Proceedings of the Standing Senate Committee on
National Finance
Issue 2 - Evidence - Meeting of December 4, 2007
OTTAWA, Tuesday, December 4, 2007
The Standing Senate Committee on National Finance met this day at 9:33 a.m. to examine the estimates laid before Parliament for the fiscal year ending March 31, 2008. Topic: Canada Pension Plan.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
Senator Day: Good morning, everyone. Welcome to this meeting of the Standing Senate Committee on National Finance. My name is Joseph Day, and I am chair of this committee.
[English]
This is the sixth meeting of the Standing Senate Committee on National Finance in this session. The committee's field of interest is government spending and operations, including reviewing the activities of officers of Parliament and the various individuals and groups that help parliamentarians hold the government to account.
We do this through estimates of expenditures and funds made available to officers of Parliament to perform their functions and through budget implementation legislation acts and other matters referred to this Senate committee.
Today, we are examining the topic of financial security for seniors and, in particular, entitlements and retroactivity in the Canada Pension Plan.
We will have two panels in our session today. We will begin with a panel of stakeholders, followed by a panel of government officials.
Bill Gleberzon, Director of Government Relations, Canada's Association for the 50 Plus: Thank you for the opportunity to present CARP's recommendations on the issue of CPP retroactivity. CARP must congratulate the committee for holding this important hearing.
Let me introduce you to CARP for those unfamiliar with our association. CARP is Canada's Association for the Fifty Plus, a non-profit, non-partisan national organization with 400,000 members. Our magazine, CARP for the Fifty Plus is read by almost 800,000 Canadians and our websites www.carp.ca and www.50plus.com receive almost 200,000 unique hits per month. Our mandate is to promote and protect the rights and quality of life for Canadians aged fifty plus. Our mission is to provide practical recommendations for the issues we raise rather than just ``CARPing'' about them. CARP receives no government funding for operating purposes in order to maintain its independence and neutrality.
CARP recommends that those who are eligible, but did not apply for CPP until after 70 years of age, should receive full CPP payments and interest from the age at which they applied and retroactively to age 70 rather than the current 11 months of retroactive payment. Furthermore, those who receive full retroactive payment should not be penalized; for example, by having to repay GIS payments, which may have been received in the interim, or having their full payment taxed as if it were a single year's income. Taxation should be prorated for the years between 70 and the age at which the CPP payment is made.
Providing full retroactivity with interest is fair and just. If someone owed the government money, the government would do whatever it had to do to obtain the full reimbursement. The same principle must apply to money owed to those who contribute to CPP. Full reciprocity of CPP payments with interest will likely reduce the government's payouts for guaranteed income supplement.
CPP is funded by the contributions of Canadian employees and their employers unless the individual is self- employed, in which case, she or he pays the full contribution. Contributions are on a pay-as-you-go basis, meaning that those who contribute are entitled to the pension amount they earn.
CPP is not government money. Governments are merely stewards of the CPP fund. It is their responsibility to ensure that CPP will be sound for all current and future contributors and recipients, as well as that all contributors receive the payments due to them.
We asked one of our members — Mr. Walter Klem, a retired civil servant — who played an instrumental role in the development and early maintenance of CPP, why the 11 month retroactivity was adopted. He told us that the 11 month retroactivity policy was probably done for administrative purposes. If this is the case, it is no justification for the continuation of this unfair practice. Moreover, the 11 month retroactivity period is outdated and unnecessary because the money is there.
As of March 31, 2006, the value of net assets of CPP was $101.1 billion compared to $83.4 billion in 2005. This amount represented approximately four times the total of pensions and benefits in 2006 and 3.5 times in 2005.
According to the Twenty-First Actuarial Report on the CPP, this is expected to grow to 5.6 times by 2020. It is stated in the report that as of December 31, 2003, the relative size of the unfunded liability will decline over time as the plan assets grow more rapidly than plan liabilities over the next few decades. Thereafter plan assets will grow at least as quickly as liabilities.
I have a chart that appeared in the Annual Report of the Canada Pension Plan 2005-06 from the Human Resources and Social Development Canada website showing the net assets, after subtracting liabilities from contributions and receivables, were $101 billion in 2006. According to the CPP's investment board website, as of November 9, 2007 — not even a month ago — CPP assets totalled $121.3 billion. The CPP board's goal for the fund is to accumulate $1.55 billion by 2050.
According to the Chief Actuary of Canada, 2004-06, the CPP is sound for the next 75 years and beyond. Its assets will reach $260 billion by 2016, with contributions exceeding benefits by 2019. In other words, by the time the first of the boomers have started to retire, the money will be there for them and for the rest of them into the future and beyond.
Of course, 75 years from now — barring any unforeseen circumstances such as extended longevity pills, which are very possible — the baby boomers will be a memory and the assets within the CPP fund will more than meet the liabilities to cover the post-baby boom era. By the way, as I am sure you know, NDP M.P. Chris Charlton introduced a private member's bill into the House of Commons in 2006 and CARP supported it.
In summary, full retroactive CPP payments with interest should be made for the period between when the post-70 years of age application is made back to age 70. Recipients should not be penalized. This is the fair and just policy to adopt because the CPP fund belongs to its contributors, who are also its recipients, and they are entitled to receive the appropriate full pension.
The fund does not belong to the government, whose duty as steward for the CPP fund is to ensure that the contributors' appropriate pension is received in full. The money is there now and for 75 years and more into the future.
Before I conclude, I must point out that there are a number of other important CPP-related issues that have been communicated to our national office by our members and non-members alike, which this committee, in our opinion, should also examine. I will list them briefly for you.
After the death of a spouse or partner, the survivor's benefit is based on 60 per cent of the deceased person's income plus the survivor's income, up to a maximum of the maximum amount of CPP payment at the time of death. Rather, we believe the pre-death CPP income should be sustained for the lifetime of the survivor, who is most likely a woman.
There is a lack of awareness that a CPP pension can be split for divorced persons, which mostly affects the post- divorce income of women. There is outrage at the practice of integrating or ``stacking'' CPP payments with corporate or occupational pensions at age 65. This practice is prevalent in the Armed Forces, among superannuates and in some corporations.
Those who want to access CPP before age 65, as well as continuing to work, must either stop work or earn no more than the maximum amount of CPP payment in the month before and the month following the receipt of their CPP payment. Afterward, they can return to work. This is both a charade and, more seriously, a disincentive for older workers to continue working, thereby contributing to the maintenance of the labour force necessary to sustain productivity.
Older persons who want to continue working after age 65 should be allowed to continue to contribute into CPP — even if they elect to access their CPP pension — with appropriately adjusted payments while they continue working, thereby removing another disincentive to the employability of older persons in order to sustain productivity.
The issue of CPP underpayment must be tackled. This occurs in one in six or seven cases — principally due to errors made by applicants, particularly their lack of awareness of their eligibility for the CPP ``drop out'' provision, or by bureaucrats. The CPP ``drop out'' provision should be extended to include unpaid caregivers who have to leave or reduce hours of work to provide eldercare at home.
The reduction made to CPP benefits, for example, disability and death benefits a decade ago as part of the government of the day's campaign to eliminate the deficit, must be re-examined. Given the great success of that campaign — exemplified by the federal government's surpluses for most of the new century, as well as the size of the CPP kitty — enhancement of these benefits to reflect the current cost of living is entirely doable.
CARP would be pleased to participate in any hearings that the committee holds on these essential items, as well as any other hearings that relate to our constituency.
Richard Shillington, Senior Associate, Informetrica Limited: I thank the committee for giving me this opportunity to speak about problems with the administration of CPP.
I would like to begin by emphasizing the critical importance of OAS, GIS and CPP to income security; but income security depends on seniors receiving the benefits that Parliament intended. It must be recognized that the majority of seniors receive their benefits. The system works well for all but a small percentage. I take issue, though, with how funds are used for those who apply late for CPP. Keep in mind CPP is funded differently from OAS and GIS. It is funded by contributions and the CPP fund is not part of consolidated revenue.
My involvement with these issues started about six years ago when I drew attention to the fact that roughly 300,000 seniors were not receiving their GIS. The department at the time stated that contacting seniors would violate their privacy. After some media attention, the department started notifying seniors about their GIS, and the number not getting their GIS dropped to about 130,000.
After this publicity, seniors with all sorts of problems with OAS, GIS and CPP started contacting me directly. One of them was Marie Baxter, and I would like to take a minute to tell you about her story.
