CPP rate?

CPP rate?

• A. 5.10%
• B. 6.00%
• C. 4.80%
• D. 5.00%

Answer: (A)

The amount you contribute to the Canada Pension Plan is based on a specific CPP rate applied to your pensionable earnings. Pensionable earnings are your earnings between the basic exemption and the yearly maximum (you start contributing after the basic exemption, and you stop once you reach the YMPE). In this scenario, the rate used for the employee portion is 5.10%, and the employer mirrors that amount. So you multiply the pensionable earnings by 5.10% to get your CPP deduction, and the employer adds the same amount. For example, if earnings are $40,000 and the YMPE is $66,600, pensionable earnings are $40,000 minus the $3,500 basic exemption, i.e., $36,500. Employee CPP = $36,500 × 0.051 ≈ $1,861.50, with the employer contributing the same amount. The total CPP contributed for the year would be about $3,723. If you were self-employed, you’d effectively cover both portions, totaling about 10.20% of pensionable earnings. The rate 5.10% shown matches the rate applicable for that year, making it the correct choice.

The amount you contribute to the Canada Pension Plan is based on a specific CPP rate applied to your pensionable earnings. Pensionable earnings are your earnings between the basic exemption and the yearly maximum (you start contributing after the basic exemption, and you stop once you reach the YMPE). In this scenario, the rate used for the employee portion is 5.10%, and the employer mirrors that amount. So you multiply the pensionable earnings by 5.10% to get your CPP deduction, and the employer adds the same amount.

For example, if earnings are $40,000 and the YMPE is $66,600, pensionable earnings are $40,000 minus the $3,500 basic exemption, i.e., $36,500. Employee CPP = $36,500 × 0.051 ≈ $1,861.50, with the employer contributing the same amount. The total CPP contributed for the year would be about $3,723.

If you were self-employed, you’d effectively cover both portions, totaling about 10.20% of pensionable earnings. The rate 5.10% shown matches the rate applicable for that year, making it the correct choice.