Apparently “budget” is not a politically correct term any more. It’s now an “Economic Action Plan.” Regardless of what you call it, the Canadian Economic Action Plan is going to be tabled in the House of Commons on March 29th. Who cares? Well, we all should because the decisions that are made will make a difference in our wallets (through changes in tax rates) and our quality of life (through changes in service levels).
The policy topic that has received a lot of buzz lately is the potential reform of Canada’s Old Age Security (OAS). Human Resources Minister Diane Finley made her case for reform in Toronto in late February. She clarified in her remarks that it is not the Canada Pension Plan (CPP) that is being discussed. For CPP, employers and individuals contribute specifically to that plan through earnings. The program up for reform is OAS, which is funded through tax dollars and is available to Canadians regardless of employment status.
Currently, the maximum basic OAS payment for eligible Canadians is $540.12 per month. These payments are taxable. If the recipient’s total income is more than $69,562 (the 2012 clawback threshold), then the OAS must be repaid at a rate of 15% of the amount over the threshold to a maximum of the total amount of OAS received.
The government has indicated that they will not be changing benefits for those who are currently retired or close to retirement. A lot of theories have been put forth as to what the OAS reforms will be. Canadian Business reports that the leading theory is that the age of eligibility will be raised to 67 from 65. Despite the fact that the age to collect was 70 when OAS was first introduced in 1952, I think it’s a bad idea to raise the age of eligibility – even with a long phase-in period to allow for proper planning. What about those low-income seniors who are not able to remain in the workforce for another two years?
If reform is truly necessary, why isn’t more attention being focused on the clawback threshold? Does someone making almost $70,000 per year really need OAS? Let’s spend social safety net dollars where needed, not on supplementing those who can already afford to support themselves.