CPP and OAS

[Zeide]

Are your Canada Pension and or Old Age Security benefits creditor Proof? Zeide

[brucecohen]

Not really. There is no capital for a creditor to seize -- just a promise from CPP and from the fed govt. A creditor can garnishee the monthly payments.

[Zeide]

Thank you Bruce. Zeide

[SpikeOPath]

Not really. There is no capital for a creditor to seize -- just a promise from CPP and from the fed govt. A creditor can garnishee the monthly payments.

Why should the government pay OAS if it can be garnished by your creditors?

I understand the requirement to pay CPP part since it's really *your* money, but OAS is taxpayers' money... why should taxpayers pay for debts you owe creditors?!?

If OAS is meant to subsidize your retirement in old age, that's not really what the money's being used for if you don't ever see it...

[Nemo2]

If OAS is meant to subsidize your retirement in old age, that's not really what the money's being used for if you don't ever see it...

The government doesn't tell you what to do with the money once it's in your hands, why should they get involved if you have pre-chosen to run up debts you can't/couldn't pay in preference to buying food, etc?

[Fergus]

OAS and CPP can not be garnishee'd by creditors. Both have sections in the legislation saying they can not be assigned, attached, given as security, etc.

However, they are subject to other legislation, i.e. the Income Tax Act so if you owe money to CRA they can (and will!) take it from your OAS/CPP.

[brucecohen]

OAS and CPP can not be garnishee'd by creditors. Both have sections in the legislation saying they can not be assigned, attached, given as security, etc.

You're right. I was not aware of this case.

However, what happens if the CPP or OAS benefits are automatically deposited into the senior's bank account, and the bank is then served with a Notice of Garnishment?

ACE acted for a senior in just such a case called Metropolitan Toronto (Municipality) v. O’Brien, 1995 CanLII 7053 (ON S.C.). In this case, the Municipality of Metropolitan Toronto obtained a judgement against the senior for money owing. The Municipality then served a Notice of Garnishment on the senior's bank.

The evidence was that the only money which went into this bank account was the senior's OAS, CPP and GIS benefits, which were electronically deposited into the bank account automatically.

The Municipality argued that once the pension money was paid into the bank account, the exemption was lost and the account could be garnisheed for money owing. (This was my understanding)

Mr. Justice O'Brien rejected this argument. He found that the funds paid into the account did not lose their protection from garnishment simply because of the modern convenience of electronic deposits.

This case is an important one. It establishes the principal that, even if a senior gets into financial difficulty and has a judgement against him or her, at least they will be able to rely on continuing to receive their CPP, OAS and GIS benefits so that they have some money to live on.That's right, they can't be assigned.

[DavidR]

I have just learned that the tax returns of persons who received lump-sum adjustments from CPP during 2008 cannot be E-Filed.

I'm not sure whether this affects DIY Net-filers, but professionals using E-File have been told to file paper returns for such taxpayers.

It seems that CPP has been checking their records and has found that many people have been underpaid over the years - mostly due to errors in the child-rearing dropout provision.

A heads up to those whose CPP benefits were unusually large in 2008!

[beluga]

BTW, has anyone ever gotten a CPP benefits estimate from the GoC epass website?

I tried March 2008 and April 2009. Both times "Service Unavailable."

[Jo Anne]

BTW, has anyone ever gotten a CPP benefits estimate from the GoC epass website?

I tried March 2008 and April 2009. Both times "Service Unavailable."

I got the estimates for my husband and me. Back in February, IIRC.

[AltaRed]

BTW, has anyone ever gotten a CPP benefits estimate from the GoC epass website?

I tried March 2008 and April 2009. Both times "Service Unavailable."

I've tried the past few months with the same "Service Unavailable". I was thinking that perhaps it was peculiar to me (apparently not all folks can access CPP benefit estimates online).

[uhoh]

BTW, has anyone ever gotten a CPP benefits estimate from the GoC epass website?

I tried March 2008 and April 2009. Both times "Service Unavailable."

I got the estimates for my husband and me. Back in February, IIRC.

we did, too.

