Complex CPP applications hurting seniors, audit suggests

(November 23, 2004) Canada’s seniors may be losing out on some of their CPP entitlements, a recent audit suggests, partly because the application process is far too complicated.

The Retirement Planning Institute (RPI), based in Ottawa, conducts independent audits of CPP and QPP cases to ensure recipients are receiving their correct entitlements. CARP, Canada’s Association for the Fifty Plus, released a summary of RPI’s audits on Monday.

More than 4,000 audits were completed over the past four years. Although no problems were found in Quebec, more than 600 entitlement errors were found in CPP applications in the rest of Canada. That’s about one in six household accounts.

The bulk of the errors has been corrected by the federal government, resulting in retroactive benefits totalling $1.3 million. Extrapolating those numbers to include Canada’s approximately two million CPP recipients suggests as much as $1 billion in lost payments over the last four years, estimates RPI director Sylvain Parent.

Most of the errors were a result of incorrect or incomplete application forms. For example, about 60% of applicants failed to include the Child Rearing Dropout Provision (CRDO) in the application form. This provision allows for periods of time when a person leaves the workforce to raise children to be considered when calculating CPP benefits. Except for Quebec, family allowance records for children born before 1992 have been destroyed, preventing verification of CRDO.

About 30% of the errors related to cases where contribution credits were not split after a separation or divorce, while about 10% were described as “systemic errors,” where correct information was improperly processed by Ottawa, RPI says.

Admittedly, RPI has a self-interest in promoting the audit process, charging $50 for each case and an additional 20% of any retroactive benefits (CARP members are eligible for a 20% discount). Is it worth it, considering Human Resources Development Canada (HRDC) offers free audits?

“We have clients who have called HRDC and have been told that everything is fine,” says Parent. “But the error is because the information HRDC has is incomplete. So we gather information from the application and compare that with the HRDC record, that’s where we discover discrepancies.”

In one RPI audit case, a woman received an additional $5,100 after a CRDO exclusion was uncovered. In another, a widow received a cheque worth more than $23,000 when it was discovered she was entitled to survivor benefits dating back to 1987. Retroactive payments average about $2,800 per account.

“If you had a child after 1958, if you think you’re eligible for disability benefits or survivor benefits, or income splitting after divorce or separation, ask questions,” advises CARP’s Judy Cutler.

“The problem is not that the government is trying to cheat anyone,” Cutler says. “The problem is the forms are not user-friendly and if you don’t fill them in properly, nobody questions it.”

“I went through the forms with a senior person at HRDC and neither of us could understand some of the questions,” Cutler adds.

Ottawa should follow Quebec’s lead, says CARP, by simplifying the application process and incorporating the CRDO provision within the CPP form.

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CPP staff should also be better trained and available to assist in the completion of applications, and to be more senior friendly in dealing with those applications, Cutler says, adding that something also needs to be done to compensate for the destruction of the family allowance files.

Cutler says CARP has already scheduled meetings with senior government officials to start the ball rolling and develop practical strategies to improve the situation.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com

(11/23/04)

Doug Watt