What you need to know about the CPP enhancement _ Avanti
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What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
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What you need to know
about the CPP
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4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
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What you need to know about the CPP
enhancement as a payroll professional
As of 2019, the Canada Pension Plan (CPP) is gradually being enhanced. This means that
today’s workers, the seniors of tomorrow, will have higher benefits and greater financial
stability through a small increase in the amount they contribute to the CPP.
Here is a full breakdown and explanation of the new CPP Enhancement (eCPP), what you
can expect for 2024, and how to master the new CPP calculations. The information in this
post is based on a recent webinar presented by the Canada Revenue Agency (CRA). If you
have any additional questions, please reference the CRA or National Payroll Institute (NPI)
for more information.
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
3/15
An overview of CPP enhancement benefits
Once fully in place in 2064, the CPP enhancement will increase the maximum CPP
retirement benefit by about 50 percent. The current maximum benefit is $15,679. Today,
the enhanced CPP represents an increase of nearly $8,000, to a maximum benefit of
nearly $23,832.
Enhanced benefits will accumulate gradually as individuals pay into the enhanced CPP.
Young Canadians just entering the workforce will see the largest increase in benefits.
Canada Pension Plan income replacement levels will go from replacing 25% of a worker's
pensionable earnings to 33%.
To fund these enhanced benefits, annual CPP contributions have increased modestly and
will continue to increase until 2025. We’ll go over how these increases work in detail
below.
Recap of CPP changes from 2019 to 2023
CPP saw rates increase incrementally from 4.95% in 2019 to 5.95% in 2023. This included
the introduction of tax deductions for enhanced contributions.
Contributions based on the 4.95% contribution rate are considered base
contributions and result in a non-refundable tax credit which is applied during an
employee's annual tax return.
Contributions greater than the 4.95% contribution rate are considered enhanced
contributions and are tax-deductible
, meaning that when the pay is processed there
is a reduction to pensionable earnings.
Let’s run through a quick scenario illustrating how that works in practice. Jane
contributes $2,200 per year to the Canada Pension Plan. Of that, $1,830 will be a base
contribution and the remaining $370 will be considered an enhanced contribution.
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eCPP 2023 and beyond
On November 1, 2023, the CRA announced the maximum pensionable earnings and
contributions for 2024.
Year’s Maximum Pensionable Earnings (YMPE) &
Year’s Additional Maximum Pensionable Earnings
(YAMPE)
The Year’s Maximum Pensionable Earnings (YMPE) determines the maximum amount on
which CPP contributions are calculated.
Starting in 2024:
YMPE will be referred to as the first earning ceiling
The maximum pensionable earnings under CPP will be $68,500, up from $66,600 in
2023
The basic exemption amount for 2024 remains at $3,500
Year’s Additional Maximum Pensionable Earnings (YAMPE) will be referred to as the
second earning ceiling
YAMPE will be the new limit up to which earnings are considered pensionable
Starting in 2024, a higher, second earnings ceiling of $73,200 will be implemented
and used to determine second additional CPP contributions (CPP2). As a result,
pensionable earnings between $68,500 and $73,200 are subject to CPP2
contributions.
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
5/15
The second earning ceiling will be 7% higher than the first earning ceiling in 2024;
then 14% higher in 2025, where it will remain at this level for the foreseeable future
Second CPP Contributions
Second CPP contributions will have a different contribution rate. This new rate will be 4%
for employees and employers, and 8% for self-employed individuals.
Starting in 2024:
Base CPP Contributions: Also known as the original CPP with a rate of 4.95%
First CPP Contributions: Contributions above the 4.95%, phased in between 2019 and
2023.
Base + First Contributions = 5.95%
Second CPP Contributions: Contributions above the YMPE at the rate of 4%.
Please note
: In 2024 there will be an additional T4 box for all Second CPP Contributions.
This box will be 16A.
Examples of Second CPP Contributions
Let's take a look at some examples of the second CPP contributions in practice.
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What you need to know about the CPP enhancement | Avanti
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6/15
Scenario 1: Maya
Scenario 2: Diego
Maya earned $100,000
in 2024 as an
employee.
*Yearly CPP exemption is $3,500
**The first earning ceiling is $68,500
***The second earning ceiling is
$73,200
Diego earned $45,000
in 2024 as an
employee.
