There are some small new features at Retraite Québec. The Pension Plan (RRQ) has included new provisions since 1er January, with, in particular, workers aged 65 and over in the crosshairs and the levy of a new contribution. Let’s take a quick overview of the changes retained for 2024.
First, indexing. Since the start of the year, pensions have been increased by 4.4%, after the increase of 6.5% in 2023. Then, the modifications. Here are the main ones.
• Possibility of stopping contributing to the QPP from age 65 for people who will already receive their retirement pension. (Calculations must then be made, because continuing contributions add a long-term supplement to the pension. Currently, employee contributions paid after the start of payment of the pension give entitlement to the supplement of 0.66% of the contributed earnings l ‘last year).
• For people continuing to work part-time or who will begin to receive their pension after age 65, the salary they will obtain after age 65 cannot reduce the average career earnings used to calculate their pension.
• Increase in the maximum age to be able to apply for a retirement pension, which will go from 70 to 72 years. And automatic cessation of contributions after age 72.
Finally, let’s move on to continuing to improve the system.
It should be remembered that, since 2019, the QPP has been made up of a basic plan to which a supplementary plan has been added, the implementation of which is intended to be gradual, culminating in 2025. For 2024 and subsequent years, the contribution of the employee’s QPP will include the basic contribution, a first additional contribution and a second additional contribution. The latter is calculated on the part of the employee’s eligible salary which exceeds the maximum earnings eligible for the QPP for the year. The rate of this second additional contribution is 8% per year, or 4% for the employee and 4% for the employer. It will have the effect of raising the additional maximum eligible earnings to 107% for 2024 and to 114% for 2025 and subsequent years, explains Revenu Québec.
In other words, in 2024, the overall contribution rate to the basic plan and to the supplementary plan of the Quebec Pension Plan will remain 12.8% for the portion of salary between $3,500 and $68,500. On the other hand, people whose salary is greater than $68,500 will be subject to a higher ceiling under the new contribution of 8% deducted from the portion of their salary between $68,500 and $73,200. (Remember that these contributions are shared equally between employees and their employers, while self-employed workers must assume the entirety.)
The maximum contribution for an employee will be $4,160 (6.4%) for the portion of salary between $3,500 and $68,500, and $188 (4%) for earnings between $68,500 and $73,200. $, indicates Retraite Québec.
What will be the impact of this additional regime?
The income replacement rate will be increased. It will increase from 25% to 33.33%. In its second phase, the eligible salary ceiling will increase for two years, i.e. in 2024 and 2025, until it reaches 114% of the maximum eligible earnings (MGA). “This new ceiling will thus allow the person whose salary is higher than the MGA to contribute more and receive benefits in proportion to their contribution so that they can also benefit from the income replacement rate of 33.33%” , explains Retraite Québec
In 2024, the maximum retirement pension from the basic QPP plan is $16,015 for a person who requests it at age 65 and who had an income of $73,200. Thanks to the implementation of the supplementary plan, this retirement pension will increase to $24,409 within 40 years. This represents an increase of almost 52%.
Tax credit, little reminder
Finally, and this has nothing to do with the QPP, eligible people aged 70 or over who have to cope with modest income are entitled for 2023 to a refundable tax credit for support for seniors of $2,000 per person, of $4,000 for a household where both spouses are eligible. However, its calculation is modified this year.
For the 2023 tax year, this credit is available to households whose family income does not exceed $64,515 for a single person and $119,404 when both spouses are eligible. By extrapolation, income should not exceed around $79,726 for a person with an ineligible spouse. As for the credit actually obtained, it is reduced this year from a family income of $25,755 for a single person and $41,885 for a couple.
Until 2022, this reduction was carried out at a rate of 5% for each dollar exceeding the threshold. For 2023 and subsequent years, a mechanism for revaluing this rate has been introduced into the legislation. The reduction rate will be 5.16% for the current tax year. In its documentation, Revenu Québec specifies that it will do the calculation for an individual if they do not request it when filing their income tax return. In addition, to benefit from it, the eligible person, and, if applicable, their spouse on December 31, must file their return. Finally, the individual is not eligible if he or his spouse is tax exempt.