Marie had applied for survivor and retirement benefits at the same time, but the department made an error and she only got her survivor benefits. About 10 years later, she discovered the error and was told that the department does not make retroactive payments. After an article in The Globe and Mail, the original administrative error was discovered. HRSDC discovered that she had not even received her 11 months of retroactive payment. She was paid her benefits without interest.
The legislation states that retroactive payments due to an administrative error should ``put the person in the place they would have been if the error had not been made.'' Marie Baxter asked about interest and was told that interest is not paid.
I started to do some research. The most recent figure I obtained under Access to Information was that about 55,000 seniors were missing out on CPP retirement benefits. Most of the cases I see involve CPP survivor benefits. One could estimate that there are also thousands who are missing survivor benefits.
In 2006 alone, some 3,000 seniors applied for CPP retirement benefits after age 70. About 350 applied after age 85; and about 290 of those 350 were women. Many thousands of Canadians are missing out on CPP retirement benefits.
For the Quebec Pension Plan, the number is virtually zero. I am told that officials in Quebec use computers to identify those eligible seniors, who are phoned or even visited to ensure that they apply for their benefits. I have another example. This is the usual pattern: The missing benefits are found not by the senior but by his or her child when the child takes over the finances of the senior. I have Ernestine's internal file with the justifications that were given for not paying her retroactive benefits.
When Ernestine applied for OAS, her social insurance number on the form indicated she had previous employment, but HRSDC did not advise her about CPP. I am quoting now from her internal file. ``According to experienced staff, she was not counselled with regard to a retirement pension, as was the normal procedure, due to her advanced age at the time.'' It was rare that, ``elderly women could have CPP contributions as many remained in the home for family reasons.''
In 1988, she applied for survivor benefits when her husband died. According to the file, ``There was no opportunity for staff to speak to her about her potential benefit because she applied by mail.''
Ernestine did not receive any statement of contributions or mailings to those eligible for CPP because of ``computer glitches.''
One official stated the following in justifying the department's position: ``However, I keep remembering being told as an analyst in similar scenarios that the onus is on the client. The fact that we publicized our benefits is sufficient. The minister is not responsible for soliciting applications.''
The family complained to the review tribunal, but that panel is not allowed to find that HRSDC made an administrative error. Only HRSDC itself can find that it made an administrative error which would justify full retroactive payments. Ernestine never received her retroactive benefits beyond 11 months. She applied at age 91. As you know, contributions to CPP are mandatory. As you see, benefits are not.
Because CPP is contributory, it seems to me that the retroactivity provision should reflect a fiduciary responsibility and benefits should not be given to other recipients.
A department briefing note states: ``There is no rationale to extend the period of retroactivity. Unlimited retroactivity places open ended liability on the Canadian taxpayer.''
Note that the Quebec Pension Plan pays five years of retroactive benefits, with interest, and has the same 9.9 per cent contribution rate as the CPP. Also, the Quebec Pension Plan has virtually a 100 per cent take-up rate. The retroactivity provision for OAS and GIS is 11 months. It is the same 11 months for CPP, despite the fact that it is a contributory program. Even if you accept that the department has no obligation to inform you about CPP when you are at the wicket applying for OAS, that is a separate issue from your entitlement to benefits funded by your contributions when you discover them.
The Chair: Thank you, Mr. Shillington. As a point of clarification, each of you has spoken about the Quebec Pension Plan with the five-year retroactivity and better outreach. Is the amount of contributed money administered separately, or is it all administered together from across Canada? Are you able to help us with that?
Mr. Shillington: Our officials can confirm this but I am quite sure it is a separate fund.
The Chair: Thank you. The contribution percentage rate is the same as you have indicated?
Mr. Shillington: Yes.
Senator Stratton: As a point of clarification, since taking office 21 months ago, this government has increased the number of points of service across the country. Canada now has 595 service centres across the country to help seniors with their benefits. We passed Bill C-36 to provide benefits to thousands of new low-income seniors. With Bill C-36, eligible low-income seniors only need to apply one time to the GIS. They will no longer find themselves filling out forms year after year to reapply for the GIS.
The government has launched a comprehensive nation-wide print, radio and television advertising campaign to help seniors apply for and receive benefits. We proactively contact seniors to directly inform them of benefits available to them by sending 268,000 application packages for the CPP and OAS in the year 2006 alone. Every March we proactively contact seniors who did not file a tax return to remind them of their benefits. We have mobile services to better reach seniors where they live. We have fact sheets in over 20 languages that are available to seniors at Service Canada locations across the country.
Seniors may call a special number, 1-800-277-9914, at any time to given them information on their benefits. That is what has been done in the 21 months that the government has been in power. It is not over. You have to recognize that we have, with the tax changes, virtually removed many seniors from paying any tax at all.
Do you have any idea what retroactivity would cost?
Mr. Shillington: You cannot do a proper costing without access to information that is not in the public domain.
Senator Stratton: I appreciate that. So you have not done that?
Mr. Shillington: No, I am continuing my answer, if I may.
The Chair: You have the floor.
Mr. Shillington: There were 3,000 seniors every year who applied for CPP after age 70. About 300 apply after age 85.
There are two costs you could do. One is to duplicate Quebec. What would it cost to provide each of those 3,000 seniors who apply late every year with five years of retroactive benefits? I know that average CPP benefits are roughly $7,000 a year. For older women, who did not contribute for many years, it is probably much less. I will pull a number totally out of the air, but the department could do this arithmetic. This is just arithmetic; it is not complicated, but I do not have the data to do that. Let us say $20,000 per person at 3,000 people would be $60 million. CPP pays out $27 billion every year, so $60 million divided by $27 billion is about one-third of 1 per cent.
Quebec already has virtually 100 per cent take-up. The cost of 100 per cent take-up is the same as the cost of full retroactivity; you are just paying the money up front or retroactively. Quebec runs a plan with virtually full take up, five-year retroactivity with interest with the same contribution rate.
Senator Stratton: So over five years you are saying $60 million a year?
Mr. Shillington: No, I said — and this is absolutely speculative — if you accept that there are 3,000 a year applying late, at $20,000 per person that would be $60 million.
Senator Stratton: What is that over five years?
Mr. Shillington: At $300 million divided by five times $27 billion, it will still be a smallish share of 1 per cent.
Senator Stratton: The government estimates $1.5 billion over five years.
Mr. Gleberzon: What is it?
Senator Stratton: It is $1.5 billion over five years.
Mr. Shillington: I would love to see that analysis.
Senator Stratton: So would I because I was interested in what you had to say. I think the government's position of $1.5 billion shows that there is a cost.
My other question is for Mr. Gleberzon and it involves the payout or back pay for those who apply at age 70 rather than at age 65. Do you know who or what group of seniors apply? I know a few. The reason they do not apply is they have enough money and income that they do not have to do so.
Have you determined why people do not apply?
Mr. Gleberzon: The people who have called us, it is usually a child who has talked to the mother or father — usually the mother — and finds out that they had worked and forgotten all about it. That is why. It is not a question that they do not need the money because often they are on GIS. It is simply they have forgotten about it.
Senator Stratton: I am curious. In the cases I know of, for the most part, they do not want the money until they have to take it because, in effect, they earn too much.
The Chair: Thank you for your questions. For the record, Senator Stratton read in a rather extensive statement, and at the end he said, ``That is what we have done since coming into power.'' It is not this committee. The ``we'' is not this committee; the ``we'' is the Harper government. It is important that senators understand that.
Senator Stratton: Essentially, we are trying to set the record straight that we are not allowing this issue to fall by the wayside.
We are tackling this issue and trying to find out why these people are not applying and helping them to apply. That is the fundamental message.
The Chair: We will have government officials here in the next round, so senators may wish to speak to the government officials on some of those points.
Senator Callbeck: First I want to thank the Standing Senate Committee on National Finance for agreeing to take some time to explore issues regarding the Canada Pension Plan.
I welcome our witnesses today. Thank you for coming.
As we all know, there are thousands of people who have paid into the Canada Pension Plan but are not receiving the benefits. Both of you have worked with seniors for many years and have been advocates for seniors. You certainly have a good understanding of what does and does not work.
In view of the fact that we have people who are not receiving the benefits they deserve, how would you advise the government to reach out to these seniors?
