Minister of Finance Bill Morneau marked the final step in implementing an improved Canada Pension Plan (CPP) today by announcing that the Governor General has signed the Order in Council to bring the CPP enhancements in Bill C-26 into force, meaning all necessary legislative requirements have been met by Canada's governments to implement the agreed-upon enhancements.
“A national approach certainly has advantages over separate strategies at the provincial level, but the CPP enhancement will pose a challenge for some businesses,” said Dowdell at the time the enhancements were originally announced, when it was also confirmed that the embattled Ontario Retirement Pension Plan would be scrapped.
The new deal would introduce the following changes to the current CPP:
- Under the current CPP, employers and employees each contribute 4.95 per cent of income between $3,500 and $55,300. The maximum CPP benefit is $1,114.17 for January - December 2017.
- Premiums on income between the Years Maximum Pensionable Earnings and the Years Additional Maximum Pensionable Earnings will be 4% for both employers and employees beginning in 2024.
- Under the new deal, the YAMPE rises to $82,700 by 2025.
- The current CPP deal is meant to replace 25 per cent of earnings up to the ceiling, while the new plan aims to replace one third of income up to the new, higher ceiling.
- Once fully phased in, CPP premiums rise by 1 per cent each for employers and employees. Self-employed Canadians must pay both the employee and employer premiums.
- The enhanced portion of employee CPP contributions is tax deductible.
- Proposed increase to federal working income tax benefit to help low income earners.