Québec Pension Plan.

Québec Pension Plan. Québec Pension Plan (QPP), program of the provincial government of Québec that provides income for retired and disabled people and for the survivors of the deceased. The QPP was created in 1966, when Québec opted to create its own pension system rather than join the federal Canada Pension Plan (CPP) that began the same year. However, the two plans are closely coordinated in major respects. The QPP is funded by employer and employee contributions. In 1998-1999 1.1 million people were beneficiaries of the QPP, and total benefits paid approached C$5.6 billion. Québec has a three-tiered pension system, made up of federal Old Age Security payments, the QPP, and private pension plans. With Old Age Security and the Guaranteed Income Supplement, all Canadians aged 65 or older who meet certain residency requirements can collect payments from the federal government. The private pension plans include employer- or union-sponsored retirement savings plans, as well as the Registered Retirement Savings Plan (RRSP), which allows individuals to create private retirement savings accounts. When the federal government created the CPP in 1966, Québec decided to design its own separate pension plan based on an agreement between the federal government and the provinces. The CPP and QPP are parallel in most respects. Eligibility rules and benefit levels are nearly identical, and benefits for employees who have worked in both Québec and other provinces during their career are combined. The QPP is financed by employer and employee contributions and by investment income earned by these contributed funds. Every working person in Québec who is over 18 and earns more than a defined minimum income must contribute to the plan. Employees' contributions are automatically deducted from their wages and are matched by their employers. Self-employed workers must pay both the employee and employer contributions. If a person earns below the minimum level, he or she is not subject to pension deductions. Earnings are only subject to pension deductions up to a maximum limit, which is based on the average Canadian income for that year. Any income that a person earns above that limit is not subject to the deductions. The income between the minimum and maximum is known as pensionable income. In 2000 the required contributions were 7.8 percent of pensionable income, of which the employee and the employer each paid half. Participants can start collecting full retirement pensions at age 65. Retirement benefits are calculated based on how long a person worked and the average amount she or he earned over that time, and they are indexed to inflation. The QPP allows parents to leave work for a period of time to look after a young child without having their low earnings in that period decrease their level of benefits. For 2000 the maximum monthly retirement benefit was set at C$762.92. Beginning in 1984 Québec allowed people to retire early at age 60 or to wait until age 70 to receive their pension benefits. Those who retire early have their monthly benefits reduced, while those who retire late have theirs increased. Unlike the CPP, the QPP allows phased retirement, in which people aged 55 or older can reduce their working hours but still contribute to the plan at the full rate. This prevents their pension benefits from being reduced by the lower income in those years. The QPP provides benefits to contributors who become disabled and their children. Benefits are also provided to the spouses and children of contributors who have died. Beginning in June 1999, same-sex partners were considered spouses by the QPP. Beginning in 1998 the governments of Canada and Québec, concerned with an increasing percentage of older people in the population, raised contribution rates to the CPP and the QPP. Under the new plan, rates would rise yearly until they reached a new stable rate of 9.9 percent of pensionable income in 2003. Contributed By: Lillian Zimmerman Microsoft ® Encarta ® 2009. © 1993-2008 Microsoft Corporation. All rights reserved.