CPP and QPP

Introduction

CPP/QPP employee and employer contributions are getting calculated within the payroll
function KATAX (parameter SI specified). No QPP/CPP contributions will be calculated in case
of negative pensionable earnings.







Technical Wage type related to CPP and QPP
Pensionable Earnings Employee Contribution Employer Contribution
Wage
type
contains the ... Wage
type
contains the ... Wage
type
contains the ...
/118 Wage type /118 CPP
Pensionable Earnings -
NO exemption. These
wage types are subject
to Canada Pension Plan
Contributions, but the
Base Exemption must
not be applied, only the
percentage as specified
in the Employers guide
to payroll Deductions.
/320 Wage type /320 (CPP EE
Contributions) is a result
wage type. The
employee s contribution
to the Canada Pension
Plan is based upon the
cumulative wage type
value in /120 and the
rules deemed in the
Employers
Guide to Payroll
Deductions
/420 Wage type /321 (QPP EE
Contributions) is a result
wage type. The
employee s contribution
to the Quebec Pension
Plan is based upon the
cumulative wage type
value in /121 and the
rules deemed in the
Employers
Guide to Payroll
Deductions ..
/119 Wage type /119 QPP
Pensionable Earnings -
NO exemption. These
wage types are subject
to Quebec Pension Plan
Contributions, but the
Base Exemption must
not be applied, only the
percentage as specified
in the Employers guide
to payroll Deductions.
/321 Wage type /420 (CPP ER
Contributions) is a result
wage type. The
employer s contribution
to the Canada Pension
Plan are an amount
equal
to the total of the
employee s
contributions.
/421 Wage type /421 (QPP ER
Contributions) is a result
wage type. The
employer s contribution
to the Quebec Pension
Plan are an amount
equal
to the total of the
employee s
contributions
/120 Wage type /120 (CPP
Pensionable Earnings)
is a secondary wage
type. All
wage types subject to
Canada Pension Plan
Contributions; as
specified in the
employers guide to
payroll Deductions,
T4001, Deducting
Canada
Pension Plan
Contribution"; are
cumulated here.
/320 Wage type /320 (CPP EE
Contributions) is a result
wage type. The
employee s contribution
to the Canada Pension
Plan is based upon the
cumulative wage type
value in /120 and the
rules deemed in the
Employers
Guide to Payroll
Deductions .
/420 Wage type /321 (QPP EE
Contributions) is a result
wage type. The
employee s contribution
to the Quebec Pension
Plan is based upon the
cumulative wage type
value in /121 and the
rules deemed in the
Employers
Guide to Payroll
Deductions .
/121 Wage type /121 (QPP
Pensionable Earnings)
is a secondary wage
/321 Wage type /420 (CPP ER
Contributions) is a result
wage type. The
/421 Wage type /421 (QPP ER
Contributions) is a result
wage type. The
type. All
wage types subject to
Quebec Pension Plan
Contributions; as
specified in
the Employers guide to
payroll Deductions,
T4001, Deducting
Quebec
Pension Plan
Contribution"; are
cumulated here.
employer s contribution
to the Canada Pension
Plan are an amount
equal
to the total of the
employee s
contributions
employer s contribution
to the Quebec Pension
Plan are an amount
equal
to the total of the
employee s
contributions..

Customization
In V_512W_D, the WT Commutation Class should be checked for those WT which needs to be
cumulated into /118,/119,120 & 121 WT.

T5KTC

How much do I pay into the CPP/QPP?
You pay contributions only on your annual earnings between the minimum and a maximum
level (Pensionable Earnings).
Basic Yearly Exemption: $3500.
Maximum Pensionable Earnings: $46,300.
Rate : 4.95 %
Monthly CPP Contribution by the Employee = [P - (E/12) ] * (R/100).
Maximum CPP Contribution = [M - E] * (R/100).
Where :
P = Monthly Pensionable Earnings , E = Basic Yearly Exemption , M = Maximum Pensionable
Earnings and R = Rate.
Total Monthly CPP Contribution = Monthly CPP Contribution by the Employee + Monthly CPP
Contribution by the Employer.
Example
Pensionable Earnings = $7000 p. m.
Basic Yearly Exemption : $3500.
Maximum Pensionable Earnings : $46,300.
Rate : 4.95 %
Monthly CPP Contribution by the Employee = [ 7000 - (3500 [From T5KTC, "Adjustment"
Field] /12)] * 0.0495 [From T5KTC, "Rate" Field] = $332.06
Maximum Yearly CPP Contribution =[46,300- 3500] * 0.0495 = $2118.60 [From T5KTC, "Tax
Threshold" Field]
Employee's Contribution :
From Jan-June CPP contribution = $332.06 p. m.
For July = $126.24
From Aug - December = $0 p. m.

CPP/QPP amounts may change during a Cross Year Calculation
CPP/QPP employee and employer contributions may change during a cross year tax calculation
in contrast to provincial and federal taxes.

Example: Employee John received within the previous year a payment of $10.000,00 by error.
The payment received by mistake had been considered to be pensionable and taxable. In the
current year you are performing a retro calculation into the previous year. The taxabe and
pensionable income of the previous year will be now $20.000,00 (before $30.000,00). Since the
pensionable earnings had been decreased, the CPP/QPP is getting recalculated and the CPP/QPP
employee and employer contributions are getting reduced. In contrast the federal and provincal
taxes paid won't change (frozen during cross year calculation).

