Please see the memo below from NAPE Secretary Treasurer Bert Blundon regarding pension deductions (PSPP).
Additional information about the PSPP, including a contribution calculator calculator that is a helpful tool for employees to use to estimate the approximate impact on a person’s net pay, can be found here: http://www.exec.gov.nl.ca/exec/hrs/pensions/plans_pspp.html
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RE: Pension Deductions
DATE: January 13, 2015
Brother/Sister:
As most of you will notice on your first full bi-weekly cheque in the new year, your pension deductions have increased. This has occurred for two reasons. Firstly, an increase has always occurred at the beginning of each and every year for decades. The second reason pertains specifically to pension premium increases announced late last year. I’ll separate the two and explain the impact upon pension premiums and deductions.
With regard to the first issue, the Public Service Pension Plan (PSPP) is designed in such a way that members pay higher premiums on portions of their pensionable salary which do not qualify for inclusion under the Canada Pension Plan (CPP). Employees do not pay CPP premiums on this amount. Under current CPP rules, employees do not pay CPP premiums on the first $3,500 of pensionable salary. In cases where the employer deducts CPP premiums immediately, an over contribution has occurred and this amount will be recaptured during the current tax year.
Public Service Pension Plan premiums are higher, and have always been so, for the first $3,500 of pensionable salary. PSPP premiums normally rise by an additional $1.8% of salary on the first $3,500. Premiums have been structured this way for decades and this has not changed. This short term change in premiums results in an additional $18 of deductions for each $1,000 on the first $3,500 of pensionable salary. After $3,500 of pensionable salary, the 1.8% or $18 for each $1,000 is removed and take home pay increases by that amount. (Tax implications not considered.)
The second issue deals specifically with the change in pension premiums announced late last year. Premiums were increased 2.15% of pensionable salary effective January 1, 2015. The increase in premiums will result in additional deductions of $21.50 for every $1,000 in pensionable earnings and will remain constant throughout the year. The new premiums remain among the lowest of any of the Public Service Pension Plans across the country. There are additional implications when pensionable salaries reach $53,600 and we will address this issue later in the year when same occurs.
Notwithstanding the above numbers, it is worth noting that the figures provided do not take into account any tax implications. Pension premiums are tax deductible reducing the impact of premium increases on take home pay. Assuming that employees are in the 30% tax bracket, take home pay after the first $3,500 of pensionable earnings will fall to $15.05 for each $1,000 of pensionable salary thereafter. The tax implications will be different for each individual depending on their personal tax situation and these comments are made for illustrative purposes and may not precisely represent each person’s tax situation.
If you require further clarification, please feel free to contact the undersigned at bblundon@nape.nf.ca or call my office phone at 570-2466.
Yours in Unionism,
Bert Blundon
SECRETARY/TREASURER
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