What is CPP and CPP2?

The Canada Pension Plan is funded by contributions from employees and employers in every province except Québec, which runs the Québec Pension Plan (QPP) instead. Each pay period, the employer deducts the employee’s CPP contribution from pensionable earnings, adds an equal employer contribution, and remits both to the CRA. Self-employed people pay both halves themselves. Contributions stop for the year once the annual maximum is reached.

Base CPP is calculated on earnings between the basic exemption ($3,500 a year, prorated per pay period) and the Year’s Maximum Pensionable Earnings (YMPE). Since 2024 there is a second tier, CPP2, charged on earnings between the YMPE and a higher ceiling called the Year’s Additional Maximum Pensionable Earnings (YAMPE). The base rate has been 5.95% each for employee and employer since 2023, and the CPP2 rate is 4% each. The YMPE and YAMPE are indexed and published by the CRA every year.

Getting CPP right involves more than the rate. Employees who turn 18 or 70, start receiving a disability pension, or (from 65 to 69) file an election to stop contributing all need special handling. Employees who change jobs mid-year start over with a new employer, so some overpay and receive a refund on their tax return; the employer’s share is not refunded. Under-deductions found later, often through a PIER review, are charged to the employer.