Today’s blog was written by Monique J. Charlebois, a bilingual lawyer with more than 20 years of experience practicing Ontario estates law.
If you have clients who have lost a relatively young spouse/parent who was the primary caregiver to young children for many years, letting them know about the Child Rearing Dropout provisions could have a significant impact on their financial situation.
In general, CPP survivor benefits are paid monthly to a spouse (including a common law spouse) of the deceased and to the deceased’s children who are either minors or still in school.
CPP benefits are calculated on the basis of how much a working person contributed to the plan between the ages of 18 and 65. Normally, if you were not employed or earning low wages, your contribution levels are lower and this leads to lower benefits. But by excluding the child-rearing years of a primary caretaker, she or he (or their survivors) are not penalized for those years out of the workforce, thus leading to higher benefits paid.
What is the CRDO?
The Child Rearing Dropout (CRDO) provisions of the Canada Pension Plan (CPP) take into account the time taken out of the work force to care for young children. This allows a primary caregiver of a child under the age of seven to exclude these years from the calculation of their retirement pension or other benefits. If a caregiver has more than one child within seven years, the period of eligibility for this drop out calculation continues until the youngest child turns seven.
The CRDO is reasonably well known to primary caregivers (mostly women, so far…) who return to the workforce and are planning their retirement. It helps that the application for the CPP retirement pension includes a section on the child-rearing years! Unfortunately, for survivor and disability benefits, the calculation of the CRDO is not automatic. A special form must be completed (the ISP 1640).
For that reason, the survivors of a deceased caregiver are probably not aware that this could also be of benefit to them, by boosting the level of benefits payable to the surviving spouse and the deceased’s children. It could even help a survivor actually meet the eligibility criteria to receive benefits. There are similar advantages for disability benefits for a former caregiver.
Benefits are retroactive and not time-limited.
There is more good news: the benefit is fully retroactive. If a survivor did not apply for it at the time of the initial application for CPP survivor benefits, it is not too late.
How to apply
For further details, here is a link to the CPP Child Rearing information sheet:
Thanks for reading!