CPP – Changing Pension Policies

Many Canadians are choosing to change the way they live, how long they work, and when they are going to retire.  Therefore, to ensure their benefits stay fair and sustainable, the Government of Canada has adapted the Canada Pension Plan (CPP) to the evolving needs of Canada’s aging population.

 The question on everyone’s mind is, “Will I be affected?”  Unless you started receiving a CPP retirement pension on or before December 31, 2010 and remain out of the workforce, then, yes, you will be affected.

 Changes to the CPP are as follows:

• Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65:  0.7% up from 0.5% per month that you delay receipt after age 65.
• Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65:  0.6% up from 0.5% per month that you are in receipt of your CPP retirement pension before age 65.
• If you are under 65 and work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions.  Prior to the changes, if you were in receipt of the CPP retirement pension and working, regardless of your age, you did not make CPP contributions.
• If you are between the ages of 65 and 70 and work while receiving your CPP retirement pension, you elect whether or not to make CPP contributions.  As noted, prior to the changes if you were in receipt of the CPP retirement pension and working, regardless of your age, you did not make CPP contributions.
• The number of years of low or zero earnings that are automatically dropped from the calculation of your CPP pension will increase.  In calculating average earnings, up to 7.5 years of your lowest earnings are eligible to be dropped from the calculation, increased from 7 years.
• You will be able to begin receiving your CPP retirement pension without any work interruption.  Prior to the changes, if you decided to take your CPP before age 65, you had to stop working or significantly reduce earnings for two months known as the “work cessation test”.  This period no longer applies and your CPP can be taken as early as age 60 without work or earnings reduction.

 The most notable changes are the mandatory contributions for working individuals 60 to 65 years of age, as well as the elective option for working individuals 65 to 70 years of age.  If you are working, between the ages of 65 and 70, and do not wish to make CPP contributions starting January 2012, you must file a CPT30 election form with the Canada Revenue Agency and with your payroll department in December 2011.  If, once you have elected to cease CPP contributions, you choose to restart contributing in the future, a new CPT30 form must be completed and filed to revoke your previous election.  Only one CPT30 form can be used per individual per calendar year.

 If you have questions about changes to the CPP retirement pension, filing a CPT30 election form, or just want to chat, give us a call. We would be happy to hear from you.

Times r a Changin’

You may have heard some discussions regarding the changes in accounting standards, specifically International Financial Reporting Standards (IFRS) and generally accepted accounting principles for private enterprises (PE GAAP). The date to mark for the change was January 1, 2011; however, not to worry. You haven’t missed any important deadlines as the new standards take effect for fiscal periods beginning on or after January 1, 2011.

Based on our knowledge of small- and medium-size businesses, we believe the accounting principles available under PE GAAP will be the most suitable. The new standards allow businesses to adopt the accounting policies that are right for them, while also simplifying financial reporting. 

Although there are many factors to consider during the transition, the following questions should be asked:

• How is the business currently reporting under existing Canadian GAAP? Previously there had been options available on how to account for items such as investments, intangible assets, income taxes, and preferred shares under differential reporting options. These past policies are still available for use under PE GAAP.
• Does the business own its land and building? PE GAAP provides a one-time opportunity to revalue capital property and strengthen the balance sheet by revaluing assets to their current fair market value, directly increasing the equity in the business with no tax consequences.
• Does the business have any active investments? This will affect how various financial instruments are reported on the balance sheet and needs consideration for the appropriate policy selection.
• Who are the users of the financial statements? This will affect what policies are adopted in the transition year to PE GAAP to ensure an accurate picture is portrayed.

 In the transition year there may be additional costs incurred for the time and consideration needed to determine the appropriate policies. We would like to arrange a meeting to further discuss your business’ transition to PE GAAP.

An Invitation to Connect

In October 2010 I wrote about Israel and Start-Up Nation, Dan Senor and Saul Singer’s book about the personality of Israel and why Israelis are so successful entrepreneurially.  It is a highly recommended read.

