Enhanced Contributions and Benefits to the Canada Pension Plan
Canada’s provincial finance ministers kicked off the first day of summer by reaching an agreement in principle with the federal government that would enhance contributions and benefits to the Canada Pension Plan (CPP). Quebec and Manitoba were the only provinces not to agree.
The agreement would see CPP benefits increased from current replacement income levels of 25 per cent of pensionable earnings to 33 per cent. Further, the pensionable earnings ceiling, also known as the year’s maximum pensionable earnings (YMPE), would increase by 14 per cent.
To pay for these benefits, contributions would increase from 9.9 per cent, split evenly between employer and employee, to 11.9 per cent. The enhanced portion of the contributions would be tax deductible.
These changes would be phased in gradually beginning in January 1, 2019 to full implementation by 2025.
Details are currently sparse but reports suggest the agreement must be finalized by July 15, 2016. Ontario’s finance minister suggested an agreement would result in a cancellation of the Ontario Retirement Pension Plan.