[beluga]

Thanks for the replies. Gives me hope to keep trying a while longer. The message does say something about temporary technical difficulties.

[BRIAN5000]

I phoned in and got mine for retiring in 2009,2010 and 2011.

What happens if you efile and found out later you needed to make an election or as above CPP payments?

[brucecohen]

I phoned CPP the other day and requested two quotes but their computer system was down. I'm now waiting for the mail lady to bring the access code required for me to run my own online estimates.

BTW I got an answer to a question that might affect many here. Being self-employed, I make CPP contributions only when my tax return is filed. So, I asked the nice CPP lady, if I start my pension this coming January, how could they include my 2009 contribution in the calculation? She said the starting pension will reflect credits through 2008. Then they'll revise and pay a catch-up once my 2009 tax return has been processed.

[Bylo Selhi]

I have just learned that the tax returns of persons who received lump-sum adjustments from CPP during 2008 cannot be E-Filed.

I'm not sure whether this affects DIY Net-filers, but professionals using E-File have been told to file paper returns for such taxpayers.

Can you first eFile without the CPP adjustment, then file a paper T1adj to adjust for the CPP adjustment (that you discovered "just" after you eFiled)?

The main benefit is that by eFiling the base T1 you avoid the need to send in all the T-slips that CRA already has plus 20 or 30 pages of forms and schedules. ISTM this would be easier for everyone concerned to deal with, including clerks at CRA who won't have to manually transcribe your numbers -- and it could save a forest or two, to boot.

[adrian2]

I have just learned that the tax returns of persons who received lump-sum adjustments from CPP during 2008 cannot be E-Filed.

If both the "regular" CPP and the lump-sum CPP are on T4A slips, wouldn't it be simpler for a Netfile user to lump them together in one box and forget that it came in 2 pieces? No harm, no foul - no intention to defraud CRA of anything, total tax stays the same.

[BRIAN5000]

The main benefit is that by eFiling the base T1 you avoid the need to send in all the T-slips that CRA already has plus 20 or 30 pages of forms and schedules.

Just because you file a paper return You need to send in T-slips?

I can't remember who I talked to I think it was CRA you file just the T1 general (4 pages) if they want anything else they will ask for it.

I was just going to send them the T1 and my declaration of my cost for PM and MO.

[Bylo Selhi]

Just because you file a paper return You need to send in T-slips?

I can't remember who I talked to I think it was CRA you file just the T1 general (4 pages) if they want anything else they will ask for it.

Before eFiling, I'd do my returns using software, (CanTax, CoolTax, QuickTax, now UFile) then print out the return and schedules. There would be a cover sheet that not only instructed what schedules, T-slips, receipts and other supporting information to include with the T1, but also the order in which to staple them together.

Perhaps that's changed in the past few years, but I can't believe that all they want is the 4-page T1. In your case, with presumed disposition of PM and MO they'd want to see at least Schedule (3?) - Capital Gains/Losses.

[AltaRed]

Perhaps that's changed in the past few years, but I can't believe that all they want is the 4-page T1. In your case, with presumed disposition of PM and MO they'd want to see at least Schedule (3?) - Capital Gains/Losses.

I don't believe it's changed. UFile makes it quite clear what has to be mailed and that includes:
- 4 pages of T1
- all relevant schedules
- all tax slips
- all other forms
- all other receipts

[Pickles]

Can you first eFile without the CPP adjustment, then file a paper T1adj to adjust for the CPP adjustment (that you discovered "just" after you eFiled)?

The main benefit is that by eFiling the base T1 you avoid the need to send in all the T-slips that CRA already has plus 20 or 30 pages of forms and schedules. ISTM this would be easier for everyone concerned to deal with, including clerks at CRA who won't have to manually transcribe your numbers -- and it could save a forest or two, to boot.

I've used Ufle since 2004 and I have both efiled and filed by mail (because of complications that required explanations not permitted in efiling). Quite frankly, I don't find it much different mailing in my return. I think they fast track returns calculated by tax programs, because I still get my refunds very quickly when I file by mail (add on 8 business days over netfilng).

