Report on the Administration of the Members of Parliament Retiring Allowances Act for the Fiscal Year Ended March 31, 2017

Benefit accrual rate

The benefit accrual rate is the rate at which a plan member’s retirement allowance for the year is accumulated.

The current benefit accrual rate for senators and members of the House of Commons is 3% per year of service, to a maximum of 75% of average annual pensionable earnings.

For service prior to January 1, 2016, the benefit accrual rate for senators is 3% per year of service, to a maximum of 75% of the average sessional indemnity; and the benefit accrual rate for members of the House of Commons, to a maximum of 75% of the average sessional indemnity, is as follows:

• 3% per year of service effective January 1, 2001
• 4% per year of service from January 13, 1995, to December 31, 2000
• 5% per year of service up to and including July 12, 1995

The age at which a retirement allowance may be paid without a reduction has been raised from age 55 to age 65 for pensionable service accrued on or after January 1, 2016. A plan member can elect to receive a retirement allowance at age 55, but the allowance will be reduced by 1% for each year the plan member is under age 65.

Retirement allowance

• A plan member’s retirement allowance is based on their average pensionable earnings for the best 5 consecutive years of pensionable earnings.
• For service prior to January 1, 2016, the retirement allowance is based on the plan member’s average sessional indemnity for the best 5 consecutive years of pensionable earnings.
• Before 2001, the average sessional indemnity was based on the best 6 consecutive years of pensionable earnings.

Table 3 shows when benefit options are available to plan members who have 6 or more years of pensionable service. The availability of a benefit depends on when the pensionable service is accrued and at what age the pension benefit is taken.

Figure 2 presents the average retirement allowance, including indexation, paid to retired plan members from 2013 to 2017. As at March 31, 2017, the average retirement allowance paid to retired plan members was $65,668 ($64,202 in 2016).

The retirement allowance of a retired plan member is suspended if that person is re-employed as a senator or a member of the House of Commons. If the retired plan member receives remuneration of at least $5,000 in any 1-year period as a federal public service employee or pursuant to a federal service contract, retirement allowances paid under the MPRAA to that retired plan member in that year will be reduced by $1 for each dollar of remuneration received in that year.

Retirement allowance

A prime minister who holds office for at least 4 years is entitled to a special retirement allowance in addition to their Members of Parliament Pension Plan benefit. As of February 6, 2006, former prime ministers can receive a retirement allowance at age 67 or upon ceasing to hold office, whichever is later.

Table 5 shows the basic formula for calculating a prime minister’s retirement allowance.

Prior to February 6, 2006, payment of the retirement allowance began when the prime minister reached age 65 or ceased to be a plan member, whichever was later. The retirement allowance was equal to two thirds of the prime minister’s salary at the time the payment of the allowance began.

Survivor allowance

An eligible survivor receives a survivor allowance equal to 50% of the retirement allowance payable to the former prime minister for service as prime minister. The survivor allowance is paid to a spouse only; there is no child's allowance payable.

Accounts

Two accounts are maintained in the Public Accounts of Canada to record transactions under the plan: the Members of Parliament Retiring Allowances (MPRA) Account and the Members of Parliament Retirement Compensation Arrangements (MPRCA) Account.

The MPRA Account records the transactions related to the benefits payable under the plan when these benefits are permitted under the Income Tax Act for registered pension plans. The MPRCA Account records the transactions related to the benefits payable under the plan when the benefits exceed the limits established by the Income Tax Act.

The MPRCA Account is registered with the Canada Revenue Agency. Transfers are recorded annually between the MPRCA Account and the Canada Revenue Agency either to remit a 50% refundable tax in respect of the net contributions and interest credits or to credit a reimbursement based on the net benefit payments. For the fiscal year ended March 31, 2017, the MPRCA Account remitted $6.3 million to the Canada Revenue Agency ($0.3 million for the fiscal year ended March 31, 2016).

The “Account transaction statements”^{Footnote 2} section of this report presents the data on the MPRA and MPRCA accounts for the fiscal years ended March 31, 2016, and March 31, 2017.

Actuarial funding valuation

As required by the Public Pensions Reporting Act, the President of the Treasury Board directs the Chief Actuary of Canada to conduct an actuarial funding valuation of the pension arrangements established under the MPRAA at least every 3 years, to be tabled in Parliament by the President. The actuarial valuation presents an estimate of the balance sheet on an actuarial basis, which means that it presents the value of assets and liabilities and any resulting excess or shortfall. The actuarial valuation also projects the current service cost for each of the 3 years following the valuation date. The most recent actuarial funding valuation (PDF Document - 1,062 KB) for the Members of Parliament Pension Plan, with a valuation date of March 31, 2016, was tabled in Parliament on November 3, 2017.

Members’ contributions

Plan members are required to pay regular monthly contributions to the Members of Parliament Pension Plan for as long as they remain a member of Parliament. Starting in January 1, 2013, plan members’ contribution rates began increasing in order to move toward an employer-member cost-sharing ratio of 50:50 by 2017. The increase was phased in over 3 years, with contribution rates rising by 1% of salary in January 2013 to 8%; by 1% in January 2014 to 9%; and by 1% in January 2015 to 10%. As of January 1, 2016, contribution rates are set by the Chief Actuary of Canada.

The coordination of benefits with the CPP and QPP, which started in 2016, means that plan members pay different contribution rates on different portions of their pensionable earnings. They pay one rate on the portion that is below the year’s maximum pensionable earnings (YMPE), another rate on the portion that is at or above the YMPE up to the maximum pensionable earnings (MPE), and another rate on the portion that is above the MPE.