*Yearly CPP exemption is $3,500
**The first earning ceiling is $68,500
***The second earning ceiling is
$73,200
Step 1:
Since Maya's earnings are more than
the first earnings ceiling, we take the
first earnings ceiling amount** and
subtract the yearly CPP exemption*.
$68,500
-$3,500
$65,000
Multiply by 5.95%, the first ceiling
contribution rate.
$65,000 x 0.0595 = $3,867.50
$3,867.50 will be her first CPP
contribution. If this was in 2023, this is
where we would stop. That would be
her total contributions that would go in
box 16. However, in 2024, there is an
extra step.
Step 1:
Because Diego’s earnings are below
the first earnings ceiling, we first take
Diego's earnings and subtract the
$3,500 exemption.
$45,000
-$3,500
$41,500
Multiply by the 5.95%, the first ceiling
contribution rate.
$41,500 x 0.0595 = $2,469.25
This gives us a total of $2,469.35 which
is the maximum
Diego will contribute
to the Canada Pension Plan for 2024
since his earnings are below the
second earnings ceiling.
Step 2:
Next because Maya's earnings are
more than the second earnings
ceiling***, we will then take the second
earnings ceiling and subtract the first
Step 2:
For Diego, his earnings are below the
second earning’s ceiling, therefore no
more calculations are required. Diego
will not make any second contributions
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What you need to know about the CPP enhancement | Avanti
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7/15
earnings ceiling from it.
$73,200
-$68,500
$4,700
Multiply this amount by 4%, which is
the contribution rate for any amounts
above the first earnings ceiling but
below the second earnings ceiling.
$4,700 x 0.04 = $188
$188 will be her second CPP
contribution.
Adding both the first and second CPP
contributions together will give a total
CPP contribution for 2024 of
$4,055.50
for Maya.
to the Canada Pension Plan.
Diego’s total CPP contributions for
2024 will be $2,469.25.
What does this mean for Maya's T4?
Box 14 will remain the same at
$100,000
Box 16 will be the first CPP
contribution of $3,867.50
New
Box 16A will be the second
contribution of $188
Box 26 (Pensionable Earnings) will be
$73,200 (first ceiling and second
ceiling combined will be reported in
this box)
What does this mean for Diego's T4?
Box 14 will be $45,000
Box 16 will be the first CPP
contribution of $2,469.25
New
Box 16A will be $0.00
Box 26 (Pensionable Earnings) will be
$45,000
Tax treatment of CPP contributions for
employers
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
8/15
Contribution type
Employee
Base 4.95%
Non-refundable tax credit
First 1%
Tax deduction
Second 4%
Tax deduction
Enhanced CPP and QPP Setup Guide
You can get a head start on the second phase of the enhanced CPP and QPP introduced
for the 2024 payroll year. Check out this Help Centre article to set up your Avanti system
for the changes and prepare for the new year.
Frequently Asked Questions
Q: Will the Box 16A amounts be deducted from the default 501, or will we
add a second CPP code?
A: Everyone must create new deduction codes for the second CPP and QPP contribution.
But don’t worry; we have a workshop scheduled to assist you in setting up these new
codes well ahead of the upcoming year. Stay tuned for further information in your inbox.
Q: Has CRA officially announced/confirmed the YMPE and YAMPE
numbers yet?
A: Yes, as of November 1, 2023, the CRA has announced the YMPE and YAMPE numbers
for 2024, and you can find them here.
Q: How will the eCPP be handled on a biweekly payroll? Here, we only see
the yearly calculations.
A: The second CPP will calculate based on YTD amounts using the YMPE and YAMPE. It
won’t begin calculating the second CPP until the first YMPE ceiling is met.
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
9/15
Q: Does the eCPP deduction start from pay period 1 based on annual
salary (i.e. if an employee’s annual salary is less than YAMPE, will Avanti
deduct eCPP during their first pay period? Will it be deducted for the
employees with a higher annual salary than YMPE?)?
A: CPP and eCPP don’t calculate based on annual salary; they calculate based on the
amount in the current pay run processing using YTD totals. Since eCPP deductions don’t
start until the first YMPE ceiling is reached, it won’t impact employees’ first pay of 2024.
If you have further questions, please refer to the resources provided by the CRA or NPI.
What you need to know about the CPP
enhancement as an employee
The Canada Pension Plan enhancement means doesn’t just affect you as a payroll
professional – it means a lot of change for your employees as well. Feel free to share the
following information on the new CPP enhancement. For your convenience, we also put
together a PDF summarizing the below information that you can download and share with
your employees.
