What Is Year's Maximum Pensionable Earnings (YMPE)
The Canadian government sets the year's maximum pensionable earnings (YMPE) figure. The YMPE determines the maximum amount on which to base contributions to the Canada or Quebec Pension Plan (C/QPP). The YMPE specifies the earnings amount that can be used in calculating pension contributions for each year.
Beginning in 2024, a separate contribution rate will be implemented for earnings above the YMPE (expected to be 4% each for employers and employees).
Understanding Year's Maximum Pensionable Earnings (YMPE)
The Canada Pension Plan (CPP) determines the maximum earnings amount for which contributions to the Canada Pension Plan can be made. According to the Government of Canada, the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2019 are $57,400—up from $55,900 in 2018. Contributors who earn more than $57,400 in 2019 cannot make additional contributions to the CPP.
- The CPP determines the maximum earnings amount for contributions to the CPP.
- Maximum pensionable earnings under the Canada Pension Plan (CPP) for 2019 are $57,400.
- The size of payments received by retirees from the plan depends on an individual's earnings during their working years.
Year's Maximum Pensionable Earnings and CPP Contributions
The Canada Pension Plan is similar to the Social Security program in the United States. It provides workers with a series of monthly payments in retirement. The size of those payments depends on an individual's earnings during their working years.
On June 20, 2016, Canada's ministers of finance reached an agreement in principle to enhance the CPP. The deal increased how much working Canadians would get from the CPP—from one-quarter of their eligible earnings to one-third, with an increase to the earnings limit. Changes will be phased in slowly over seven years—from 2019 to 2025—so that the impact is small and gradual.
The enhancement has the following features:
- The income replacement level will increased to one-third of individuals' income.
- The upper earnings limit is targeted at $82,700 for 2025.
- There will be a gradual seven-year phase-in beginning on January 1, 2019, composed of a five-year contribution rate phase-in below the yearly maximum pensionable earnings followed by a two-year phase-in of the upper earnings limit.
- The Working Income Tax Benefit will increase to help low-income earners.
- The enhanced portion of employee CPP contributions will be tax deductible.
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2019.
The higher contribution rate on earnings below the YMPE ($57,400 in 2019) will be phased-in over the first five years. In 2023, the CPP contribution rate, as estimated by the Department of Finance Canada, will be 1 percentage point higher for both employers and employees on earnings up to the YMPE. Beginning in 2024, a separate contribution rate (expected to be 4% each for employers and employees) will be implemented for earnings above the YMPE at that time.