Do you have to apply for your CPP Post Retirement Benefit?
I’ve received a number of inquiries recently from people asking me if they need to apply in order to receive your CPP Post Retirement Benefit (PRB.)
The short answer is “No”—there is no application required for a PRB. The slightly longer answer though is that the timing for Service Canada to process PRBs appears to be uncertain, and it sometimes appears necessary to call them before they’ll issue a PRB.
For more information on what a PRB is, read this article: https://retirehappy.ca/cpp-post-retirement-benefit/.
What is the typical timing to receive a PRB?
PRBs are always payable effective January of the year after the earnings/contributions are made. For instance, 2014 earnings will create a PRB that is effective in January 2015. According to Service Canada’s website, “The first payment will usually be issued early in April,” but according to their call center, it’s often not issued until sometime in July or August.
Using my own situation as an example, it’s now July 8, 2015, and I’m still waiting to receive my PRB for my 2014 earnings/contribution. I’ll update this article as soon as I receive my first payment.
Update – I received my PRB for 2014 earnings in September 2015.
What amount of your earnings are used for the PRB calculation?
Using 2014 earnings as an example, if you started receiving your regular CPP retirement pension in 2013 or earlier, your PRB effective January 2015 will be based on your earnings for the entire year of 2014.
However, if you started receiving your regular CPP retirement pension in 2014, your 2014 earnings will be split between your regular retirement pension and your PRB, with the priority being your regular pension calculation. Depending on what month in 2014 your regular CPP retirement pension started, earnings up to the pro-rated Year’s Maximum Pensionable Earnings (YMPE) amount will be used for your regular retirement pension calculation, and any balance remaining will be used for your PRB.
Let’s look at the following example to see how this works.
Sandy was born June 23, 1954, and started to receive his regular CPP retirement pension at age 60, with his first payment effective July 2014. He worked steadily throughout that year, and his total employment earnings for 2014 amounted to $40,000. His actual employment earnings were $20,000 for January to June, before his CPP retirement pension started, and the same amount from July to December. However, that’s not the way that his earnings will be allocated for CPP purposes.
Under the CPP legislation, regardless of when in 2014 Sandy actually earned his salary, it will first be attributed to his regular pension calculation up to the pro-rated YMPE for the period prior to his pension starting. In Sandy’s case, that means that any employment earnings up to $26,250 (6/12ths of the 2014 YMPE of $52,500) will be used for the calculation of his regular retirement pension and the remaining $13,750 ($40,000 – $26,250) will be used to calculate his PRB effective January 2015.
How much will Sandy’s PRB be?
Based on the earnings of $13,750, Sandy’s PRB will be $4.79 monthly effective January 2015.
There is a complicated three-step process for calculating his PRB, as follows:
- The maximum PRB for someone who is age 65 and had maximum earnings for 2014 is $26.63 (1/40th of the 2015 maximum retirement pension of $1,065).
- Sandy’s PRB would be adjusted from the maximum, based on his PRB earnings compared to the YMPE for 2014 ($13,750 / $52,500 x $26.63 = $6.97).
- Sandy’s PRB would be further reduced by his age-adjustment factor effective January 2015. He’s 54 months under age 65 at that time and the 2015 age-adjustment factor is 0.58% per month, so the $6.97 is reduced by 31.32% (54 x 0.58%), making his actual PRB $4.79 per month.
There is no need or process to apply for your PRB.
It will always be payable effective January of the year after the earnings/contributions, but you will receive your first payment in April at the earliest and ???? at the latest.
It sometimes seems that you must phone Service Canada at 1-800-277-9914 to “remind them” to calculate and pay your PRB.