Changes to your CPP contributions
As 2024 kicks off we want to let you know why you might want to budget for a higher
contribution amount coming off your pay for CPP. As of 2019, the government has
gradually been enhancing the Canada Pension Plan (CPP). This means that today’s
workers and the seniors of tomorrow will have higher benefits and greater financial
stability through a small increase in the contribution to CPP.
An overview of CPP enhancement benefits
Once fully in place in 2064, the CPP enhancement will increase the maximum CPP
retirement benefit by about 50 percent. The current maximum benefit is $15,679. Today,
the enhanced CPP represents an increase of nearly $8,000, to a maximum benefit of
nearly $23,832.
Enhanced benefits will accumulate gradually as individuals pay into the enhanced CPP.
Young Canadians just entering the workforce will see the largest increase in benefits.
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10/15
CPP income replacement levels will go from replacing 25% of a worker's pensionable
earnings to 33%.
To fund these enhanced benefits, annual CPP contributions have increased modestly and
will continue to increase until 2025.
How will you benefit from these CPP changes?
When a contributor turns 60 years old, they can decide to start receiving CPP benefits at
a reduced rate. Generally, the later a CPP contributor decides to start receiving CPP
benefits, the higher their CPP benefits will be. A contributor can do this up until they turn
70 years old where it is then mandatory to stop contributing and start receiving CPP
benefits.
Contributors can decide to start receiving benefits from the CPP at 60 but must wait until
65 to opt out of the Canada Pension Plan.
Using the example above, if Maya and Diego worked for 40 years and each contributed
throughout their work years, they will each receive different amounts since your CPP
benefits depend on how much you contributed throughout your lifetime. Someone who
has contributed the maximum amount of CPP throughout their lifetime will receive higher
benefits than someone who contributed less. With that being said, the enhancement will
raise benefits for all contributors across the board.
CPP
Contributor
Average
Career
Earnings
Work Years
(2025-
2065)
Estimated
Annual
Benefits
with Base
CPP Only
Estimated
Annual
Benefits with
CPP
Enhancement
Diego
$45,000
40
$10,593
$13,984
Maya
$100,000
40
$15,679
$23,593
Tax treatment of CPP contributions for
employees
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
11/15
Contribution type
Employee
Base 4.95%
Non-refundable tax credit
First 1%
Tax deduction
Second 4%
Tax deduction
eCPP 2023 and beyond
On November 1, 2023, the CRA announced the maximum pensionable earnings and
contributions for 2024.
Year’s Maximum Pensionable Earnings (YMPE) &
Year’s Additional Maximum Pensionable Earnings
(YAMPE)
The Year’s Maximum Pensionable Earnings (YMPE) determines the maximum amount on
which CPP contributions are calculated.
Starting in 2024:
YMPE will be referred to as the first earning ceiling
The maximum pensionable earnings under CPP will be $68,500, up from $66,600 in
2023
The basic exemption amount for 2024 remains at $3,500
Year’s Additional Maximum Pensionable Earnings (YAMPE) will be referred to as the
second earning ceiling
YAMPE will be the new limit up to which earnings are considered pensionable
Starting in 2024, a higher, second earnings ceiling of $73,200 will be implemented
and used to determine second additional CPP contributions (CPP2). As a result,
pensionable earnings between $68,500 and $73,200 are subject to CPP2
contributions.
4/15/24, 7:05 PM
What you need to know about the CPP enhancement | Avanti
https://www.avanti.ca/post/cpp-enhancement
12/15
The second earning ceiling will be 7% higher than the first earning ceiling in 2024;
then 14% higher in 2025, where it will remain at this level for the foreseeable future
Second CPP Contributions
Second CPP contributions will have a different contribution rate. This new rate will be 4%
for employees and employers, and 8% for self-employed individuals.
Starting in 2024
Base CPP Contributions: Also known as the original CPP, with a rate of 4.95%
First CPP Contributions: Contributions above the 4.95%, phased in between 2019 and
2023.
Base + First Contributions = 5.95%
Second CPP Contributions: Contributions above the YMPE at the rate of 4%.
Please note
: In 2024 there will be an additional T4 box for all Second CPP Contributions.
This box will be 16A.
If you have further questions, please refer to the resources provided by the CRA or NPI.