Mr. Shillington: I have had some experience with this with the GIS story, if I can call it that. Starting in 2001, after some media attention, the department started mailing letters to people after income taxes advising them of their eligibility for GIS, which brought the number down by about one half, but not to zero. The people who are not getting CPP will occasionally get a letter from the department telling them that they are eligible for CPP.
I am convinced that if you really want to do a serious individual outreach, not just mass media, you will have to contact individual seniors and do what Quebec does. When they apply for their drivers licence or health card, the computer says this person should be told, or you phone them. If there are 50,000 eligible people who have not applied and it takes one hour to reach them at $10 per hour, it will cost $500,000 to inform those individuals. In this town, that is not a huge amount of money compared to the $1.2 billion they are owed. We could spend $500,000 and get $1.2 billion, if that figure is accurate, into the hands of low-income seniors, predominantly women, and disproportionately quite elderly. I would phone them. We all know that if the tables were turned and they owed $127 to Revenue Canada, eventually they would be phoned.
Senator Callbeck: Phoning would be your recommendation. It appears that sending out letters really is not doing it. I have figures for 2006-07: The department mailed out 20,604 letters to people aged 70 and older who were not receiving the Canada Pension Plan, but they only got back 1,877 applications.
Mr. Shillington: That is consistent with my experience with the GIS. Some six or seven years ago, when I first discovered there were 300,000 eligible seniors not receiving GIS, I pictured people who did not speak English or French, people in nursing homes, quite marginalized; I could not have been more wrong. I talked to hundreds of thousands of seniors. They were bank tellers, et cetera, people who were simply unaware.
A good friend of mine had not applied for the Canada Pension Plan and he was 68 years old, because he thought he had to be retired. He was still working. This man has a postgraduate degree and lived in Canada his whole life. The rule is you cannot collect CPP before age 65 unless you are retired or at least quit for a month, but after 65 years the rule changes. He thought he could not apply for CPP because he was still working. There is a lot of confusion out there. Some people think it is the same rule for Old Age Security; that you must be retired before you can apply. There is a lot of confusion.
Back to the original question, you could do the mailings, but I think you have to learn from Quebec and you must contact individual seniors and say: We have money for you. Then we can see how many of them say, no, I do not need it, you can keep it.
Senator Callbeck: Is there any way to make the mailings more effective?
Mr. Shillington: I have documents of all sorts of individuals. The first woman who contacted me about CPP after the GIS story was Isabelle Conn, and she showed me the statement of contributions — that document we all get every few years — that was still being mailed to her husband. On the form his birth date was 1903. They were being mailed to him in 1999. The same form that I get that says when you turn 65 here are the benefits you are entitled to. He had been dead for 15 years. The department was mailing a form to a deceased man. Because he never applied, she never got survivor benefits. How would she figure out that this form being mailed to her husband, deceased for some years, would actually have entitled her to survivor benefits?
I do not think it is an outrageous burden to ask. At 50,000 names, that would take 10 people a few months.
Senator Mitchell: I would like to address two particular issues. The retroactivity, I think, is a red herring. Your figures have underlined that. I would like you to underline that the $1.5 billion that Senator Stratton is talking about is over five years. It would be larger per year than the $60 million that you have estimated, but it would still be about 1 per cent.
Mr. Shillington: I am a mathematician by training, so I would love to follow the math. I think he said $1.2 billion.
Senator Stratton: $1.5 billion.
Mr. Shillington: That is $300 million a year. There is 3,000 people applying late per year, so it is $100,000 each? It cannot be right.
It may be that the figure assumes both retroactivity and full take-up, that we find everyone and they all get retroactive benefits. That may make sense, but then it is their money.
Senator Mitchell: That was my next point. This is not a social program where people are being given money; this is a pension plan where people have paid their money. It is their money. We are not doing them a favour by giving them the money. At least it is a contract that we have made with them.
Mr. Shillington: It is not a contract. That is the point.
Senator Mitchell: They have paid money into this assuming they would be entitled to be paid.
Mr. Shillington: I made that comment because I had a long discussion at a pension conference a month ago with a lawyer who explained to me that it is not a contract. It is legislation, and Parliament can change the legislation unilaterally, which is why it is not a contract.
Mr. Gleberzon: I think the $1.5 billion has to be put into context of the figure that I found on the CPP Investment Board's website, which is less than a month old. The CPP assets today total $121.3 billion. Compare those assets to what they were even two years ago and project that into the future.
The $1.5 billion, even if that figure is accurate, is 1 per cent, but 1 per cent of a moving target. We have to put it in that context. It is not 1 per cent of a target that will dry up.
I should also point out that there is a typo in my speech. It says that the goal is to have 1.55 trillion, not billion, by 2050. We are looking at a fund that sees itself and has no reason to not believe that it cannot attain that objective that will be growing into the future.
Senator Mitchell: I am absolutely in agreement with you. I am not arguing. I was trying to put the 1.5 billion, which I am disputing as well, into perspective. This idea of an unlimited liability clearly is not unlimited. It can only go back to age 70 in any event. It is not like some infinite liability whatsoever. It is a red herring to argue against your case and to spin that out in a negative way.
Your point is my next question, which was the financial viability of the CPP. There was major concern about it in the 1990s and this urban myth, I think, that somehow you will never get your CPP because that fund will be bankrupt, but in fact that is not the case. It was restructured under Mr. Martin, and it is well funded now and is projected to be absolutely sufficiently well funded. This is not an undue burden on that program, and too bad if it is. People are entitled to it.
Mr. Gleberzon: Going back a bit, I think it was overkill when they were projecting the dire circumstances at the time because of the situation of the deficit, et cetera. I teach part-time at university, and my students still, 10 years later, are convinced that CPP will not be there for them when they retire. I tell them to trust me on this one even if they do not trust me on anything else: It will be there.
Mr. Shillington: I would be surprised if they will get it at age 65.
Mr. Gleberzon: That is another matter, and that I do not know, but I do know it will be there whatever age they get it.
Senator Mitchell: You are saying roughly 70,000 people would be eligible, and maybe you have discounted that to 50,000.
Mr. Shillington: I did an Access to Information request about five years ago, which cost me a substantial sum of money, with a comma in it. That figure was 55,000. However, I do not do Access to Information requests annually.
Senator Mitchell: What would you say is the percentage of women who are in that 50,000? It is very high, of course.
Mr. Gleberzon: They outlive men.
Mr. Shillington: In the number over 85, we know it is something like 290 out of 350.
Senator Mitchell: If it were predominantly men, I wonder if this would be occurring.
Mr. Shillington: It is the same for the GIS story. I have seen documents, again obtained under Access to Information because they are not made available, about the people who were discovered in the GIS outreach. If I remember correctly, two-thirds of GIS recipients are women, and 80 per cent of the ones who were found were women.
Senator Murray: Mr. Chair, listening to some of these horror stories about eligible people not receiving their payments, the heretical thought occurs to me that perhaps some part of the administration of this program ought to be devolved to the provinces.
Senator Callbeck, I am sure the government of Prince Edward Island would have no difficulty tracking down those who are eligible for the CPP and ensuring they get their cheques.
The Chair: Please direct your comments to our witnesses.
Senator Murray: If the federal government is unable to handle the administration of a program of this size, other arrangements ought to be made.
Mr. Gleberzon, I was struck by the paragraph in your presentation where you say:
There is outrage at the practice of integrating or ``stacking'' CPP payments with corporate or occupational pensions at age 65. This practice is prevalent in the Armed Forces, among superannuates and in some corporations.
Explain how this is done, how prevalent it is, and how they get away with it.
Mr. Gleberzon: The way it is done is that when people retire, they expect to get whatever their pension is plus CPP. They find that what actually happens is CPP is integrated with their pension. Say the pension would have been $1,000 and CPP would have been $800. They expect $1,800 but they get $1,000 because the CPP is integrated with their pension.
Senator Murray: How do they get away with that?
Mr. Gleberzon: When people complain about it, no one pays attention. They complain to us all the time and we are writing to the various government offices about this.
In regard to corporations, I am not sure what can be done because that is probably an arrangement made between a union and the corporation. I am not sure how you can intervene in that sort of thing, and I do not think there are any NDPers here, other than to get them to talk to the unions to see if they can stop that kind of practice. I know that the kind of responses, from the correspondence we get from people, just catches people off guard.
Senator Murray: How is it done with what you call superannuates?
Mr. Gleberzon: I do not know the details. My impression is that it is an arrangement made internally, and that is something you might want to talk to the next panel about. They may or may not know.
Senator Murray: Where is the outrage?
