INTRODUCTION
Substantial changes will be made to the Canada Pension Plan (CPP) starting on January 1, 2024. Substantial changes will be made to the Canada Pension Plan (CPP) starting on January 1, 2024. The introduction of CPP2 is the key element of these CPP payments 2024 changes, which is the introduction of a second tier of CPP contributions.
THE TWO TIER OF CPP CONTRIBUTION
Two levels are present in the new contribution system.
A) Standard CPP contributions limit the maximum amount of income that can be
subject to the First Earnings Ceiling (YMPE).
The YMPE is determined to be $68,500 by 2024.
B) The second tier of CPP contributions will be limited to the YAMPE as a new
addition.
The YAMPE will be set at $73,200 in 2024, which will result in a 7% increase over
the YMPE.
CONTRIBUTION RATES
For employees, employers, and self-employed individuals, the CPP contribution rate is unchanged at 5.95% for earnings up to the YMPE ($68,500).
Earnings between the YMPE ($73,200) and YMP will be subject to an additional contribution rate of 4% for both employees and employers (8% for self-employed).
IMPACTS ON BUSINESSES AND INDIVIDUALS
FOR EMPLOYEES
Between $68,500 and $73,200, employees will receive an increased contribution (max to $188.00) on their earnings.
FOR EMPLOYERS
Employers are required to adjust their payroll systems to accommodate the new contribution tiers and rates. To make CPP payments in 2024, the appropriate CPP and CPP2 contributions must be withheld and remitted.
FOR SELF-EMPLOYED INDIVIDUALS
The employee and employer portions will be contributed by self-employed individuals, which will result in a higher overall contribution rate on their earnings under these thresholds.
The CPP Enhancement set to roll out in 2024, represents a significant benefit for future retirees. Plan ahead with an understanding of these changes.
This blog is solely aimed at providing information. Advice or legal opinions are not offered by it. If you need more information, feel free to contact us or visit the CRA website.