You have the opportunity to meet one of the authors in October 2011 when the Jewish Federation of Winnipeg’s mission to Israel has on its itinerary a meeting with Mr. Singer.  If you have already read Start-Up Nation, you will appreciate the value of this opportunity.

The Federation trip will leave Winnipeg on October 28^th and return November 12^th.  The trip will include various historical, religious and cultural sites which make the trip awesome from the get-go.  This particular trip will include a commercial component to make it even more valuable to business people.  In addition to Mr. Singer, we will be addressed by Abe Finkelstein of Vintage Venture Partners.  We will visit the Intel Chip making Hi-Tech Fab.   We will also visit Better Place and see their electric vehicle demonstration, and meet Dalia Rabin, its founder.  (I understand Better Place has recently signed a contract with the Province of Ontario.)

The commercial portion of the general itinerary is rounded out with a couple of additional speakers.  And if this isn’t enough business for you, Federation, in conjunction with Lazer Grant, is also arranging specific business connections for entrepreneurs wishing to make specific contacts and meetings.

The religious and cultural portions will include visits to the Old City of Jerusalem where, all within a few hundred meters of each other, are the Western Wall, the Dome of the Rock, and the Church of the Holy Sepulcher.  We will visit Yad Vashem which is the Israeli Holocaust museum, the Knesset which is the Israeli parliament, and Yad Lakashish which is a facility which makes elder persons’ lives meaningful.  We will go to Masada and then to the Dead Sea for a float.  The itinerary is packed and no doubt I have missed some things.  The trip ends with a couple of days’ relaxation in Eilat, a seaside resort in the south of Israel.

I sincerely hope you are able to join us.  Space is limited so please do not wait too long to register.  For your convenience we have posted the latest itinerary and a registration form on our website, www.lazergrant.ca.  Let me know if you have any questions.  We would love to have you on board.

Better Bonus Plan: Better Results

Bonus plans are a subject we have talked about and written about many times.  I am passionate about them.  They must be effective.  If not, they are a waste of money.

The most common is a discretionary bonus plan.  You know the type.  It is where the owner looks at the operating results, sees they are good and decides to give out bonuses.  However, the recipients have no idea why they have received the bonus.  After a couple of years of “free” bonuses, an expectation arises.  The employees come to believe they are entitled to the bonus.  When a year yields poor results, to conserve resources the owner reduces or eliminates the bonus.  The result:  a negative work environment.  Employees wonder, when they have performed or expended the same effort as in the past and believe the poor results are not their fault, why they should suffer.  If you have a discretionary bonus plan, it is of no benefit to you and you may as well give the money away.

For a bonus plan to be effective it has to have certain components.

• Employees must be able to impact their bonus.  The impact must be an improvement of company performance, an increase in profits.  If employees are going to impact the bottom line they must understand how the company makes money.
• The employees must be able to see the results of their behavior throughout the year.  If their activity is producing results, they are encouraged to continue.  If their activity is not, they will understand the need to make adjustments.
• A shared bonus is key.  All contribute, and all share in the success of the business.  The team’s actions are interdependent and so should the reward be for excellent results.  A salesman cannot be great without a delivered product.  A manufacturer needs great production along the entire line.  Inventory must be on the shelf at the right time.  Ensuring your team understands interdependence will also improve performance.

With these components, design your bonus plan to include the financial measurable, the amount of bonus, the thresholds that must be achieved, the method of distribution to employees, the timing and frequency of the distributions, and how the results will be published.

Designing an effective bonus plan involves more than just looking at last year’s results.  We know, from personal experience.  That’s why we are offering to assist any business in the development of one.  We will, without charge, design and facilitate the implementation of a plan for any company.  We want to do this for our clients since our role in the relationship is to help you to succeed.  This offer is also for non-clients; we would consider it a privilege to contribute to your success as well.

To take us up on this no-charge offer, call, write or email us prior to June 1, 2011.

We know an effective bonus plan leads to better results.  Let us prove it to you.