Mr. Gleberzon: The outrage is from the people who contact us, saying, ``What is going on here? I was expecting to get X, and instead I am getting X minus Y, or Z. How did that happen?''
Senator Murray: If their union leadership has agreed to such an arrangement under the collective agreement, I suppose their complaint should be directed to the union leadership.
What about the armed services? How do they do that?
Mr. Gleberzon: Again, I suggest you speak with them. I can only tell you that we do get correspondence from people who have retired from the armed services and find this out and say to us, ``What can you do about this?'' As I say, what we can do is bring it to your attention, as I am trying to do now.
Senator Murray: Are you suggesting here that the Department of National Defence or the armed services stacks CPP payments into the pension that a retired serviceman would get?
Mr. Gleberzon: I am suggesting that this is what people have told us. I am simply conveying what they have told us.
Senator Murray: We will have to take a look.
The Chair: If you can provide us with any more specific information, Mr. Gleberzon, on that particular matter, that would be helpful to us.
Senator Mitchell: This is very technical, but I am not certain that it is as evil as it appears to be. I think it allows the pension to pay more earlier. This is for people who retire before 65. If you retire at 55, your pension might pay you $1,000 a month until you died at 90, but if you integrated it with your CPP at 55, they will pay you $1,800 a month until age 65, and the pension has to pay you $1,000 because you are getting $800 from CPP until you are 90. It may be that it allows the pension fund to pay you more earlier, which they otherwise would not be able to afford to do.
The Chair: We will try to get specific information on this. It does not help to speculate without having objective information. We know there is a problem. We will try to find out what it is.
Senator Di Nino: I too had a question on the stacking issue. I have been involved with seniors and seniors' issues for the last three decades in Toronto, and I have never heard that. I am surprised. I agree with you that we should look into it. I do not think it is a problem. It may be some individual case or maybe a contractual obligation with a union so they can better serve their client base eventually at the time of retirement. I will leave that question alone.
The Chair: We will try to get some information. Mr. Gleberzon has undertaken to try to provide us with more specifics.
Senator Di Nino: Mr. Gleberzon, our colleague Senator Stratton outlined some of the initiatives that have been part of this recent government's attempt to try to solve this problem. I would like to give you a bit of applause, because I think your organization has also done very well. CARP and its approach to dealing with seniors' issues has served that community very well. You should take some credit for that.
I have a specific question dealing with a comment that you made about seniors who would be retroactively reimbursed not being asked to repay the GIS. In effect, that would mean that they would not only be fully reimbursed, they would get a windfall. What is the rationale for that?
Mr. Gleberzon: The rationale, based on what Mr. Shillington has said and what we hear, is that people who do not apply for CPP do not do it on purpose — it is an oversight. Therefore, in the interim, they often have survived on GIS. If they then are given CPP retroactively with interest and have to pay back GIS, they are no further ahead so they will go back on GIS.
Our concern — and we see this in a number of other areas — is that people are provided with money and the money is either taxed, or if they were receiving GIS there are some problems that emerge, in which they are really no further ahead.
I think part of the rationale for these hearings is to ensure that people are not only getting what they deserve, but that they are getting ahead of the game; they are not suffering unduly. If you provide them with full retroactivity with interest and then force them to repay GIS during that same period of time if they have received it, where is the rationale in that? I do not see how the government benefits or how the people benefit.
Senator Di Nino: Surely, the initiative that you and others have undertaken to try to deal with this issue of seniors who have not received their full and just payment of CPP is to return that amount of money to them. In the meantime, if they have received at least partial payment in whatever form, do you not think that should be considered in this full retroactive payment?
Mr. Gleberzon: No, because at the time they were not receiving CPP and they were dependent on GIS. Once they do get the money back, chances are very high that they will no longer need to receive GIS. I think you have to begin at that point in time.
Senator Di Nino: Perhaps Mr. Shillington has a comment.
Mr. Shillington: I do not think it is useful to put into the plan the facility for committing fraud. You do not want to encourage a situation where people will accumulate benefits and ``work the system.'' However, if a senior receives a windfall inheritance and has a substantial interest income in that year as a result, we do not ask them to pay back their GIS for the last five years. The same thing applies for capital gains; in effect, it is income over many years that is received in one year. We do not ask them to go back and repay their GIS.
What I would do in the provision is say if you are going to get retroactive CPP benefits, you will sign a document that says you were unaware. It would be a legal undertaking that you are not working the system.
The other point I should make is that if we were to do what Quebec does and get the take-up rate to 100 per cent, the retroactivity issue becomes mute. It goes away, except for the ones out there now. The emphasis should be on ensuring that everyone applies early on and then, hopefully, the retroactivity issue goes away. I think you could have an undertaking so people are not milking the system.
We have many situations in which GIS is for immediate needs. That money was spent on food, groceries, for people with extraordinarily low income. That is money spent. We do not ask to retroactively pay back GIS when people have a one-year RRSP withdrawal, capital gains, interest income, et cetera, so why for CPP?
Senator Di Nino: I think that is a much more complex issue than we have time to discuss this morning, but at least we put it on the record.
Mr. Shillington: Good point.
Senator Di Nino: I am baffled by the information that we are receiving this morning about the number of people who are unaware of their benefits, notwithstanding all the opportunities for informing themselves. Senator Callbeck gave us a statistic that over 20,000 notices were sent out to people and only 1,000 of them responded.
Mr. Gleberzon, as I said, I have a lot of respect for your organization. Does this make any sense to you? Why are people not claiming what is due to them? What are the main reasons? How can we stop this from happening, other than making a phone call five or six times a year until they pick it up, which I am not sure we should be doing, at least not that often. What are you hearing from your members?
Mr. Gleberzon: The experience we have is often the person has simply forgotten or does not understand. It is the child that follows up.
I cannot answer this. I am not an economist. My background is as a historian so I look at things a bit differently. You need evidence. The only way we can answer that question is to have someone do a study to try to figure out why this is happening; otherwise we are speculating.
My experience — and I do not know about Mr. Shillington's — is limited to what we have heard from people. Whether that cuts across the 20,000 or not, I do not know. Anything that I would say would be based on that limited amount of experience and the rest would be speculation.
I think the department should undertake a study to try to find out why we still have these numbers of people, given all of the good things that the government has done to reach out to people. It can be done.
Senator Di Nino: I wonder if one of the reasons might be that Canada has changed, particularly in the last 20 years, with a variety of new Canadians coming from all over the world. Would this be a language issue as well? Have you heard that reason?
Mr. Shillington: In a couple of cases, yes, but it is not typical. I can point to people such as the bank teller, who was obviously competent in dealing with numbers and was just unaware.
Senator Di Nino: I understand that those who have developmental disabilities, those with mental problems, as well as those with a doctor's certificate, can go retroactively right from the beginning.
We have a group of people who, for valid reasons, have not taken up their rightful claim to CPP. Should we not expect as well at some point in time that people — particularly a PhD, as you mentioned, Mr. Shillington — should take some personal responsibility as well?
Mr. Shillington: Of course we should, but the vast majority of cases that I have seen are people who are quite elderly.
Senator Di Nino: They were not elderly when they retired.
Mr. Shillington: It was a new program then. I know we do not have time to go into this case, but the reason I reacted emotionally when you talked about people with incapacity, a case crossed my desk where a woman in a psychiatric hospital with Huntington's disease — committed against her will — missed five years of Old Age Security. There is an incapacity provision in the legislation that says if you were incapacitated and that is why you applied late, you will receive full retroactive benefits. The department denied her the retroactive benefits.
She went to the review tribunal and the review tribunal sided with the family; it said no, she is incapacitated and therefore should get the full retroactive benefits. The department informed the family they would next argue this in federal court. That is when I got an email on a Saturday evening from a woman in Vancouver, her daughter, who said she needed a lawyer to fight the department to get five years of retroactive benefits for her mother who is in a psychiatric hospital. I found a lawyer within three or four days who would take the case pro bono and the department backed down.
When you mentioned the incapacity provision, there is no dispute that the intent of the legislation is that when you turn 65 years of age, you will receive Old Age Security subject to some residency requirements. There is no dispute about when this woman turned 65 years.
She was incapacitated. The legislation does provide an incapacity provision. I have her file folder if anyone wants to see the submission that the department made to the government about why this woman should not get her full retroactivity for OAS. The legislation is there, but it is subject to interpretation; is it not? I am sorry to get passionate about this subject.
