Report on the Administration of the Members of Parliament Retiring Allowances Act for the Fiscal Year Ended March 31, 2020

About this report

This report provides information on the administration of the Members of Parliament Retiring Allowances Act (MPRAA) for the fiscal year ended March 31, 2020. The MPRAA is the legislation that governs the Members of Parliament Pension Plan, which provides retiring allowances to eligible individuals who have served as members of Parliament. This report is tabled in Parliament in accordance with section 67 of the MPRAA.

About the plan

Established in 1952, the Members of Parliament Pension Plan is a defined benefit pension plan that is funded by contributions from plan members and from the Government of Canada. The plan offers a source of lifetime retirement income for eligible retired and disabled parliamentarians.^{Footnote 1}

Membership in the plan has been mandatory since 1965 for members of the Senate, and since 2000 for members of the House of Commons.

Since January 1, 2016, plan member contribution rates have been set by the Chief Actuary of Canada. The employer-member cost-sharing ratio of 50:50, which is required under the Pension Reform Act, was achieved in 2017.

Benefit formula

The benefits provided under the plan are calculated using a formula that is based on a plan member’s pensionable service and their annual pensionable earnings during their 5 highest‑paid consecutive years of service.

Benefits for pensionable service accrued on or after January 1, 2016, have been coordinated with the Canada Pension Plan (CPP) and Québec Pension Plan (QPP). As a result, a plan member’s retirement allowance now consists of 2 separate components:

• a lifetime pension benefit, payable until the plan member’s death
• a temporary bridge benefit, payable until the plan member reaches age 60

The retirement allowance of a plan member who reaches age 60 (or who starts receiving a retirement allowance after age 60) is reduced by a percentage of the average maximum pensionable earnings (AMPE) for CPP and QPP purposes, multiplied by their years of pensionable service.

Table 1 shows how members’ retirement allowances are calculated.

Types of benefits

The type of benefits a retired member receives depends on when their pensionable service was accrued and the age at which the pension benefit is taken.

• Retirement allowance: members who have 6 or more years of pensionable service are entitled to receive a retirement allowance
• Withdrawal allowance: members who cease to be parliamentarians are entitled to a withdrawal allowance if they
• have not completed 6 years of pensionable service
• are disqualified from the Senate or expelled from the House of Commons

Benefit accrual rate

The benefit accrual rate is the rate at which a plan member’s retirement allowance for the year accumulates. It applies to retirement allowances and survivor benefits, but not to withdrawal allowances.

The current benefit accrual rate for plan members is 3% per year of service.

For service before January 1, 2016, the benefit accrual rate for members of the Senate is 3% per year of service; and the benefit accrual rate for members of the House of Commons is as follows:

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

Benefits paid

In fiscal year ended March 31, 2020:

• $55.3 million in benefits^{Footnote 2} were paid ($45.93 million in the previous fiscal year)
• 55 new retirement allowances and survivor benefits became payable
• 33 retirement allowances and survivor benefits ceased to be paid
• average retirement allowance paid was $71,271 ($69,081 in the previous fiscal year)

Figure 1 shows the average retirement allowance, including indexation, paid to retired plan members from 2016 to 2020.

Number of active and retired plan members

As at March 31, 2020, plan membership was as follows:

• 436 active plan members (439 in the previous fiscal year)
• 596 retired plan members (575 in the previous fiscal year)

Figure 2 shows the number of active plan members and the number of retired plan members from 2011 to 2020.

The 10-year average annual growth rate^{Footnote 3} for active plan members was 0.5% (0.6% in 2019) and 1.7% for retired plan members (1.4% in 2019).

Membership type

Plan members are classified as active members or retired members. Survivors and dependent children are also included in plan membership statistics.

Table 4 shows the breakdown of plan members by membership type for 2019 and 2020.

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.

Before 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.

Accounts

Two accounts are maintained in the Public Accounts of Canada to record transactions under the plan:

• Members of Parliament Retiring Allowances (MPRA) Account
• 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. Transactions 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, 2020, the MPRCA Account remitted a refundable tax of $814,100.

Data on the MPRA and MPRCA accounts for the fiscal years ended March 31, 2019, and March 31, 2020, are presented in the Account transaction statements.

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. This valuation presents an estimate of the balance sheet on an actuarial basis, which means that it presents the account balances 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 report for the plan, which has a valuation date of March 31, 2019, was tabled in Parliament by the President of the Treasury Board on November 24, 2020.

Members’ contributions

Plan members are required to make regular monthly contributions to the plan for as long as they remain parliamentarians. To ensure the sustainability of the plan, contribution rates have been at the 50:50 employer-member cost-sharing ratio since 2017. Contribution rates have been set by the Chief Actuary of Canada since January 1, 2016.

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 YMPE for 2020 is $58,700 ($57,400 for 2019).

The MPE is the maximum earnings on which pension benefits can be accrued under a registered pension plan during a calendar year. The MPE for 2020 is $162,500 ($159,000 for 2019).

Table 6 shows plan members’ contribution rates to the MPRA Account for calendar years 2019 and 2020.
Table 6. Plan member contribution rates to the MPRA Account (applied to pensionable earnings)

Plan members make contributions based on their pensionable earnings at 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 pensionable earnings for the remainder of their service.

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

Prime ministers must contribute at the applicable contribution rate based on 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

The Income Tax Act defines the limit on which benefits can be accrued under a registered pension plan during a calendar year. Retirement compensation arrangements provide benefits on pensionable earnings that exceed that limit. On January 1, 2016, the earnings limit formula was revised to reflect the coordination with the CPP and QPP.

Plan members under the age of 71 contribute to the MPRA and MPRCA accounts a portion of their pensionable earnings up to the MPE for that year, until they have accrued a retirement allowance equal to 75% of the average pensionable earnings. Once a plan member has reached the MPE 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 calendar years 2019 and 2020.
Table 7. Plan member contribution rates to the MPRCA Account (applied to pensionable earnings)

Government of Canada contributions

Every month, the Government of Canada is required to make contributions to the MPRA and MPRCA accounts. These contributions match the contributions made by plan members toward benefits earned during that month. The government’s contribution rates can be expressed as a percentage of the pensionable payroll.

Table 8 shows the Government of Canada’s current service contribution rates for calendar years 2019 and 2020.

Interest

Every quarter, the Government of Canada 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, 2020, interest was credited quarterly at a rate of 0.40%.

Credits and debits to the accounts

If there is an unfunded actuarial liability in either the MPRA Account or the MPRCA Account, the MPRA Account or the MPRCA Account must be credited with such amounts that, in the opinion of the President of the Treasury Board, on the basis of actuarial advice, would be necessary to meet the total costs of all allowances and other benefits payable under the plan. Conversely, if the balance of the accounts is greater than the actuarial liability, the President of the Treasury Board has the authority, on the basis of actuarial advice, to debit amounts from the MPRA Account or the MPRCA Account.

For the fiscal year ended March 31, 2020, no actuarial adjustment was required to meet the total cost of all allowances and other benefits payable under the plan.

President of the Treasury Board

The President of the Treasury Board is responsible for the overall management of the plan on behalf of the Government of Canada, the plan’s sponsor.

Treasury Board of Canada Secretariat

The Treasury Board of Canada Secretariat:

• develops policy for the funding, design and governance of the plan
• provides strategic direction, program advice and interpretation
• develops legislation
• prepares annual report for tabling in Parliament
• liaises with plan stakeholders

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, including all communication with plan members. 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 on the plan. The Office of the Chief Actuary conducts an annual actuarial valuation of the plan for accounting purposes and performs 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.