CPP2 Coming in 2024: What the Second Earnings Ceiling Means for You

Key takeaways

• CPP2 (the second additional Canada Pension Plan) began January 1, 2024
• CPP2 applies to earnings between the Year's Maximum Pensionable Earnings (YMPE) and the Year's Additional Maximum Pensionable Earnings (YAMPE)
• The employee and employer CPP2 contribution rate is 4% each; self-employed pay both (8%)
• CPP2 contributions do not generate a tax credit — they generate a deduction (line 22215) instead
• For 2024: YMPE is $73,200; YAMPE is $83,300; CPP2 max employee contribution is $188 (based on $4,700 × 4%)

CPP2 is the second tier of Canada Pension Plan contributions, phased in starting 2024. It applies to employment income between the regular YMPE ceiling and a higher YAMPE ceiling, creating a new earnings band where additional CPP contributions are required.

How CPP2 contributions work

CPP contributions now have two components. CPP1 covers earnings from the Year's Basic Exemption ($3,500) up to the YMPE ($73,200 for 2024). CPP2 covers earnings from the YMPE up to the YAMPE ($83,300 for 2024). The CPP2 contribution rate is 4% for both employee and employer — less than the 5.95% CPP1 rate — and the earnings band in 2024 is $10,100, making the maximum CPP2 employee contribution $404 (2024, before indexation).

Tax treatment difference

CPP1 employee contributions generate a federal non-refundable tax credit (line 30800) at the lowest federal tax rate (15%). CPP2 employee contributions generate a deduction (line 22215) — which is more valuable for higher-income earners who pay at higher marginal rates, but less predictable in its tax benefit. Self-employed workers who pay both employee and employer CPP2 contributions can deduct the employer portion (line 22215) and claim the credit for the employee portion — same as CPP1.

Payroll system implications

Employers had to update payroll systems before January 1, 2024 to correctly calculate and remit CPP2. The CPP2 ceiling, rate, and tracking are separate from CPP1. Employees who work for multiple employers could have CPP2 over-remitted; the excess is refunded via Form CPT20 or reconciled at tax time.