Additional Reading Links
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Payroll Updates
Canadian Payroll
Updates: March
Roundup
It’s been a busy month!
Many provinces
announced their 2024
budgets with major
initiatives that may
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Payroll Updates
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guide to Canadian
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Without the right tools,
tax season can be
tough. We’re here to
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To help you get through
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Changes in Current Operating Assets and Liabilities-Indirect Method
Mohammed Corporation's comparative balance sheet for current assets and liabilities was as follows:
Dec. 31, 20Y2
Dec. 31, 20Y1
Accounts receivable
$18,400
$17,600
Inventory
52,600
53,300
Accounts payable
28,700
27,400
Dividends payable
21,000
23,000
Adjust net income of $105,400 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
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Once you have calculated the changes in the current operating assets and liabilities determine what impact those changes would have on
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[The following information applies to the questions displayed below.]
Altira Corporation provides the following information related to its merchandise inventory during the month of August
2021:
Aug.1 Inventory on hand–2,000 units; cost $5.30 each.
8 Purchased 8,000 units for $5.50 each.
14 Sold 6,000 units for $12.00 each.
18 Purchased 6,000 units for $5.60 each.
25 Sold 7,000 units for $11.00 each.
28 Purchased 4,000 units for $5.80 each.
31 Inventory on hand-7,000 units.
Required:
1. Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2021,
balance sheet and the cost of goods sold it would report in its August 2021 income statement using the FIFO method.
Cost of Goods…
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Exercise 11-13 a-b (Part Level Submission)
According to a payroll register summary of Bramble Company, the amount of employees' gross pay in December was $862,000, of which $87,000 was not subject to Social Security
taxes of 6.2% and $761,000 was not subject to state and federal unemployment taxes.
(a)
X Your answer is incorrect. Try again.
Determine the employer's payroll tax expense for the month, using the following rates: FICA 7.65%, state unemployment 5.4%, and federal unemplayment 0.8%. (Round
answer to 0 decimal places, e.g. 125.)
Payroll tax expense
$:
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te with security updates, fixes, and Improvements, choose Check for Updates.
Minnie has asked you to review the methods Min Armin Wastege uses when dealing with
Accounts Receivable. Minnie has compiled the following information for the past 2 months and
wants you to update her records on August 31, 2020.
On June 30, 2020 the Account Receivable balance for Min Armin Wastege was $13,585 Dr with
an Allowance for Doubtful Debts of $462 Cr. In the last two months
Sales (net of GST)
Sales Returns & Allowances (net of GST)
Cash Collected
Bad Debts to be written off (Including GST)
$4 800
400
3 550
660
The bad debts listed above have not been written off as yet. Minnie has also calculated based on
past experience that 7% of net credit sales go bad. All sales are made on credit.
REQUIRED:
А.
Prepare the following General Journal entries to
1.
account for the write off of the bad debt during the past two…
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Required:
Record the following transactions of Allen Inc.: (Round your answers to 2 decimal places.)
DATE
TRANSACTIONS
2019
8 Purchased merchandise on credit from Alenikov Designs, Invoice 1091,
list price $3,200, trade discounts of 20 percent and 10 percent; terms
1/10, n/30.
17 Paid the amount owed on the purchase of March 8 from Alenikov Designs,
less the 1 percent discount, Check 185.
March
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What are 2 ways to check a client's subscription level in QuickBooks
Online Accountant?
From the Subscriptions and billing screen from the Gear icon
From the Advanced tab in Account and Settings
From the Clients tab in Account and Settings
By hovering over the qb icon in the Clients menu
From the Company Settings screen from the Gear icon
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Gradebook / ACT 196: Payroll X M Question 1- Ch. 7 - Assignmen x +
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Exercise 7-6A (Static)
How does a payroll accountant use the information in the General Ledger? (You may select more than one answer. Single click the
box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to
empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
? General Ledger account balances aggregate data to determine payroll costs.
?Payroll expenses contained in the General Ledger are not used to make personnel decisions.
The payroll accountant uses General Ledger balances to…
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Lisa, age 46, needed some cash so she withdrew $56,500 from her Roth IRA, At the time of the distribution, the balance in the Roth IRA was
$200,000. Lisa established the Roth IRA 10 years ago. Over the years, she has contributed $21,300 to her account. What amount of the
distribution is taxable and subject to early distribution penalty?
Multiple Choice
$5,650.
$35,200.
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