The YMPE is the maximum earnings for which contributions can be made to the CPP or QPP during a calendar year. The MPE is the maximum earnings for which pension benefits can be accrued during a calendar year, as defined by the Income Tax Act.

Table 6 shows plan members’ contribution rates to the MPRA Account for the calendar years 2017 and 2018.

Plan members make contributions on their sessional indemnities based on the rates shown above, until they reach the maximum benefit accrual rate of 75%. Once they have reached that maximum, the contribution rate drops to 1% of salary for the remainder of their service.

Some plan members, such as the speakers, Cabinet ministers, leaders of the opposition and parliamentary secretaries, receive additional allowances and salaries. They make contributions on these additional amounts based on the rates indicated.

Prime ministers must contribute at the applicable contribution rate of their salary received as prime minister, in addition to their contributions as a member of the House of Commons.

If eligible, a plan member can elect to make contributions on prior service in Parliament, in which case the member must pay interest on past service contributions.

Retirement compensation arrangement

Retirement compensation arrangements provide benefits that exceed the allowable limits for a registered pension plan under the Income Tax Act. The Income Tax Act defines the maximum pensionable earnings for which benefits can be accrued during a calendar year. As of January 1, 2016, the earnings limit formula has been revised to reflect the coordination with the CPP and QPP. The earnings limit for 2017 is $153,100 ($151,900 for 2016).

Plan members who have not reached the age of 71 contribute to the MPRA and MPRCA accounts a portion of their sessional indemnity up to the earnings limit for that year, until they have accrued a retirement allowance equal to 75% of the average sessional indemnity. Once a plan member has reached the earnings limit for the calendar year, the member contributes a certain percentage to the MPRCA Account as established under the MPRAA.

Table 7 shows plan members’ contribution rates to the MPRCA Account for the calendar years 2017 and 2018.

Government contributions

Every month, the government is required to contribute an amount to the MPRA and MPRCA accounts, after taking into account plan members’ contributions, to fund the costs of all future benefits that members have earned during that month. The government contribution rate for each account varies from year to year and can be expressed as a percentage of the pensionable payroll.

Table 8 shows the government’s current service contribution rates for the calendar years 2016 and 2017.

Interest

Every quarter, the government credits interest on the balance of each account at a rate set under the Members of Parliament Retiring Allowances Regulations. Effective January 1, 2013, the interest rate to be credited to the MPRA and the MPRCA accounts is the effective quarterly rate derived from the valuation interest rate used in the most recently tabled valuation report from the Chief Actuary of Canada. For the fiscal year ended March 31, 2017, interest was credited quarterly at a rate of 1.131%.

Credits and debits to the accounts

When the government identifies an unfunded actuarial liability in either the MPRA Account or the MPRCA Account following the tabling of an actuarial valuation report in Parliament, the government must, over a prescribed period, credit to the account such amounts that, after the prescribed period, would cover the unfunded actuarial liability identified.

The Pension Reform Act amended the MPRAA to permit the government, on the basis of actuarial advice from the Chief Actuary, to debit amounts from the MPRA and the MPRCA accounts if the amounts to the credit of the accounts exceed the total costs of all retirement allowances and other benefits payable under the plan. For the fiscal year ended March 31, 2017, there was no debit or credit recorded to the accounts.

Treasury Board of Canada Secretariat

The President of the Treasury Board is responsible for the overall management of the Members of Parliament Pension Plan on behalf of the Government of Canada, the plan’s sponsor. The Secretariat supports the Treasury Board’s role by developing policy for the funding, design and governance of the plan and of retirement allowances for members of Parliament. In addition, the Secretariat provides strategic direction, program advice and interpretation; develops legislation; liaises with stakeholders; communicates with plan members; and prepares the annual Report on the Administration of the Members of Parliament Retiring Allowances Act.

Public Services and Procurement Canada and the Senate of Canada

Public Services and Procurement Canada and the Senate of Canada are responsible for the day-to-day administration of the plan. This includes developing and maintaining the plan’s pension systems, books of accounts, records, and internal controls, as well as preparing account transaction statements for reporting in the Public Accounts of Canada.

Office of the Chief Actuary

The Office of the Chief Actuary, an independent unit within the Office of the Superintendent of Financial Institutions Canada, provides a range of actuarial services and advice to the Government of Canada on the Members of Parliament Pension Plan. The Office of the Chief Actuary is responsible for conducting an annual actuarial valuation of the plan for accounting purposes, and for performing a funding valuation once every 3 years. It also sets contribution rates and coordination factors for the plan, and recommends credits and debits to the accounts.

Statistical table 1
New and past retirement allowances
Fiscal year ended March 31, 2017

The following 36 new retirement allowances became payable:

• 8 to former senators
• 6 to survivors of former senators
• 4 to former members of the House of Commons
• 0 to former members of the House of Commons whose retirement allowance was reinstated
• 15 to survivors of former members of the House of Commons
• 1 to a former member of the House of Commons reinstated in accordance with An Act to Amend the Members of Parliament Retiring Allowances Act
• 1 to reinstate the student allowance of a former member of the House of Commons
• 1 to the child of a former member of the House of Commons

Withdrawal allowances (returns of plan members’ contributions, plus interest) were paid in respect of 0 senators and 8 members of Parliament.

Retirement allowances ceased to be payable to the following 33 plan members, who died during the fiscal year:

• 0 senators
• 8 former senators
• 1 survivor of a former senator
• 19 former members of the House of Commons
• 5 survivors of former members of the House of Commons