Mr. Gleberzon: The bottom line for us is that CPP is the contributor's money. The government's duty, as stewards, is to ensure that they receive what is their due. Therefore, the onus and responsibility, it seems to us, is on the government, if they have assumed the position of steward, to ensure that happens. The issue of responsibility cannot be shifted to the contributor but to the government since they are the stewards.
Senator Di Nino: We do not disagree with that. The metaphor would be related to leading a horse to water.
The Chair: Senator Di Nino, you have used up all of our time. I will suggest that the two senators who did not have an opportunity to pose any questions on this round be at the top of the list for the next round, that is, Senators Chaput and Eggleton. Senator Eggleton, have you a question that must go to these witnesses? We have the second panel, which are government officials.
Senator Eggleton: I will wait for them.
The Chair: And Senator Chaput?
Senator Chaput: Yes.
The Chair: Thank you. I will suspend for two minutes to allow for a panel change, but before doing so, I should like to thank Mr. Gleberzon and Mr. Shillington for being here. Do not apologize for being passionate, Mr. Shillington; we appreciate the passion you put into this matter.
[Translation]
Yves Giroux, Senior Chief, Social Policy Branch, Department of Finance: Mr.Chair, I am Senior Chief of the Social Policy Branch at the Department of Finance. I am joined by my colleagues from Human Resources and Social Development Canada, the Office of the Chief Actuary and the Office of the Commissioner of Review Tribunals.
As you know, the Canada Pension Plan (the CPP) is one of the three pillars supporting Canada's retirement income system. It provides a basic pension, replacing 25 per cent of average earnings up to a maximum, for workers who have paid into the plan — which is therefore a contributory plan. It also provides disability, survivor and death benefits. Tables 1 and 2 of the documents that were previously distributed to you provide some basic facts and figures about the plan.
Another pillar that is important to Canadians is the Old Age Security (OAS) program, which provides a monthly benefit to Canadians 65 and over who meet residency requirements, not contribution requirements this time, and the Guaranteed Income Supplement, which provides an additional benefit to low-income Canadians who receive the OAS.
The third pillar is tax-deferred private savings and pension plans sponsored by employers.
[English]
Canada is recognized internationally as one of the few countries with a public pension system that is financially sustainable in the face of aging, and that is recognized by the OECD, among others. Every time we have discussions with the OECD, we are praised for our achievements. The 1997 reforms to the CPP put the plan on a sound financial footing. The most recent actuarial report on the CPP tabled last month confirms that the plan will remain financially sustainable at the current contribution rate of 9.9 per cent for at least the next 75 years. You already have or will soon have a copy of the report distributed to you.
The Canada Pension Plan is a self-financing program governed by an act of Parliament. Chart A in the document illustrates the plan's governance structure. A key feature of this structure is that the Government of Canada and the provincial governments are co-stewards of the CPP. This co-stewardship is reflected whereby the federal Minister of Finance is required to review the financial status of the CPP with his provincial counterparts every three years. At the conclusion of each review, the finance ministers, both federal and provincial, recommend whether any changes are required to the contribution rate, benefits or the funding policy. These reviews are based on actuarial reports prepared by the Chief Actuary of the CPP, Mr. Ménard.
Federal-provincial co-stewardship also means that any substantive changes to the CPP legislation require the formal consent of at least two-thirds of the provinces having at least two-thirds of the population of Canada, as well as the approval of Parliament.
Co-stewardship is also reflected wherein CPP revenues and expenditures are not part of the Consolidated Revenue Fund of the Government of Canada, nor of any provincial government. Canada Pension Plan revenues and expenditures are recorded in separate account in the accounts of the Government of Canada. Furthermore, CPP revenues can be used only to pay CPP benefits.
Revenues not immediately required for this purpose are transferred to the CPP investment board. The CPPIB is mandated to invest these funds in the best interests of contributors and beneficiaries without undue risk of loss. It operates at arm's length from governments and invests CPP assets in a diversified portfolio of market securities.
The CPPIB was created in 1997 as part of the reforms to put the CPP finances on a long-term sustainable basis. As mentioned by earlier witnesses, at the end of March 2007, CPP assets managed by the investment board stood at about $120 billion. They are projected to continue growing. However, the liabilities are also substantial. Mr. Ménard can give you more details. While assets stand at $120 billion, the liabilities are close to $500 billion.
When Mr. Gleberzon indicated that there are significant amounts of money in the fund, the other side of the ledger is that there are substantial liabilities that will have to be paid. That will happen as the baby boomers retire. The investment earnings on this portfolio will help pay CPP benefits that would otherwise have to be paid through higher contribution rates.
There are points I would like to make regarding your earlier discussions. The first, I already made regarding the assets.
[Translation]
Although the first witnesses mentioned that the fund contains about $120 billion, we must recognize the fact that the actuarial liabilities reach $500 billion.
Mr. Shillington also mentioned the case of a bank employee who unfortunately forgot to file an application for retroactive benefits under the Canada Pension Plan and who today, at the age of 67, finds that it is too late to ask for retroactive benefits in his case.
The Canada Pension Plan is designed so that people who apply for their retirement benefits between the ages of 65 and 70 receive an actuarial increment for each month after 65.
The worker that Mr. Shillington referred to is still eligible for a form of retroactivity because it is included in the benefits that are higher than they would have been before. That perhaps puts things back into perspective.
Reference was also made to the rate of benefits paid by the Government of Quebec being 100 per cent. I am an economist by training and, for me, incentives are important to consider.
We must remember that provincial governments are responsible for paying social insurance benefits but they are not responsible for paying old age benefits. The Quebec Pension Plan is also a separate, non-consolidated fund, and, for the Government of Quebec, the incentives are such that if social insurance recipients over 60 years of age apply for Quebec Pension Plan benefits, any social insurance benefits they receive from the Government of Quebec are reduced by the same amount.
Without assuming that this is what the Government of Quebec is doing, we must consider the fact that the incentives are in place for provincial governments to encourage their citizens to claim transfer payments, not consolidated ones. That perhaps explains why the Government of Quebec communicates more proactively with people aged 60 and over.
[English]
The Chair: Do you agree with Senator Murray's point that it might be better if the provinces operated this program?
[Translation]
Mr. Giroux: That is a question for Parliament. I have to say that, for this matter, I am happy to be a public servant. If you have questions, I would be happy to answer.
Jean-Claude Ménard, Chief Actuary, Office of the Chief Actuary: Mr. Chair, thank you for the opportunity to speak to you today about the Canada Pension Plan. I would first like to say a few words on the mandate and activities of the Office of the Chief Actuary.
Our mandate is to conduct statutory actuarial valuations of the Canada Pension Plan, the Old Age Security program, and other pension and benefit plans covering the federal public service, the Canadian Forces, the RCMP, federally appointed judges and members of Parliament.
Since 2001, we have also performed an annual actuarial review of the Canada Student Loans Program. The primary role of the Office of the Chief Actuary in relation to the CPP is to provide actuarial services to the federal and provincial governments who are the stewards of the Canada Pension Plan.
These services include preparing actuarial estimates of costs and liabilities and long-term financial projections of any changes being considered by governments to the CPP.
Canada has set in place a public pension system that is expected to be sustainable and affordable well into the future despite the changing demographic conditions. Our mandate is to monitor and communicate future demographic and economic risks by submitting regular actuarial reports to Parliament.
[English]
In addition, when a bill is introduced before Parliament that may have a significant impact on the financial status of a public pension plan falling under the statutory responsibilities of the Chief Actuary the Office of the Chief Actuary must submit to the appropriate minister an actuarial report valuing this impact.
I submit these reports, as well as the triennial statutory actuarial reports, to the Minister of Finance, the Minister of Human Resources and Social Development, and the President of the Treasury Board. The OCA provides actuarial advice to these departments to assist them in the design, funding and administration of these programs.
I would like to make comment on what Mr. Shillington said earlier. He said that about 3,000 people apply for their benefits after the age of 70. Although he is right for past years, in the last two years it is about an average of 2,000 people and not 3,000.
Dominique La Salle, Director General, Seniors and Pensions Policy Secretariat, Human Resources and Social Development Canada: Thank you for inviting me to speak to you regarding the Canada Pension Plan.
[Translation]
I am Director General of the Seniors and Pensions Policy Secretariat. I am pleased to be here today.
