In 2019, the government commenced a two-part enhancement to the Canada Pension Plan (CPP), with full implementation to be completed in 2025. Phase 1 occurred from 2019-2023; phase 2 will occur from 2024-2025. Overall, the changes will require larger contributions but also will provide larger benefits.
Pre-CPP enhancement
CPP contributions for employees and employers under the pre-enhancement CPP model (referred to as base contributions)were calculated as 4.95% of the employee’s pensionable earnings to a maximum of the year’s maximum pensionable earnings (YMPE; for 2023, $66,600), less the $3,500 basic exemption.
Phase 1
Referred to as the first enhanced CPP contributions, these are calculated as a percentage of the YMPE, less the $3,500 basic exemption, with the contribution rate for employees and employers gradually increasing from 4.95% in 2019 until it reached 5.95% in 2023.
Please see the second part of the article in our next post.
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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