This article is to inform you about some important updates to the rules regarding additional Canada Pension Plan (CPP) contributions.
What’s New?
Starting January 1, 2024, the second additional CPP contributions, known as CPP2, must be deducted from earnings between the year’s maximum pensionable earnings (first earning ceiling) and up to the year’s additional maximum pensionable earnings (second earning ceiling). The first earning ceiling is estimated to be $69,000 and the second earning ceiling is estimated to be $73,830. These are estimates and the final ceilings will be announced by the end of 2023.
An Example
Let’s consider an example based on the 2024 estimated figures provided by the government. Assume earning from employer A is $71,000. The amount between the two ceilings is $2,000. There will be a 4% contribution requirement for both the employee and employer on the $2,000. In this case, the CPP2 contribution is $160 ($80 each) in total. If this income is from self-employment, the self-employed individual must contribute the full 8%.
Looking Ahead
For each year on and after January 1, 2024, the CRA will dictate the rate used to calculate the CPP2 contribution amount to be deducted, as well as additional maximum pensionable earnings.
Next Steps
We encourage you to familiarize yourself with these changes and prepare accordingly. If you need any assistance or have any questions, please don’t hesitate to reach out to us.
For more details, you can read the official government announcement:
