2016 Canada Pension Plan (CPP) Update
As of January 1, 2016 the maximum Canada Pension Plan retirement benefit for new recipients age 65 will be $1,092.50 per month, an increase of $330 for the year compared to the maximum in 2015. Additionally, basic Old Age Security pension also increased from $569.95 to $570.52 per month.
Canada Pension Plan (CPP) monthly payments are adjusted every January if there are increases in the cost of living as measured by the Consumer Price Index (CPI). While the maximum CPP retirement benefit has shown consistent and steady growth, most Canadians should not bank on receiving the maximum amount upon retirement. At the most basic level, the amount you get from CPP is determined by how much you put into it. The best way to discover how much you qualify for is to get your CPP statement of contribution from Service Canada.
The amount you will receive is dependent on two criteria:
The first criteria is the amount of years spent contributing to the CPP (39 years at the Maximum Pensionable Earnings is the magic number). The second criteria is the amount you are contributing during those years. Every year a Maximum Pensionable Earning total is set, and if you reach or exceed this maximum you ensure that you will receive the maximum benefit in the least amount of years possible.
In 2016 the following changes have been made to the CPP:
- The Yearly Maximum Pensionable Earnings (YMPE) for 2016 have been increased to $54,900 from $53,600*
- Maximum employee and employer contribution for 2016 will be $2,544.30 each (from $2,479.95) and the self-employed contribution is $5,088.60 ($4,959.90 in 2015).
*It is important to note that any income generated above the Maximum Pensionable Earnings is not taxed towards the CPP.
The following items remain the same:
- The CPP basic exemption amount remains at $3,500
- Employee/employer contribution rates remain unchanged at 4.95%, and the self employed contributions are still at 9.9%
The table below lists the maximum monthly payment amounts for CPP benefits, except for the death benefit, which is a one-time payment.
EI maximum increases effective January 1, 2016
The federal government recently announced an increase in the employment insurance (EI) maximum insurable earnings amount and a corresponding increase in the EI weekly maximum benefit. Effective January 1, 2016, maximum insurable earnings will increase to $50,800 per year. Accordingly, the new maximum EI benefit amount will be $537 per week.
In 2016, both the employee and employer EI premium rate will remain at $1.88 and $2.632 per $100 of salary, respectively. At the higher $50,800 insurable earnings level threshold, the maximum contribution for 2016 will be $955.04 for employees and $1,337.06 for employers.
Short-term disability plans that have a maximum set at the EI maximum, rather than at a specific amount, will automatically increase effective Jan 1.
If your plan has a specific dollar maximum that is less than $537 per week, and you participate in the EI premium reduction program, you will need to amend your plan to at least $537 per week in order to remain eligible for the program.
If your Short-term disability plan has a specific dollar maximum and you participate in the EI premium reduction program, you may wish to consider amending your plan to a maximum that is automatically adjusted to the EI maximum. This will avoid the need for future amendments whenever the EI maximum changes.