Finance Committee on May 6th, 2019

[Nathalie Martel, Director, Old Age Security Policy and Public Pension Statistics Division, Seniors and Pensions Policy Secretariat, Income Security and Social Development Branch, Department of Employment and Social Development]

Thank you, Mr. Chair.

Good afternoon.

Clause 156 amends the Old Age Security Act to enhance the guaranteed income supplement earnings exemption.

The guaranteed income supplement, or GIS, is a benefit paid to low-income seniors in addition to the old age security pension. The GIS is based on income to ensure that benefits are targeted to those most in need. The GIS earnings exemption currently allows low-income seniors to earn up to $3,500 per year in employment income without a reduction to their GIS. Income from self-employment does not currently qualify for the exemption.

The proposed amendments would increase the GIS earnings exemption from $3,500 to $5,000, extend the earnings exemption to self-employment income and provide an additional 50% exemption on up to $10,000 of employment or self-employment income beyond the $5,000 exemption.

This enhanced exemption would apply starting July 2020.

An estimated 330,000 low-income seniors would receive an increase in their benefits. The annual cost would amount to more than $460 million.

The average benefit increase for low-income seniors who are in the labour market is estimated at $1,400 a year.

[The Chair, Liberal, Wayne Easter]

Are there any questions?

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

I just want some clarity on this issue, because it's a big one in my riding and I've heard a lot from people I represent.

I represent quite a few smaller indigenous communities. Most of the people who are seniors in those communities don't have government pensions and there usually aren't too many people who have corporations that provide pensions, so there's not a lot of income other than the GIS and old age security.

We have a lot of people who have lived their lives practising traditional pursuits: hunting, trapping, fishing, making snowshoes, making canoes, making all kinds of stuff. The school often wants them to come in to provide that information to the younger people, or youth groups or different agencies will ask them to do it. They'll give them a per diem or an honorarium. A lot of people who receive this find out at the end of the year when they get their income tax notices that they've collected money and now their pensions will be docked, will be a reduced amount.

Will this change it and allow them to work in the different facilities and collect a bit more money than they were getting historically?

[Nathalie Martel]

Right now, the money they earn, if it's considered employment income for tax purposes, they can exempt up to $3,500 of this income. If they earn beyond $3,500, they will benefit from this enhancement.

If it's considered self-employment income, right now there is no exemption at all on it. This type of income doesn't qualify for the current $3,500 exemption. People with self-employment income will benefit from this exemption. It means they will be able to earn this additional money without seeing a reduction in their guaranteed income supplement.

[Michael McLeod, Liberal, Northwest Territories, NT]

When you say “self-employment income”, are you talking about somebody who is running a small business? What's the definition?

[Nathalie Martel]

It's as specified in the Income Tax Act.

Suppose I have a contract. If I am a consultant, for example, and I make a bit of money out of it, it would be considered self-employment income.

If it is considered self-employment income for tax purposes and it's included in net income for tax purposes, that is the definition we use for the purposes of calculating the guaranteed income supplement.

[Michael McLeod, Liberal, Northwest Territories, NT]

Okay. Thank you.

[Nathalie Martel]

You're welcome.

[The Chair, Liberal, Wayne Easter]

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

As a clarification on that, the changes take effect from $3,000 to $5,000, so someone can work and earn $5,000 with no impact on GIS.

[Nathalie Martel]

That's correct.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Then the second part of that change, which is instituted in the BIA, is the amount from $5,000 to $15,000.

Can you provide colour on that, please?

[Nathalie Martel]

Yes. The full exemption will apply to the first $5,000 of income, and a partial exemption will apply at a rate of 50% up to $10,000, beyond $5,000.

For example, if you have $7,000 of employment income, for GIS purposes, we will ignore the first $5,000 completely and we will exempt an additional $1,000, so 50% of the additional $2,000 beyond $5,000. Thus, you have $6,000 that will not be taken into consideration when we calculate the guaranteed income supplement.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Ms. Martel, when you look at the GIS and OAS tables on the website, on the GIS calculation, CPP is one of the factors in terms of determination of income. This will benefit seniors who are working who may not have been in the labour force a long time, who want to work past age 65, who need those few extra dollars.

In terms of the estimated number in the budget, over approximately a four-year period of time, this is a $1.7-billion expenditure by the federal government. Is that correct?

[Nathalie Martel]

That's correct.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

It will probably help tens of thousands of seniors from coast to coast to coast, if I'm not mistaken.

[Nathalie Martel]

We estimate that 330,000 low-income seniors will benefit from this measure.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for that data point.

[The Chair, Liberal, Wayne Easter]

Is there any further discussion on division 7, or are there any other questions?

Thank you, Ms. Martel.

Now, turning to part 4, division 8, which deals with non-permitted surplus, we have Ms. Elder and Mr. Crabtree.

Ms. Elder is senior director, pensions and benefits sector, and Mr. Crabtree is executive director, pensions and benefits sector.

Ms. Elder, go ahead.

[Deborah Elder, Senior Director, Pensions and Benefits Sector, Office of the Chief Human Resources Officer, Treasury Board Secretariat]

Thank you, Mr. Chair.

I'm here to speak to you today about the proposals contained in clauses 157 to 159. These clauses propose to increase a surplus limit set out in the legislation governing the Canadian Armed Forces, the public service and the Royal Canadian Mounted Police pension plans from 10% to 25% of the amount of liability.

These amendments will enable the Government of Canada to build a larger surplus cushion in each of its pension funds and thereby reduce the risk of future funding deficiencies. They relate to the manner in which the Government of Canada funds its pension obligations and demonstrates sound financial stewardship. They do not impact the benefits payable to plan members, the cost of the plans or the Government of Canada's pension liabilities.

That concludes our overview of this division. We'd be happy to answer any questions you may have.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You plan to increase the surplus limit from 10% to 25%. Is the 25% figure used for pension fund management purposes? I'd like to know on what basis that percentage was selected.

[Simon Crabtree, Executive Director, Pensions and Benefits Sector, Office of the Chief Human Resources Officer, Treasury Board Secretariat]

I can confirm it is the same limit as used in the Income Tax Act. In 2010 the Income Tax Act was amended from 110% with a 10% surplus to 125%, so it's the same limit. That is the legislation that applies to all other federally regulated pension plans.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You said that it wouldn't have any impact on the government's financial burden, that there wouldn't be any additional expenses associated with the limit increase.

Does the government frequently stop making its contributions as a result of the limit? How often does that occur? Can we estimate the amounts in question?

[Simon Crabtree]

I'm so sorry. There are multiple conversations here.

Just to repeat, are you looking for the frequency of the special payments that are made or the level of payment?