So, I would advise the person to file by mail to avoid possible future hassles adn questions re: the CPP, since it appears to be one of those situations that requires a mailed return.

[DavidR]

I have just learned that the tax returns of persons who received lump-sum adjustments from CPP during 2008 cannot be E-Filed.

I'm not sure whether this affects DIY Net-filers, but professionals using E-File have been told to file paper returns for such taxpayers.

Can you first eFile without the CPP adjustment, then file a paper T1adj to adjust for the CPP adjustment (that you discovered "just" after you eFiled)?

No such luck - CRA has been tipped off in advance. The error message says "Information provided to us by Human Resources and Social Development Canada indicates that your CPP benefit relates to a lump-sum payment and, as a result, qualifies for a special tax calculation. We are unable to make this calculation using E-File. A paper return should be filed."

If both the "regular" CPP and the lump-sum CPP are on T4A slips, wouldn't it be simpler for a Netfile user to lump them together in one box and forget that it came in 2 pieces? No harm, no foul - no intention to defraud CRA of anything, total tax stays the same.

Unfortunately the lump-sum doesn't come in a separate box. I didn't even know I was dealing with a lump-sum until I got the error message!

[brucecohen]

I was all set to submit the application to start CPP at 60 when I got over-the-phone estimates for starting at 60, 61 and 62 and then did some present value calcs. See what you think.

If I wait, I expect to continue to pay max CPP self-employed contributions. For 2009 that'll be $4,237 minus the value of the tax credit on half and tax deduction on half. (The max cont rises every year in line with the YMPE on which the starting benefit is based. For simplicity, I'm treating $4,237 as a constant since the higher cont next year etc will buy more benefit.)

The OAS clawback is a non-issue. I won't need CPP to meet expenses over the next few years. So it's purely a comparison of contributions-out in 2010-2011 versus benefits in.

Base case: I turn 60 late this year and start CPP on Jan 1, 2010. Estimated annual pension: $6,840

61 case: I start CPP on Jan 1, 2011. Estimated pension: $7,440, a variance of $600 from the base case. (For simplicity I've ignored the CPI-YMPE gap. Each year's benefit is indexed to the CPI for current recipients but to the YMPE for first-timers. Normally YMPE increases by more than CPI)

62 case: I start on Jan 1, 2012. Estimated pension: $8,160, a variance of $1,320 from the base case.

So...

...if I wait to 61 I effectively buy an indexed life annuity of $600/year. If I wait to 62, I buy an indexed life annuity of $1,320/year.

My PV calcs assumed 2% inflation and 5% nominal return. Thus, 3% real return. Tax-sheltered for simplicity.

If I live to 70, the PV of 61-start annuity is $4,716. My cost would be $4,237 less tax breaks. The PV of the 62-start annuity would be $9,352. My cost would be $8,474 less tax breaks. So, it seems that waiting would pay.

If I live to 80, the costs are the same but the annuities naturally have higher PVs: $8,697 for the 61-start and $18,368 for the 62-start.

ISTM that I should wait till at least 61, redoing this analysis each year in light of physical and financial health at that time.

Any thoughts, errors or omissions?

[kcowan]

IANAPE but it makes sense that continued contributions would cause your yield to grow.

I would do the what if analysis on various longevity assumptions. That would seem to be the only factor not fully researched.

Paying more and getting more but for a shorter period is always risky but if you live long and prosper it might be a good move.

You mentioned that OAS was not a factor but it would be if you were counting on receiving it and then got clawed back because of your higher CPP.

[brucecohen]

I would do the what if analysis on various longevity assumptions. That would seem to be the only factor not fully researched.

I figured that if the cost-benefit tradeoff was positive at 70 there'd be no point in running it out longer. The StatCan life expectancy table indicates a 60-year-old man has a 54% chance of living past 80, a 34% chance of living past 85 and a 16% chance of living past 90.

You mentioned that OAS was not a factor but it would be if you were counting on receiving it and then got clawed back because of your higher CPP.

According to my current projection, I should be able to keep my post-65 "net income" below the OAS clawback threshold. That's why I said it's a non-issue.