2024 CPP Second Tier Enhancement Process Overview

2024 CPP Second Tier Enhancement Process Overview

ISSUE: Second Tier of CPP to be implemented for 2024. 

GOAL: The goal of this article is to detail the changes made to edsembli HRP to accommodate 2024 CPP Tier 2 calculations and provide an overview of the necessary steps upon the installation of this patch into HRP. 

CRA Resource: https://www.canada.ca/en/revenue-agency/news/cra-multimedia-library/businesses-video-gallery/canada-pension-plan-enhancement-second-cpp-contribution.html 

Process Overview:

Requirements are categorized and listed as shown below; 

SYSTEM CHANGES (Interface):

Payroll > Board > CPP, EIC, WSIB, EHC

NEW FIELD: ‘YAMPE’ (Yearly Additional Maximum Pensionable Earnings)

• YAMPE represents the second Earning Ceiling for CPP. 

Note: YAMPE will remain configurable so that it can be setup accordingly. 

NEW FIELD: ‘CPP Employee Rate 2’ 

CPP Calculation Example: 5.95% up to 66,660 and 4% from 66,600 to 72,400

0 < x < 3,500 – 0% CPP

3,500 < x < 66,600 – 5.95% CPP – Box 16

66,600 < x < 72,400 – 4% CPP – Box 16A

Note: YTD Tables will be used to reference the separate Records which map to each T4 box

Step 2: Payroll > Pay Process > YTD Record Adjustment module

New Record Visible: CPP YAMPE Earning Ceiling 2 visible under YTD Module

Note: This module should allow manual adjustments to calculated CPP values

Step 3: Payroll > Pay Process > Pay Run > Pay Register module

-CPP & CPP2 are blended together in the Pay Run > Pay Register (the field is CPP & CPP2 summed) 

Note: CPP2 Stored separately from the original CPP (back end) à This is because they feed different boxes 16 and 16A on T4 

Scripts to View CPP & CPP2 in back end:

EMPLOYEE PAY RECORD TABLE 

select * from EC_EMPLOYEE_PAY_RECORD

where EMPLOYEE_ID in ('xxxxx')

and ENTITY_TYPE in ('CPP', 'CPP2', 'CPP_GROSS')

and PAY_NUMBER >= 'YYYYNN'

EMPLOYEE YTD ENTITY TABLE (After running Pay 2023NN - CPP Gross changed to $69,205.97)

select * from EC_EMPLOYEE_YTD_ENTITY

where EMPLOYEE_ID in ('xxxxx')

and ENTITY_TYPE in ('CPP', 'CPP2', 'CPP_GROSS')

and YEAR = '2023'

Tax Analyzer Configuration:

PAYROLL > BOARD > FEDERAL TAX DATA

NOTE: If client does not enter anything in the field internally, the system will take 4.95% by default. 

ADDITIONAL NOTE: The above 4.95% is strictly for Tax Calculation on CPP for K2 (Federal) and K2P (Provincial). 

-Payroll Log File reflects updates

Tax Start / End section

CPP Start / End section

TAX ANALYZER REPORT

HRP's K2 & K2P CALCULATIONS:

1. Total CPP Gross with S1 Factor = ((S1 * (YTD CPP Gross + Current CPP Gross) = ((3.25 * (66,600.00 + 4,597.15)) = 23,1390.74 
2. Total CPP Gross = (YTD CPP Gross + Current CPP Gross) = (66,600.00 + 4,597.15) = 71,197.15  

Take the higher value of A or B in this case they are the same, so 'CPP Gross' will be 71,197.15 

3. New Max Annual CPP = (Base CPP Rate * (CPP YMPE - CPP Annual Exemption)) = (4.95% * (66,600 - 3500)) = 3,123.45 
4. New Actual Annual CPP = (Base CPP Rate * (Total CPP Gross with S1 Factor or Total CPP Gross - CPP Annual Exemption) = (4.95% * (71,197.15 - 3500) = 3,351.01

Take the lower value of C and D so 'Annual CPP' will be 3,123.45

5. Total UIC = (Current UIC + YTD UIC) = (74.93 + 449.60) = 524.53 
6. Annual UIC = (Total UIC * S1) = (524.53 * 3.25) = 1,704.72
7. YTD UIC Actual = (YTD UIC Actual + Current UIC) = (449.60 + 74.93) = 524.53 
8. Take the highest value of F and G in this case they are the same 1704.72
9. Annual UIC Max = (EI Max Earning * EI Rate ÷ 100) = (61,500 * 1.63%) = 1,002.45

Take the lower value of H and I in this case they are the same, so 'Annual UIC' will be 1,002.45

K2   = (Annual CPP + Annual UIC) * Federal Low Rate = ((3,123.45 + 1,002.45) * 0.15) = 618.89

K2P = (Annual CPP + Annual UIC) * Provincial Low Rate = ((3,123.45 + 1,002.45) * 0.0505) = 208.36