[English]
CPP retirement pensions are based on how much and for how long one contributes to the CPP, as well as the age at which one's pension begins. It is important to note that the CPP retirement pension provides flexibility to all contributors in that a retirement pension can become payable at any time after age 60. A basic retirement pension is payable at age 65, as long as the contributor has made at least one year of contributions.
If a person chooses to apply for the pension before age 65, the early pension is reduced by .5 per cent for each month. Therefore, taking a pension at age 60 will incur a maximum reduction of 30 per cent, or 6 per cent per year. Those who choose to wait to take their pension after age 65 will have their pension increased by the same percentage. Taking a pension at age 70 will see a pension increase by 30 per cent.
Most Canadians apply between the ages of 60 and 70 for their retirement benefits. In fact, approximately 95 per cent of those applying for a CPP retirement pension are between the ages of 60 and 65.
With regard to eligibility for CPP disability benefits, the criteria and calculation of benefits varies considerably from that of the retirement pension. CPP disability benefits are intended to replace a portion of earnings for contributors who can no longer continue working because of a disability. Applicants must first meet an earnings test — that is, contributions in four of the last six years — that demonstrates a recent attachment to work. Once established, they also have to demonstrate that they have a severe and prolonged mental or physical disability that prevents them from regularly working at any job.
Normally, people apply for CPPD benefits when they become disabled. There are provisions in the legislation to allow them to make a successful claim for benefits, even though they would have applied well after becoming disabled.
[Translation]
I know that members of this committee are particularly interested in knowing about the provision for retroactive payment of CPP benefits.
[English]
For eligible seniors who do not apply immediately, the legislation allows up to 11 months of retroactive benefit payments. The 11-month retroactivity provision was chosen because it was considered to be a reasonable period to accommodate delays in obtaining information or evidence required to make an application, as well as to address ordinary oversights in submitting an application.
The current limitations on retroactivity are consistent with similar programs in Canada, including other federal and provincial income support programs, such as the Alberta Seniors Benefit Program, British Columbia's Senior's Supplement, the Ontario Guaranteed Annual Income, the Quebec Family Allowance and Newfoundland and Labrador Seniors' Benefit.
Without limits on retroactivity, individuals could manage CPP benefits as a savings program. Beneficiaries could delay applying for CPP benefits so as to take advantage of the GIS and provincial income-tested programs. As an example, people could use drug benefits and bank CPP benefits for a large retroactive sum to be requested at a later time. This would allow access to low-income benefits to people who would not otherwise be eligible.
There are provisions permitting the minister to pay benefits exceeding 11 months when the department has made an administrative error or provided erroneous advice, or when a client could not submit an application because of a mental or physical incapacity.
The erroneous-advice provision imposes a liability on the department if an authorized employee gave wrong advice or made a mistake on a file that caused an individual not to receive benefits they would have otherwise received.
[Translation]
For example, if a person attempted to file an application for retirement benefits at age 65, but did not do so because an employee told them he should not, when he does apply, he may be entitled to retroactive benefits back to age 65.
[English]
In the case of incapacity, the minister may pay retroactive benefits for the periods where incapacity prevented an individual from applying.
[Translation]
The vast majority of the seniors' population is receiving the benefits to which they are entitled. The department makes extensive efforts to make contributors aware of the benefits that CPP provides. This is done by targeted mailings, advertising and many other activities.
The passage of C-36 allows the application process to be further simplified. We are working with third parties to help build capacity to disseminate information on CPP to Aboriginal people, particularly in remote communities, immigrant seniors and the homeless, working closely with municipal social services.
[English]
I would like to add — and this touches a bit on what my colleague from the Department of Finance was saying — we are in discussions with provinces whereby we would have access to their social welfare roll so we can compare this to people who are being paid GIS. As a matter of course, we provide the information on GIS recipients, since the provinces often tag along on this criterion. If you are a GIS recipient, you are also eligible for X, Y, Z programs at the provincial level.
We need to have that information back. We have an agreement with Ontario which allows us to see who is on the welfare roll, and compare this person to see if he or she is in receipt of GIS and then target a particular individual.
We are well advanced in discussions with British Columbia; we have been in discussions for three years with the Province of Quebec; and we are in good shape with New Brunswick. This is very important and is a closing-the-circle type of initiative.
The outreach we do at the community level is to reach people who we otherwise could not with even the best computer system and database. We are talking about homeless people, and so on. We are trying innovative ways to reach these people. It is done at the community level. We have a pilot project with the City of Ottawa where we train front-line workers to ask the right questions and point to the right type of support.
I would like to assure honourable senators that we are committed to ensuring that all eligible applicants receive the benefits to which they are entitled. We believe the 11-month retroactivity provision allows most seniors to receive the benefits to which they are entitled. In that respect, 93 per cent of applicants are paid within a month of receiving their application.
We continue to take active steps to meet this commitment for those not currently in receipt of their benefits through outreach as well as a simplified application process.
[Translation]
I would be happy to respond to your questions in either official language.
The Chair: Thank you. The floor goes to Mr. Philippe Rabot.
Philippe Rabot, Commissioner, Office of the Commissioner of Review Tribunals, Canada Pension Plan/Old Age Security: Thank you, Mr. Chair. In the last fiscal year, my office received close to 5,000 appeals from individuals, most of whom had been denied disability benefits. In about 100-200 cases, I would say, application for benefits had been granted and paid on a retroactive basis but the appellants were seeking to have their retroactivity period extended. Of the appeals we deal with, 91 per cent pertain to disability benefits. So retroactivity arises as an issue most frequently there, but it does arise occasionally with retirement or other pensions.
It is rare that a review tribunal is able to extend the retroactive period of benefits for an individual who has already received the maximum retroactivity permitted by the legislation. The only exception — that Mr. Shillington alluded to — is for incapacity. This is a fairly onerous legal test and few applicants are able to meet that test.
[English]
In some appeals concerning cases where maximum retroactivity has been paid, it is argued that delay is attributable to misinformation provided by Service Canada. The example most often cited is about someone who asks for information about seniors' benefits and is provided with information about the Old Age Security program, but not about the Canada Pension Plan, as, I believe, Mr. Shillington discussed. Perhaps it is erroneously assumed that people are not eligible for the program.
Mr. Shillington also mentioned that the minister has the power to correct administrative errors and instances of erroneous advice by giving greater retroactivity than the 15 months specified in the legislation. Review tribunals do not have that authority. The irony is that any person who has been either denied or granted a pension has the right to appeal if the person is not satisfied with the decision. However, if they have been given maximum retroactivity and then they appeal, there is nothing we can do for them because we do not have the authority, as review tribunals, to even look at the issue as to whether an administrative error took place or the people delayed applying because they received poor information from Service Canada.
One of the issues where retroactivity comes up a lot has to do with people who are between the age of 60 and 64 and apply for an early retirement pension. They will apply for that retirement pension in many instances because they are no longer able to work. However, they are not aware that they could be applying for a disability pension instead, which is more generous pension scheme for most people.
By the time they find out about it two or three years later, perhaps, it is too late to cancel the retirement pension and replace it with a disability pension. We see that happen in about 100 cases per year. There again, there is nothing we can do for them, which is unfortunate, because when you apply for an early retirement pension, you might experience a penalty that will be as much as 30 per cent and the consequences of that choice will be felt right past age 65 until the end of life. If people had been told that they might be eligible for a disability pension, they might have received a higher pension until the age of 65. At 65 years, the disability pension would have been automatically converted to a full retirement pension without having to make application for it.
The impact of limits on retroactive payments of CPP benefits is by no means confined to individuals applying for or receiving a retirement pension. Disabled persons who apply for CPP disability pension are also affected by the maximum retroactivity clause. Again, these might be people who did not apply for a disability pension until many years after the onset of their disability because, in most cases, they were not aware of the existence of the program.
I would like to point out to the committee that if any consideration is to be given to changes in the retroactivity provisions of the existing legislation for CPP retirement benefits or survivor benefits, then perhaps consideration will have to be given to applications for other pensions. In that way, people who are unaware of their entitlement to apply for a disability pension until five or 10 years after the fact will be placed on the same footing and have the same opportunity to seek greater retroactivity than the legislation currently provides.
Senator Eggleton: I will go back to the basic question that Senator Callbeck originally wrote about in respect of why people are not applying for these benefits. I want to understand the issue in terms of the modern context of people's eligibility for CPP.
