CPP Contribution Rates are Increasing in January
For many of our members, the change will not be significant on a week-to-week basis. Those earning higher amounts, such as Postdocs and Sessionals with a heavy teaching load, will see a maximum increased CPP contribution of $155.10 per year (based on earning $57,400 or above).
The Canada Pension Plan (CPP) is a federal government program that provides pension and benefits when people retire, become disabled or die. It covers almost all working Canadians over the age of 18. The CPP is funded by contributions from employees and matching employer contributions, as well as investment earnings generated.
The Government of Canada is introducing changes to CPP that will be phased in over a number of years. The first change takes effect in January and will require that both employees and the University contribute more to CPP. Beginning with your January pay deposit, the CPP contributions will increase from 4.95% to 5.10%.
CPP contributions are calculated on earned income above $3,500 and up to the YMPE (Year’s Maximum Pensionable Earnings). Here’s an illustration of the impact of the contribution increase when comparing the maximum contributions in 2019 to 2018.
| CPP Contributions: | 2018 | 2019 |
| YMPE | $55,900 | $57,400 |
| Basic Exemption | $ 3,500 | $ 3,500 |
| CPP Contribution Rate | 4.95% | 5.10% |
| Calculation of Maximum Contributions for the Year | ($55,900 – $3,500) * 4.95%
= $2,593.80 |
($57,400 – $3,500) * 5.10%
= $2,748.90 |
| 2019 Increase in the Maximum CPP Contribution | $155.10
|
The above example shows the maximum CPP contributions for the year. If your earned income for the year, is less than the YMPE, your CPP contributions will not reach the maximum for the year. CPP is deducted on each bi-weekly pay deposit and contributions cease when the maximum amount for the year is reached. McMaster University matches your contribution amounts.
The next change to CPP will take place in January 2020 when the rates will increase to 5.25% of earned income.