As you probably know, CPP contributions have been steadily rising since 2019. On the other hand, according to the Government, anyone contributing to the CPP enhancement after January 1, 2019 will receive an increased amount of CPP retirement pension, post-retirement benefit, disability pension, and survivor’s pension when they retire.

Year 2024 will bring USA new Government invention:  the so-called “second tier rate hike on CPP contributions”.Here are some details.

The first earning ceiling is the eligible income on which you make CPP contributions.  It is known as the year’s maximum pensionable earnings, or YMPE. YMPE will be $68,500 in 2024.The basic exemption amount for 2024 will remain at $3,500.

A second earnings ceiling that will initiate higher CPP will be known as the Year’s Additional Maximum Pensionable Earnings, or YAMPE. It will not replace the first earnings ceiling. Instead, it will subject worker’s earnings to two earnings limits. The value of the second earnings ceiling is based on the value of the first earnings ceiling and set at an amount that is approximately 7% higher than the first earnings ceiling.

Beginning January 1, 2024, employees and employers will each contribute an additional 4% on earnings above the YMPE, up to the amount of the YAMPE. These are their second CPP contributions.

As a result, for 2024 pensionable earnings between $68,500 and $73,200 will be subject to “second CPP contributions” (CPP2) at an employee/employer rate of 4%, with a maximum contribution of $188 each ($73,200 – $68,500) X 4%. The 2024 self-employed CPP2 contribution rate will be 8%, and the maximum self-employed contribution will be $376 ($188 x 2).

Let’s see an example. James is an employee earning $75,000. For 2024, given the new YMPE of up to $68,500, which is the first earnings ceiling, he will contribute $3,867.50 of base CPP ($68,500- $3,500) X 5.95%. Given the second earnings ceiling for 2024 of $73,200, James will contribute the full $188 in second CPP for total 2024 CPP contributions of $4,055.50 ($3,867.50 + $188).

The maximum self-employed contribution for 2024 will be $8,111.00 ($4,055.50 x 2).