Back 20 or 30 years, people would show up at work until the day they turned 65 years of age. The next day, they would be in full retirement leisure, or whatever leisure they could afford. Today, people will work past the age of 65 but not necessarily at the same pace. They might do some contract or part-time work. They might have an uneven income because in one month they might earn money but no money in the next. They might intend earning a lot of money but end up not doing so.
Does that create confusion in people's minds in terms of their eligibility for the CPP? As I understand it, if you are earning more than your eligible CPP benefit you would not be eligible for it. Perhaps you could clarify that information vis-à-vis today's reality of people working either part-time or full-time beyond the age of 65.
Mr. Ménard: This raises many issues. I would like to start by thanking Senator Callbeck, who raised the issue last month, specifically the questions that were asked of us. It helps us to provide you with our best answers.
In the actuarial report, the eligibility rate for males is not 100 per cent but 106 per cent. It is higher than 100 per cent because English Canada, like Australia, has one of the highest migration rates in the world; a large group of people moved in and moved out of the country over the past 40 years. In other words, many people contributed to CPP between the ages of 40 and 50. This group of people is eligible for benefits even though they are living abroad. That is one thing I want to mention. The population that we are looking after is quite different than the population for Old Age Security and the Guaranteed Income Supplement.
Twenty-four million people have contributed at least one year to the Canada Pension Plan since 1966. In the record of earnings, we have about 284,000 people who are 70 years of age or older and who are not yet in receipt of CPP retirement benefit. Some reasons include leaving Canada before or after becoming eligible. In some cases, people who are residents here in Canada have not applied. Perhaps they applied for the Quebec Pension Plan; our database does not have access to the QPP. Out of this 284,000 people, there are many who are even past the age of 100 years. Some of them contributed at age 50 in 1966 and possibly died in 1972 and we were not informed. We looked at the ages of these people, we applied the Canadian mortality patterns to this group and we ended with 118,000 people who might still be alive as of July 1, 2005.
The administration was very helpful in providing us a database to perform better projections and, because of that, we have access to the record of earnings, the CPP file master benefits file and the Old Age Security master benefits file. Do not worry: We do not have SIN numbers or other personal information; it is only numbers and we can do a lot with numbers.
Following the discussions that we had in March regarding Bill C-36, we have identified about 26,000 individuals who are in receipt of Old Age Security, GIS payments or CPP survivor benefits, but have not applied for their CPP benefit. Later on, I think Mr. La Salle will talk about the current initiative that is under way to reach these people. After all, these people are already receiving a cheque, so we know who they are.
We think that among this 118,000 people, we have about 10,000 dual CPP contributors. One-half of them could be in receipt of the QPP benefit and the other half is presumed to be outside Canada. That means there are 82,000 people presumed alive who are not in receipt of OAS or CPP survivor benefits and who only contributed to the CPP. We presume that most of these people reside outside of Canada.
Of the 284,000 people, two-thirds are male, one-third female. Most of these people have only contributed for one year. Indeed, 88 per cent have contributed for less than five years. We still have close to 2,000 people who have made significant contributions to CPP and we were able to find at least one half of those amongst the 26,000 people.
Regarding the people who have contributed to the CPP and who are not in receipt of a benefit, my claim is that, except for these 26,000 people, most of them are living outside of Canada.
Senator Eggleton: You did not answer my question. I appreciate everything you said because I think it needs to be heard. Maybe you are not the right person to answer; perhaps it should be Mr. La Salle.
I was asking about the adjustments to current trends and modern-day realities in terms of CPP, specifically whether that is a factor and how you would address that in the future.
Mr. La Salle: We are talking about a couple of things. The program is a contributory program. Regarding different patterns of work, if you have some income earnings, then you decrease some of your take-up of CPP. That would not be the case. You are probably referring to the GIS component of OAS.
Essentially, there is CPP which is based on contribution, on what you have put into the system and at what age you take your retirement. That is a stand-alone item. If you are 65 and have 10 years of residence, then you are eligible for the OAS benefit. If you are a low-income senior, then you access GIS. GIS is contested. There is a certain exemption for that part of the benefit if you have earnings, whether part-time or otherwise. The first $500 is exempted. After that, it is a two-for-one reduction.
The GIS has something like a $7,000 maximum benefit, so it would take about $15,000 of income to reduce that component to zero. I do not know if that clarifies matters.
Senator Eggleton: You say you are eligible for CPP when you retire. What I am getting at is this: People do not necessarily just retire nowadays; they might keep going in some part-time fashion after retirement. How does that affect their CPP eligibility and do they understand how it affects their CPP eligibility?
Mr. La Salle: When you apply for your CPP pension, it freezes there. You can work after that, but you do not accrue additional CPP benefit.
Senator Eggleton: Are you still entitled to the benefits gained at age 65 regardless of whether you retire?
Mr. La Salle: Yes, senator. You are in pay and then you can go and work. You no longer contribute to the plan.
Suzan Kalinowski, Chief, Income Security, Social Policy, Federal-Provincial Relations and Social Policy Branch, Department of Finance Canada: I simply wished to reiterate Mr. La Salle's point that the CPP benefit, once it is taken up, is not reduced.
[Translation]
Senator Chaput: I would like to come back to one point and I think you will all agree with me. There are still some seniors who are not getting the benefits to which they are entitled. Whatever the reason may be, there are still a number of them.
You have told us that number is dropping, and that is very good. You have told us about some initiatives that you have successfully undertaken.
You mentioned incentives that could be the reason why some provinces are more successful than others in reaching those who should be receiving the benefits to which they are entitled.
One of you mentioned something about a successful program at municipal level, if I understood correctly, involving social workers.
I wonder why we are not considering municipal governments a little like partners. If there is one level of government that knows the situation, it is the municipalities, is it not?
Mr. Lasalle: Yes, indeed, that is where it all happens. The homeless, for example, are not looked after from Ottawa, it happens at community level. It really is often paramunicipal organizations and the like, such as the Soupière de l'amitié in Gatineau and so on.
We have a pilot project with the City of Ottawa in which we train police officers, who are more likely to come across homeless people in the street, to ask questions that might identify them as eligible candidates for the programs we are offering. It seems to be successful.
We are also reaching out to First Nations. Last month in British Columbia, for example, we used a meeting of the Assembly of First Nations to provide information.
We are also trying to reach immigrants who speak neither French nor English. I know that Service Canada is developing information material in different languages. So efforts are being made along those lines too.
Senator Chaput: Are you able to evaluate, or is it too soon, whether you have been successful in reducing the number of people who are not getting benefits?
Mr. La Salle: I will have to get back to you on that, I do not have the information with me. For each of these initiatives, we do have an evaluation framework, we want to find out what is happening and to measure the success.
I recall a project in Nunavut, or in northern Alberta, a fairly remote area, where about ten people in a community started receiving benefits. In a small community, that makes a big difference.
[English]
Senator Callbeck: I know you heard the previous witnesses and my questions to them. I have great concern for the thousands of people that have paid into CPP but are not receiving the benefits. You do a lot of outreach, but obviously, from the figures that I stated earlier, we are not really getting the desired results.
When I asked the other two witnesses what they recommend the federal government do, they talked about the situation in Quebec where people are contacted by telephone. We have a list of 26,000 people who are receiving OAS. We know where they live. We know they are not getting CPP to which they are entitled.
Has any thought been given to phoning these people like they do in Quebec?
Mr. La Salle: Regarding these 26,000, there is a pre-filled form that is being sent to them by Service Canada. My colleagues from Service Canada have much more information on this matter. We send them letters targeted to their situation that takes into account their particulars and we pre-complete the application on their behalf. Should that be followed by phone calls? It would not be a bad idea, but that is a question to which Service Canada should respond.
There are many outlets for Service Canada, but I would defer to them on how they manage this matter. Mr. Ménard worked for the Government of Quebec for many years and he may have some views on how they deal with this issue.
Mr. Ménard: I worked at the QPP for 18 years. QPP continues to be successful reaching people and there is no reason why CPP cannot do exactly the same. Could we phone these people? Certainly we could. Would we be able to reach everyone by phone? No. Some people may be quite old and need assistance from their children. Therefore, the timing of the phone call is important. The exercise we have done in the past months should be done each year to match the files and to ensure the right amount is paid to the right person.
The Chair: Have you estimated what it would cost to do more effective outreach? This committee is driven by such estimates.
Mr. Ménard: I do not have an estimate on the cost for these 26,000 people specifically. However, in the actuarial report, the assumption was made that they would apply, so the cost related to these 26,000 people is already included.
