Year's Maximum Pensionable Earnings (YMPE)
The Canadian government sets the year's maximum pensionable earnings (YMPE) figure. The size of those payments depends on an individual's earnings during their working years, the age an individual starts receiving their pension, and how much and for how long an individual contributes to the CPP. The Canada Pension Plan (CPP) determines the maximum earnings amount for which contributions to the Canada Pension Plan can be made. There will be a gradual seven-year phase-in, starting on January 1, 2019; this will consist 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. Beginning in 2024, a separate contribution rate will be implemented for earnings above the YMPE (expected to be 4% each for employers and employees). The Canada Pension Plan is similar to the Social Security program in the United States. According to the Government of Canada, the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020 are $58,700 — up from $57,400 in 2019.
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.
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 2020 are $58,700 — up from $57,400 in 2019. Contributors who earn more than $58,700 in 2020 cannot make additional contributions to the CPP.
Beginning in 2024, a separate contribution rate will be implemented for earnings above the YMPE (expected to be 4% each for employers and employees).
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 agreed to augment the CPP. The deal increased how much working Canadians would receive from the CPP — from one-quarter of the employees' eligible earnings to one-third, with a boost to the earnings limit. Changes will be phased in gradually over seven years — from 2019 to 2025 — so that the impact is measured and piecemeal.
The enhancement has the following features:
$58,700
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020.
The higher contribution rate on earnings below the YMPE ($58,700 in 2020) 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 one percentage point higher for both employers and employees on earnings up to the YMPE.
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.
Related terms:
Canada Pension Plan (CPP)
The Canada Pension Plan is one of three levels of Canada's retirement income system, which is responsible for paying retirement or disability benefits. read more
Earnings
A company's earnings are its after-tax net income, meaning its profits. Earnings are the main determinant of a public company's share price. read more
Pension Adjustment Reversal (PAR)
Pension Adjustment Reversal (PAR) is an option to adjust retirement funds for those withdrawing early from a Canadian tax-assisted retirement plan. read more
Pensionable Service
Pensionable Service refers to the amount of time a worker accrues credit toward a pension plan in which they are enrolled. read more
Pension Plan
A pension plan is an employee benefit that commits the employer to make regular payments to the employee in retirement. read more
Provincial Parental Insurance Plan (PPIP)
Provincial parental insurance plan (PPIP) is a reference to the Quebec Parental Insurance Plan by those outside the Candian province of Quebec. read more
Social Security
Social Security is a federally run insurance program that provides benefits to many American retirees, their survivors, and workers who become disabled. read more
Unfunded Pension Plan
An unfunded pension plan is an employer-managed retirement plan that uses the employer's current income to fund pension payments as they become necessary. read more