CPP’s Child Rearing Dropout Provision

One way you may be able to increase your CPP benefits is by taking advantage of the “Child Rearing Dropout Provision.”

If you stopped working – or worked fewer hours – to care for your young children under the age of seven, that period could be excluded from your contributory period.  It can also affect disability pension benefits and death and survivor benefits.

Here’s an example:

Julie was employed full-time until her daughter, Elizabeth, was born in 1983.  She then stayed home until Elizabeth started school in 1989.  When Julie applies for her pension at age 65, she requests the Child Rearing Dropout Provision.  CPP will then exclude the period from the month following the child’s birth to 1990 in it’s calculation of her benefit amount.

Related: Do We Need To Expand CPP?

She will receive $735 per month.  Without the provision, her pension would have been $650 per month.

Determine if you are eligible

You may apply if:

  • You have children born after December 31, 1958
  • Your earnings were lower because you either stopped working or took a lesser paying job to be the primary caregiver of a dependent child under seven years of age
  • You received Family Allowance payments, or were eligible for the Canada Child Tax Benefit (even if you didn’t receive it because your family income was too high)

I contacted Service Canada for further clarification.  The “dropout” period is the actual time that your children were 1 month to 7 years old.

Related: The High Cost Of Childcare

I was hoping that – in my case – 11 years could be added to the general dropout provision (17% in 2014).  I worked full time – and had some of my highest earnings as compared to the Maximum Pensionable Earnings – during the major part of that period, so I don’t want to exclude them.  Unfortunately for me, I will not be able to take advantage of this provision.

When can you apply?

When you apply for your CPP benefits, the application form (ISP1000) includes a section on child rearing that you can fill out.

If you are already receiving CPP benefits you can still request this provision by completing for ISP1640 and mailing it to Service Canada.

What documents do you need?

For each child listed on the application form, you must provide one of:

  • The child’s name, date of birth and Social Insurance Number, or
  • The original or certified true copy of the child’s birth certificate

For children born outside of Canada you may also be required to provide proof of entry into Canada.

Waiving your rights

The person (usually the mother) who received the Family Allowance or Child Tax Benefit payments can waive the rights to the Child Rearing Provision in favor of the spouse who remained home and was the primary caregiver.  Note – this only applies to spouses, not grandparents or other relatives that may have cared for the child.

Related: Why You Should Protect Your Earnings With Disability Insurance

Either parent can request the CRDOP, but it can’t be used by both parents, neither can the period be split between parents.

Conclusion

According to a 2011 report by Canada’s task force on financial literacy:

  • 55,000 people are missing out on CPP payments
  • 160,000 eligible people don’t apply for OAS
  • 135,000 – 150,000 of those eligible are not receiving GIS benefits

That means you must apply.  Apply for survivor benefits.  Apply for death benefits.  Apply for the dropout provision.  It is not automatic.

Related: How Do You Choose Your Retirement Date?

Make sure that you take the steps necessary to receive the highest payment possible

All applications are available at Service Canada.  For further information about your own situation call them at 1-800-277-9914.


11 Responses to CPP’s Child Rearing Dropout Provision

  1. I was a stay at home mom for a long while and reentered the job market at a lower rate. This is for me for sure. I will be a low income retiree in a decade or so and I can use every single penny I can get.

    I thought I would somehow have to involve my ex-husband in the process but it is much easier if I do not.

    • Boomer says:

      @jane savers: It can make quite a bit of difference as shown in the example above.

      I returned to work full time when my husband had a serious accident and was unable to work. So, for 6 of my 11 weeks I had a higher income but little or none for 5 years. I would like to have been able to split the years between us, but it’s all or none. My low income years will instead be added to the general dropout provision.

      BTW Jane, I love the name of your blog. I enjoy puzzles, but some major pieces have been lost along the way in my own money puzzle. :\

  2. Money Saving says:

    Wow – that seems like a great option for folks that stay home with kids. My wife is considering going part time when our daughter enters Kindergarten next year. Something like this in the US sure would be nice. We’ve pretty much figured when she goes part time we’ll be missing out on ~$4K of 401K contributions annually for 6-8 years :-(

  3. Robert says:

    Valid point, but hopefully this type of provision will be removed from CPP as it is reformed in the future. It probably applies to me to some degree, but it obviously should not be part of a pension plan as it is a type of social welfare.

    • Boomer says:

      @Robert: I don’t really agree with you on this point. I can think of a lot of other reforms that can be made with both CPP and OAS.

      I don’t think stay at home parents should be penalized for being home with children during their formative years. Working parents get a child care tax credit. Wouldn’t this somewhat even the playing field?

      • Robert says:

        I think acknowledging parenting in some way is a great idea. But that is social welfare not a pension plan. In your example, working parents do not have the tax credit paid from CPP funds.

        • I’m guessing that you never took time off work for child-rearing if you feel it should be removed. This is a great thing that doesn’t punish parents for taking themselves out of the work force during the years their children need them the most. I think this is a great program and I had never heard of it before, so thanks for sharing!

  4. Constance says:

    “Either parent can request the CRDOP, but it can’t be used by both parents, neither can the period be split between parents.” Explain this please.

    Both can claim ……

    Except for the time the husband returned to/attended university to obtain his Chemical Engineering degree and I worked full time, I was the primary caregiver for our daughter. When the husband applied for early CPP in late 2007, I waived my rights to the child rearing provision for this 24 month period. This action improved his early CPP monthly payment by a few dollars.

    I plan to start early CPP in Jan 2014. On my application I requested and was granted a 36 month child rearing dropout provision to cover the 36 months it took me to find full-time employment after he graduated and we relocated for his new job.

    • Boomer says:

      @Constance: I specifically asked this question of the Service Canada phone representative and she said it couldn’t be split.

      If you are able to, she obviously gave me wrong information. I will check again.

      Thank you for commenting on your own experience.

  5. Constance says:

    http://www.servicecanada.gc.ca/eng/services/pensions/cpp/child-rearing.shtml

    Either spouse or common-law partner can request the child-rearing provision, but it cannot be used by both parents for the same period of child-rearing.

    The word is “same”. You can use the child-rearing provision for “different” time frames.

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