surviving spouse (a widower) or the orphan children of a female
contributor to receive these benefits. As of January 1, 1975, the
qualifications became retroactive although the benefits did not. All widowers
or children of deceased female contributors must apply immediately to get
their proper benefits.
The Canada Pension
Plan also makes provisions for pensions to common-law spouses. Before
January 1, 1975, however, it was necessary for the common-law spouse to have
been living with the deceased for a period of seven years in order to qualify
for a widow's pension if there was a bar to marriage (i.e., one or both
parties were still married to another person). If there was no bar to marriage
(i.e., the partners in the common-law union were living together by choice and
not because it was not possible to get married) then the qualifying period was
only three years.
In all cases the
woman, as there really wasn't a common-law widower's pension, must have been
represented as the contributor's wife as far as friends, business, etc. were
concerned, i.e., the couple did not use separate surnames such as Mr. Brown
and Miss, or Ms. Smith. It is sad that even if they had lived together for the
seven necessary years, if there was a legal wife lurking in the background who
had not disqualified herself by living with another man, the legal wife would
usually get the pension. The `using his name' syndrome is sort of stale
also, what with Joe Clark and Maureen McTeer, a former first couple of
Canada in the picture.
The Canada Pension
Plan has become more sophisticated in that it now recognizes the common-law
spouse after three years where there is a bar to marriage. Let us hope that,
in their wisdom, the Canada Pension people will recognize only the common-law
spouse, and not the legal spouse who may not have seen his or her deceased
mate for many years. Where there is NO bar to marriage, the common-law spouse
is recognized after one year of living together as husband and wife.
At this point I
advise anyone, male or female, who has had a common-law spouse die since
January 1968 to apply for a surviving spouse's pension if that deceased spouse
was a contributor to the plan.
LINE 115 - OTHER PENSIONS OR
SUPERANNUATION
Please note that
in 1988 and 1989 and 1990, this deduction changed to an exemption which in
turn changes up to a non-refundable tax credit which is 17% of the amount.
This line usually
refers to pensions from previous employment. If you have a pension from
previous employment in Canada, you will usually receive a T4A slip showing
that amount. If you have a lump sum withdrawal from a pension plan, that too
would be included here. Special Averaging may be available if part of the lump
sum accrued was before December 31, 1971. Don't get excited, it is worth
peanuts in today's dollars. It used to be an important calculation in 1975, we
charged $50.00 for it then.
If you have
retired here from another country, such as the U.S.A., you may be receiving
that country's Social Security or other government pension. If so, you were
likely told that this was non-taxable. This is not so. American Social
Security is not usually taxable (there is an income test) in the U.S.A. but it
is taxable in Canada since 1984. For 1985, 86, 87, and 88, under the new
Canada/U.S. Tax Agreement, only one/half of your U. S. Social Security will be
taxable. It should be reported on this line. For 1989 and 1990, the rules have
changed again. You must report the FULL U.S. pension on this line and claim
1/2 as a deduction on line 256 of your return. It is important to keep track
of any foreign tax you have paid on the pension. It may be claimed as a credit
on Schedule 1, the detailed tax calculation schedule.
TIP
It may be possible
to raise the issue that a person's contributions to the U.S. Social Security
system should be deductible from the amounts received. This was raised some
years ago before the Tax Appeal Board and lost by the taxpayer in regards to
certain other U.S. pensions (see Stephan v. M.N.R., 63 DTC 863; Raven v.
M.N.R., 68 DTC 799). Still, it seems to us on reviewing these cases that
they might have been better argued for the taxpayer.
Another note is
appropriate here. If you are an American citizen, you must continue to file
American tax returns. You will likely not have to pay any tax, but you must
continue to file American returns to maintain your status for passports, etc.
LINE 115(B) - LUMP SUM PAYMENTS
This is where you
would report Lump Sum Payments from pensions and Deferred Profit Sharing
Plans. Box D of T4A slips)
LINE 115(C) - ANNUITY PAYMENTS
In general, they
include:
1) earnings
portion of general annuities from Box (J) on T5 slips and Box (G) on T4A
slips.*
2) registered
retirement savings plans (up to 1988 - after 1988 use line 129 on return.*
3) deferred
profit sharing plans (Box (H) on T4A slips**
4) registered
retirement income funds (Box (C) on T4RIF**
5) income
averaging annuity contracts**
Your age and
whether the payments were received as the result of the death of your spouse
will determine how you will report here.
NOTES:
*If you were 65
or older on Dec 31, 1990, or under 65 and received the annuity payment due to
the death of your spouse, you may report the earnings portion of general
annuities as interest on line 121 or as pension on line 115. If reported as
interest it qualifies for the $1,000 interest deduction on line 238 (86, and
87 only, there is NO INTEREST DEDUCTION for 1988, 1989 and 1990). If reported
as pension, it qualifies for the $1,000 pension income deduction on line 240
(86, 87 only - Line 314 for 1988, 1989, and 1990). Choose whichever is most
beneficial for you. Remember though, in 1988, 1989, and 1990 the interest
deduction is cancelled and the pension deduction changes to a 17% tax credit.
*Report annuities
from these sources on Line 115. They qualify for the Pension income deduction
on line 240 for 84, 85, 86 and 87. For 1988, 1989, and 1990, report this on
line 129 and claim the $1,000 pension deduction on line 310.
*If you were under
65 and did not receive the annuity payments as the result of the death of your
spouse, report the earnings on line 121. (qualifies for the $1,000 interest
deduction on line 238) for 86, and 87 (gone in 1988, 1989, and 1990))
**Report annuities from these sources on line 130 as other income. Please note
that these rules have changed from 84, 85 and 86. In those years, you could
also report as pension if between 60 and 65 and you had not rolled any
registered pension funds into RRSPs.
