CPP Contributory Period Overview
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Questions and Answers

At what age does the contributory period begin for an individual?

  • At age 18 or January 1, 1966, whichever is later (correct)
  • At age 70
  • At age 60
  • At age 21
  • Which of the following statements about contributions to the CPP is true?

  • Employees and employers share the contribution equally. (correct)
  • Self-employed individuals pay only the employee portion.
  • Only employees are required to pay CPP premiums.
  • Contributions are waived once an individual reaches age 60.
  • When do contributions to the CPP stop for a working beneficiary under 65?

  • Contributions do not stop until age 70
  • When they die
  • When they reach age 65 (correct)
  • When they begin receiving CPP retirement benefits
  • What is the impact of additional contributions made by working beneficiaries under age 65?

    <p>They increase the retirement pension through post-retirement benefits.</p> Signup and view all the answers

    Which of the following is considered a contributory earning for CPP?

    <p>Income from pensionable employment exceeding $3,500</p> Signup and view all the answers

    What happens to contributions for individuals once they reach age 70?

    <p>Contributions cease for everyone immediately.</p> Signup and view all the answers

    What is the role of the Yearly Maximum Pensionable Earnings (YMPE) in CPP contributions?

    <p>It sets a cap on the amount of pensionable earnings subject to CPP premiums.</p> Signup and view all the answers

    How does the YMPE change over time?

    <p>It is adjusted annually to reflect changes in average wages.</p> Signup and view all the answers

    What is the Yearly Additional Maximum Pensionable Earnings (YAMPE) for 2024?

    <p>$73,200</p> Signup and view all the answers

    What is the basic exemption level (YBE) for contributions?

    <p>$3,500</p> Signup and view all the answers

    How much can a self-employed individual contribute for earnings up to the first earnings ceiling (YMPE) in 2024?

    <p>11.90%</p> Signup and view all the answers

    If Jake earns $29,000, what are his contributory earnings calculated based on the YMPE and YBE?

    <p>$25,500</p> Signup and view all the answers

    What contributions percentage do employees have to pay on earnings exceeding the first earnings ceiling (YMPE) and below the second (YAMPE) starting in 2024?

    <p>4%</p> Signup and view all the answers

    What is the contribution amount for an employee on earnings up to the first earnings ceiling (YMPE) in 2024?

    <p>$3,867.50</p> Signup and view all the answers

    What will be the YMPE for the year 2025?

    <p>$69,700</p> Signup and view all the answers

    What is the CPP contribution rate for self-employed individuals earning between the first (YMPE) and second earnings ceiling (YAMPE)?

    <p>8%</p> Signup and view all the answers

    Study Notes

    Contributory Period Overview

    • CPP benefits correlate directly with contributions made by employees and employers.
    • Mandatory for individuals over 18 working in Canada (excluding Québec) earning over $3,500 to pay CPP premiums.
    • Contributions consist of a 50% share by the employee and a matching contribution from the employer.
    • Self-employed individuals pay both employee and employer portions.

    Definition of Contributory Period

    • Begins at the later of January 1, 1966, or the individual's 18th birthday.
    • Ends when the individual starts receiving a retirement pension (minimum age 60), reaches age 70, or passes away.

    Changes to Contribution Requirements

    • Prior to 2012, no CPP contributions were required after starting to receive CPP retirement benefits.
    • Effective January 1, 2012, individuals under 65 who work and receive benefits must continue paying CPP premiums until age 65.
    • Employers of these working beneficiaries must also continue contributions until they turn 65.
    • Additional contributions create post-retirement benefits, increasing retirement pension payouts based on a rate of 1/40 of the maximum CPP retirement pension for each additional contribution year.

    Contributory Earnings

    • Contributions are computed as a percentage of pensionable employment earnings above the year's basic exemption (YBE) and below the yearly maximum pensionable earnings (YMPE).
    • YMPE is adjusted yearly according to average wage changes; the 2024 YMPE is set at 68,500withasecondaryceiling(YAMPE)at68,500 with a secondary ceiling (YAMPE) at 68,500withasecondaryceiling(YAMPE)at73,200.
    • The YBE, frozen since 1998, is currently $3,500.

    Contribution Example

    • For an individual earning 29,000,contributoryearningsarecalculatedas29,000, contributory earnings are calculated as 29,000,contributoryearningsarecalculatedas25,500 using the formula [(minimum of pensionable earnings or YMPE) - YBE].

    Contribution Rates

    • Both employees and employers contribute based on employee's contributory earnings, with employee share deducted from pay.
    • From 2024, additional 4% contributions for earnings exceeding the YMPE but below the YAMPE are required for both employees and employers.
    • Self-employed individuals contribute 11.9% of income up to the YMPE and 8% of income between the YMPE and YAMPE.
    • Self-employed individuals must submit their contributions either through installments or when filing annual tax returns.

    CPP Contributions for 2024 & 2025

    • 2024 Contributions: Employee: 5.95%, Self-Employed: 11.90%
      • First Earnings Ceiling: $68,500
      • Maximum Contribution (Employee): $3,867.50
      • Maximum Contribution (Self-Employed): $7,735.00
    • 2025 Contributions: Employee: 5.95%, Self-Employed: 11.90%
      • First Earnings Ceiling: $69,700
      • Maximum Contribution (Employee): $3,938.90
      • Maximum Contribution (Self-Employed): $7,877.80

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    Description

    This quiz explores the contributory period of the Canada Pension Plan (CPP) and its implications for employees and employers. Learn about the requirements for contributing to CPP, particularly for individuals earning above the threshold. Understand how contributions impact the benefits received under the plan.

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