Indian workers and the Canada Pension Plan
We recognize that many First Nations people in Canada prefer not to describe themselves as Indians. However, we use the term Indian in these pages because it has a legal meaning under the Indian Act.
Under the Indian Act, an Indian means a person who pursuant to this Act is registered as an Indian or is entitled to be registered as an Indian.
Special rules apply to Indian workers. You will find information to help you determine if an Indian worker can participate or not in the Canada Pension Plan (CPP).
How to obtain an application for coverage of employment of an Indian in Canada under the Canada Pension Plan whose income is exempt under the Income Tax Act.
Election by the Employer
The employment of an Indian hired pursuant to a contract of service (employer/employee relationship), whose earnings are not included in computing income for purposes of the Income Tax Act is excepted from pensionable employment. However, conditions have been established to enable the worker to participate in the CPP. Accordingly, the employment of an Indian may be included in pensionable employment provided the following conditions are met:
- the Indian is resident in Canada for the purposes of the Income Tax Act; and
- the employer elects to pay CPP contributions for all Indian workers.
The employer must complete, in prescribed form, a CPT124 - Application for Coverage of Employment of an Indian in Canada under the Canada Pension Plan Whose Income is Exempt under the Income Tax Act.
Election by the Employee
Where the employer does not elect to cover Indian employees under the CPP, an Indian's employment may still be included in pensionable employment provided that all of the following conditions are met:
- the employer refuses to apply for coverage for his Indian employees;
- the Indian is resident in Canada for purposes of the Income Tax Act;
- the Indian's employment is not pensionable by virtue of any other provision of the Act or Regulations;
- the Indian makes an election to have his employment included as pensionable employment; and
- the Indian pays within one year after April 30 of the following year the required contribution (both the employer and employee shares).
Self-Employment on a Reserve
A self-employed Indian's income from self-employment on a reserve is not included in contributory earnings for CPP purposes. However, a provision of the Canada Pension Plan Regulations has the effect of negating this exclusion under the Canada Pension Plan. Consequently, an Indian who is self-employed on a reserve can participate in the CPP.
An Indian who is self-employed on a reserve and wishes to participate in the CPP must meet the following conditions:
- the income for CPP purposes is all income earned on the reserve plus any other income earned elsewhere, if applicable;
- a federal income tax return (T1) is filed, although this has no bearing on the Indian's taxability for income tax purposes; and
- the required contribution (both the employer and employee shares) is included with the federal tax return for the year of the pensionable employment.
Indians living on reserves in the province of Quebec should contact Revenu Québec for information concerning participation in the Québec Pension Plan.
Need more information?
To get more information, call 1-800-959-5525.
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