Senator Callbeck: You all agree, then, that this would be a good idea for the department to do.
On the Senate Order Paper, I asked, when seniors apply for OAS, are they informed of their eligibility for CPP. I also asked if frontline personnel have access to personal records.
I will read the answer I received, ``Canadians may choose to apply for CPP at different ages. Service Canada staff does not necessarily confirm whether someone applying for OAS is in receipt or eligible for CPP benefits.'' The letter goes on to say that any frontline personnel with access to a senior's OAS file will also have access to an individual's CPP file.
Why could that not be a policy? If someone is inquiring about their OAS, they are automatically told that they have to apply for the Canada Pension. Apparently the staff person has that information.
Mr. La Salle: I would defer to Service Canada, because there may be a system issue. They are in the process of integrating the systems between OAS and CPP.
The Chair: Is there anyone here from Service Canada who could come to the table and identify himself or herself? If not, we will have to follow up.
Mr. La Salle: Ms. Pam Menchions is here from Service Canada,
The Chair: Is Service Canada a part of Human Resources and Social Development Canada?
Mr. La Salle: It is part of the portfolio.
The Chair: Ms. Menchions, you have heard the question. Could you respond?
Pamela Menchions, Director of Operations Management, Service Canada: The age at which you apply for Canada Pension Plan is optional; it can vary. Our instructions to frontline staff are not to necessarily invite people to apply for Canada Pension Plan when they apply for OAS.
Senator Callbeck: The employee is aware that individuals are eligible for CPP, so why can they not tell them?
Ms. Menchions: It is an individual choice when to apply for CPP.
The Chair: We understand the policy.
Senator Murray: It is beyond neither the wit, nor the computer capacity, nor the administrative capacity of the Government of Canada to rescue these people before they fall through the cracks. Alternatively, as one of the witnesses phrased it, before they find out down the road that they made the wrong choice in applying for early retirement rather than disability.
I am always very impressed, as one who files income tax online, how quickly the system can figure out where I am, what I am owed or what I may owe. Someone mentioned Bill C-36 in regard to modernizing service delivery. How does it modernize? In respect to the payment of interest on amounts owing to Her Majesty and the same regarding the Old Age Security Act!
I could introduce you as well to a new concept brought in by your colleagues in federal-provincial fiscal relations. It is called the cumulative best-of concept in which they compare what the Government of Nova Scotia is entitled to under a present program with some now defunct or hypothetical program and what they might have had wherein they will cut a cheque for the difference if the latter is less than the former.
We can do more through the system, as you have suggested, through Service Canada, since that department seems to be carrying the burden of this today.
Mr. Rabot, you mentioned that the same authority should be given to tribunals as now exists with the minister to authorize certain retroactive payments. You went on to say that if other unspecified amendments were made to CPP, they should be extended to OAS and GIS. Are you suggesting other amendments that might be made?
You say:
Parliament should consider an amendment to section 66(4), which would extend to review tribunals the same authority which the minister currently enjoys to alter the effective date of payment of benefits if it is determined that an appellant's failure to apply sooner for those benefits is attributable to erroneous advice or administrative error.
Okay, we see that, we take that on board. Are there other amendments you think ought to be made in terms of retroactivity with CPP benefits?
Mr. Rabot: From our perspective, the retroactivity period is very short because of the time it takes for people to learn of their entitlement to benefits. In combination with the outreach efforts that Service Canada and the department can make, a longer retroactivity period would go part way to alleviating the problem of people who are not aware of the benefits to which they are entitled.
Senator Murray: How long?
Mr. Rabot: I have heard Senator Callbeck and others talk about the Province of Quebec, where the retroactivity period is five years. I think that might be an appropriate consideration. I heard one of the witnesses this morning say that the Province of Quebec's interest in having a longer retroactivity period is that it gets people off welfare. I think the federal government should also be similarly interested in getting people off welfare.
[Translation]
Mr. Ménard: As to the experience with the Quebec Pension Plan, I would like to clarify a very important point. In 2007, we will be starting payments for 400,000 people. These are retirees, people receiving the survivor's benefit, the disabled and orphans. For 99 per cent of these people, the retroactivity period for the Quebec Pension Plan is exactly the same as for the Canada Pension Plan. The difference in the Quebec plan is as follows. If you apply after 66 years of age, you can go back to 65 if you wish. They say they have a five-year period. But if you apply when you are 67, it is not five years. At 67, it is two years of retroactivity. You can choose to receive either higher benefits with a higher adjustment factor, or retroactivity back to age 65.
Another very important factor is that the pension calculation, for those who apply for the Canada Pension Plan after 65 years of age, is, in all cases, either equal to or better than the Quebec Pension Plan. Periods of work after 65 years of age can replace other years. So we do not extend the contribution period. The initial amount, not the retroactive amount, for everyone applying for a pension under the Canada Pension Plan is between 4 per cent and 10 per cent higher than an application made to the Quebec Pension Plan by a person with the same history.
[English]
Ms. Kalinowski: The point I would like to make regarding changes to CPP benefits — for instance, changes to the retroactivity provisions or extending retroactivity to disability benefits — is that the CPP plan is a co-stewarded plan with the provinces. Therefore, those issues would have to be discussed and agreed upon with provincial counterparts. I guess they would also have to be examined in terms of the financial implications for the plan. As we said before, it is a self-financing plan so contributions come in and expenditures are paid out. In effect, retroactivity would change the plan expenditures so those would have to be costed and discussed with the provinces.
Senator Di Nino: Mr. Ménard, I believe you said there is a provision in the financial statements for the unfunded retroactive — the 26,000 people in particular. Is that correct?
Mr. Ménard: I said that in the actuarial report, the projections include the costs related to these 26,000 people. In other words, we are assuming that these people have applied for their CPP benefits.
Senator Di Nino: What is that number?
Mr. Ménard: No, I do not have it.
Senator Di Nino: Maybe you could supply it to us because we were talking about it earlier.
We were informed that 20,000-plus letters were sent out, I am assuming to the 26,000 persons who applied. Only 1,000 came back. Was there a follow-up to see what happened to the other 19,000-plus who did not reply?
Ms. Menchions: I would like to clarify that the 20,000 letters referred to earlier were letters sent to contributors by our statement of contribution mail out. The 20,000 we are talking about this morning are not included; that is an additional 26,000 that was referred to this morning. They are two different groups of people. We are just sending the letters to the 26,000 over the next few weeks.
The Chair: It would be beneficial for senators to know how independent the Quebec program is. Quebec maintains its own fund of contributions and invests it on its own. Does Quebec determine its own contribution and benefit rate, or is that all part of the national program?
Ms. Kalinowski: No, the Quebec Pension Plan has separate legislation. It collects its own contributions and determines its own benefit levels. It is an independent plan. The Parliament of Quebec makes decisions relating to that plan.
There are discussions between the stewards of the Quebec Pension Plan and the stewards of the Canada Pension Plan in terms benefits, contribution rates, et cetera.
The Chair: Senators have found the ability to compare the Canada Pension Plan with the Quebec Pension Plan a good opportunity to see the benefits of one and the other. In terms of making changes in the three-year review, is that all provinces except Quebec?
Ms. Kalinowski: No, Quebec is an included province with a voice. We seek its consent to changes to the Canada Pension Plan.
The Chair: Quebec participates and can determine the rate for the rest of Canada, but it can set its own rate without the input from the rest of Canada, is that right?
Ms. Kalinowski: That is correct.
The Chair: That is what I was beginning to think.
Senator Murray: Do not worry; Ontario has a de facto veto because it takes two thirds of the provinces with two thirds of the population. Do not worry. You are in safe hands; Ontario has a veto.
The Chair: You are the senator from Ontario; I am from New Brunswick.
Mr. LaSalle: Returning to a question asked by Senator Murray on the issue of erroneous advice and administrative error, in 1987, when Parliament granted the authority to the minister to make a determination in that respect, it did so because before there was no such avenue; it was ex gratia payments, and so on.
That exercise was done with the principle of natural justice, where people can bring their case and they have to be looked at on a case-by-case basis. The appeal to such decisions is through the federal court. Jurisprudence has demonstrated thus far that it was the right course of action.
The Chair: On behalf of the senators in the Standing Senate Committee on National Finance, we would like to thank each of you. You are doing important work for seniors and senior financial security in Canada.
We appreciate this very valuable time that you have given us. We may well have some follow-up questions, but we now know who you are and what you are doing.
The committee adjourned.