Enhancements to the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP)
Your enhanced QPP contribution, as well as the new 4% contribution on the upper earnings value, will each be 100% matched by your employer.
?
CRA announces CPP max pensionable earnings for 2024.
?
For the first time, a second earnings ceiling will be used to determine additional contributions.
?
The maximum pensionable earnings under the Canada Pension Plan for 2024 will be $68,500, up from $66,600 in 2023, according to the Canada Revenue Agency.
Beginning next year, a second earnings ceiling of $73,200 will be used to determine additional CPP contributions, known officially as the year’s additional maximum pensionable earnings. As a result, earnings between $68,500 and $73,200 will be subject to a second tranche of CPP contributions as part of the?plan’s expansion that began in 2019. The basic exemption amount for 2024 remains at $3,500.
?
Employee and employer CPP contribution rates for 2024 remain at 5.95%, and the maximum contribution will be $3,867.50 each — up from $3,754.45 in 2023.
Employee and employer contribution rates for the second earnings tranche will be 4.00% in 2024, and the maximum contribution will be $188.00 each.
?
?
Heads up! New CPP and QPP boxes on the T4 slip:
·???????? Box 16A: employee’s Second Additional CPP Contributions (CPP2)
·???????? Box 17A: employee’s Second Additional QPP Contributions (QPP2)
?
New boxes have been added to the T4 slip for recording secondary additional CPP and QPP contributions that begin in 2024. After January?1,?2024, any employee who contributes to the CPP or QPP will make CPP2 or QPP2 contributions if and when their annual income surpasses the first earnings ceiling, the Year’s Maximum Pensionable Earnings (YMPE). Employers will make a matching CPP2 or QPP2 contribution.
?
CPP2 and QPP2 reporting obligations in boxes 16A and 17A start for T4 slips issued for the 2024?tax year.
?
Boxes 16A and 17A should be left blank for T4 slips issued for the 2023?tax year and in any subsequent year when an employee makes no CPP2 or QPP2 contributions.
For more information, please visit the following page on Canada.ca: New CPP and QPP boxes on the T4 slip.
?
Understanding the Calculation
?
Impact on Employees
The CPP enhancements not only impact your payroll but also influence employees’ retirement benefits. Essentially, the enhanced CPP will provide increased retirement, survivor, and disability pensions for all contributors.
领英推荐
?
The increment is a long-term adjustment and will fully materialize after about 40 years of making contributions, increasing the maximum retirement contribution amount by about?50%.
?
Contributions
If you are over the age of 18 and work in Canada, you contribute to CPP (or QPP in Quebec) on annual employment earnings between $3,500 and the annual earnings limit ($68,500 in 2024). The CPP uses a Statement of Contributions to show you a record of your pensionable earnings and contributions to the Plan. The QPP uses a similar Statement of Participation. Your Statement shows your total CPP/QPP contributions for each year and the earnings on which your contributions were based. It also provides an estimate of what your pension or benefit would be if you and your family were eligible to receive it now. Employees can obtain a copy of their statement by contacting Service Canada or Retraite Québec.
?
Impact of Personal Taxes
INCOME TAX RELIEF BASED ON ENHANCED CONTRIBUTIONS
?
Your additional or enhanced contributions are treated as fully tax-deductible to offset the higher contributions being paid. Similar to a pension or RRSP contribution, they reduce your taxable income and lower your income tax deductions.
?
From 2019 through 2022, tax relief was provided when individuals filed annual tax returns. If you review your returns for the past few years, you should see an amount on Line 22215 of your federal tax return identified as ‘Deduction for CPP or QPP enhanced contributions on employment income.’ Any subsequent tax refund would have been processed by the Canada Revenue Agency (CRA). For employees in Quebec, the adjustment is on Line 248 of your Quebec tax return.
?
Note: If you are an employee aged 65 to 69 and are in receipt of a CPP/QPP retirement pension, you may choose not to make CPP contributions by completing the form CPT30, Election to Stop Contributing to the Canada Pension Plan or Revocation of a Prior Election. You must send the original CPT30 election form to the CRA and file a copy with the Payroll Department. No CPP contributions will be deducted on pay dates following the month the form is filed. You can download the CPT30 form from the CRA’s website.
?
The enhanced portions of the CPP reduce the employee’s net taxable income at source. The 4% of CPP contributions on the pensionable earnings above the YMPE up to the YAMPE (second ceiling) will reduce the net taxable income at source.
?
YAMPE Impact
2024
YAMPE (Enhanced) ?$ 73,200.00
YMPE ?$ 68,500.00
Enhanced CPP Amount? ?$ 4,700.00
Enhanced CPP Rate? 4%
E CPP Contribution ? ?$ 188.00
Example
?Gross Taxable Earning ?$ 4,700.00
Less Authorized Deduction ?$ 188.00
Net Taxable income ?$ 4,512.00
Once CPP deductions stop, the adjustment to the net taxable benefit will stop, too. At this point, employees will notice a slight increase in their income tax.
?