2008 CPP (Canada Pension Plan) and 2008 EI (Employment Insurance)
2008 CPP/QPP Rates, Contributions and Deductions
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At the beginning of the year 2008, the lowest rate of the two possible rates of contribution to the public service pension plan is used until the maximum level of contribution for that rate is reached. |
For the calendar year 2008, the contribution rate will increase by 0.3%. Effective January 1, 2008, public service pension plan contributions will be 4.9% (to a maximum of $2,200.10 for the 2008 taxation year) on all pensionable earnings below and equal to the yearly maximum pensionable earnings (YMPE) ($44,900 for the 2008 taxation year) and 8.4% on all pensionable earnings over the YMPE.
Contributions to the public service pension plan have a direct bearing on the income tax deducted at source since these contributions are deducted from the gross pay before determining the tax rate. Once the contributions reach the maximum public service pension plan low level, the contributions will increase from 4.9% to 8.4%. The larger the public service pension plan contribution, the less income tax will be withheld from your pay.
Many employees reach their maximum level of Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions sometime during the year. If you reach the maximum level of CPP/QPP, you will see an increase in the amount of your net pay as there will no longer be CPP/QPP deductions withheld. Beginning with the new year, you will recommence paying CPP/QPP contributions until such time as you reach the maximum CPP/QPP contribution level for 2008.
The CPP and QPP rate, effective January 1, 2008, remains at 4.95% of pensionable earnings. The maximum CPP/QPP contribution is $2,049.30 for the 2008 taxation year.
The CPP contributions provide a federal tax credit of 15%. This tax credit is applied directly to the income tax that is owing and is not dependent on your income tax bracket. Please note that the Quebec Tax Reform eliminated the Quebec provincial tax credit for QPP effective January 1, 1998. The tax credit for QPP is now included in the basic credit amount of $10,215 for the 2008 taxation year.
2008 EI (Employment Insurance) Premiums
Your rate of EI premiums (excluding employees working in the province of Quebec), for the 2008 taxation year has decreased from 1.80% to 1.73%. The annual maximum insurable earnings have increased from $40,000 to $41,100. If you reached the maximum EI premiums during the previous year, you will recommence paying EI premiums in the new year until the maximum premium level is reached. Once you reach the annual maximum premium deduction of $711.03 in 2008, you will see an increase in the amount of your net pay as there will no longer be EI deductions withheld from your pay.
If you work in the province of Quebec, your rate of EI premiums for the 2008 taxation year has decreased from 1.46% to 1.39%. The annual maximum insurable earnings have increased from $40,000 to $41,100. If you reached the maximum EI premiums during the previous year, you will recommence paying EI premiums in the new year until the maximum premium level is reached. Once you reach the annual maximum premium deduction of $571.29 in 2008, you will see an increase in the amount of your net pay as there will no longer be EI deductions withheld from your pay.
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