Cases
1) If an employee leaves one employer during the year to start work with another
employer:
The new employer also has to deduct CPP/QPP contributions without taking into account what
was paid by the previous employer. (This is the case even if the employee has paid the maximum
premium amount during the previous employment.)
Employer CPP/QPP deducted (Till September) = $1600
Max. Yearly contribution = $2118.60
Employer E2 deducts (from October to December) = $2118.60
The max. total CPP contribution by the Employee for both the employer's = $3718.6

2) If an employee is transferred from Quebec to another province or territory:
when calculating the amount of CPP contributions, you take into account the QPP contributions
deducted from that employee throughout the year. The total contributions to both plans cannot be
more than the maximum contribution for the year.
QPP Paid (till September) = $1500
Max. Yearly contribution = $2118.60
CPP Contribution (from October to December) = $2118.60- $1500 = $618.6
The Max total CPP + QPP contribution by the Employee for the year = $2118.60

3) If an employee is transferred from another province or territory to Quebec:
when calculating the amount of QPP contributions, you take into account the CPP contributions
deducted from that employee throughout the year. The total contributions to both plans cannot be
more than the maximum contribution for the year.
CPP Paid (till September) = $1800
Max. Yearly contribution = $2118.60
QPP Contribution (from October to December) = $2118.60-$1800 = $318.6
The Max total CPP& QPP contribution by the Employee for the year = $2118.60

4) If an employee's Business Number changes during the year :
Deduct CPP/QPP contributions without taking into account what was paid earlier. (This is the
case even if the employee has paid the maximum premium amount.)

5) In case of a Merger :
when calculating the amount of CPP/QPP contributions, you take into account the CPP/QPP
contributions deducted from that employee before the merger. The total contributions cannot be
more than the maximum contribution for the year. This is maintained in T5KBN.

6) If an employee has already paid $1800 till September, the amount to be deducted in
October :
Max. Contribution = $2118.60
Contributions so far (YTD) = $1800
CPP for October = $1831.5 - $1800 = $318.6


Canada Pension Plan - In SAP
CPP CANADA Pension Plan
This is a deduction made from Employee earnings. The deduction goes into Employee pension
plan. And is paid to employee by the government, when the employee retires. The company also
makes an equal contribution to what employee is contributing.
In Quebec region instead of CPP, QPP is deducted. (QPP Quebec Pension Plan).

Method of Calculation
Every year, a Maximum amount is defined (This is the maximum ceiling amount on which the
CPP/QPP can be calculated.). And also a Annual Basic exemption is defined.
So the maximum earnings which can be subject to CPP/QPP is Maximum ceiling amount
Annual Basic Exemption amount.
i.e (47200-3500)*4.95% = 2163.15 (for Year 2010. see table below)
So for the year 2010, for an employee the total CPP deductions cannot exceed 2163.15
If an employee reaches this amount half way in the year, then for the rest of the duration of the
year, there would be no CPP deductions.

Example :
Employee pensionable earnings for a Month = 6000 $. (Stored in either of wage types /118, /119,
/120, /121)
So the Basic exemption per pay period would be 3500/12 = 291.66 (assuming the employee is
paid Monthly and there are 12 Pay periods in a year)
So the Earnings on which Pension is calculated is 6000-291.66= 5708.3
The Pension for the month would be 5708.3*4.95% = 282.56
So every month till July, 282.56 is deducted. At the end of July the total deductions cumulated
would be 1977.93 And in the month of August 282.56 is not deducted as the total deduction
would become 2260.5, which is greater than the maximum limit of 2163 (upto July
1977.93+282.56 for August). So for the month of August only 185.21 is deducted as the total
deductions would be 2163.15(1977.93 upto July + 185.21 for August), and there would not be
any deductions for the months September to December.

Relevant Wage types / Cumulation Classes


/118 and /119 are non exempt wage types i.e while calculating CPP/QPP, the basic exemption is
not calculated on these amounts. These earnings can include wages which came from retro or
bonus payments etc.

Table T5KTC stores the data like Max CPP / QPP amount, CPP/QPP rate and Basic
Exemption


Function KATAX calculates CPP/QPP, when called with SI as the 1st parameter



CPP Slab Rates for Various Years Source (http://www.cra-arc.gc.ca/)



Various Scenarios

1)Excess CPP deductions
If for an emplouee the CPP deductions were deducted in excess, then while filing their income
tax and benefit returns, employees can claim the refund. However , the Employers cannot
entitled for a refund.

2)Change of Job
If the employee changes the employment, during a year, the new employer will be deducting the
CPP / QPP without considering the amount already deducted by the previous employer. Even
though, the maximum amount of CPP has been deducted at the previous employer.

3)Transfer of Employees (to Qubec / from Qubec) to any other Province
If an employee from any other provice is transferred to Qubec, then the CPP deducted till date
will be considered and the Max Amount for the province of Quebec will be valid
If an employee from Qubec is transferred to any other province, then the Max amount as per CPP
would be valid, and the amount already deducted in QPP is also considered

4)In case of Mergers and Acquisitions
In these cases as per the rule(http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/rstrctrcpp-eng.html),
the previously deducted CPP/QPP amount would be considered. In SAP, if because of these
Mergers and Acquisitions, if there is a change in the Business numbers, then for the system to
consider the previously deducted amount, an entry has to be made in table T5KBN.

Year End Forms
CPP Contributions are shown in Box 16 of T4 form. Only the Employee contributions are shown
QPP contributions are shown in Box 17 of T4 form. Only the Employee contributions are shown
QPP contributions are shown in Box B(SAP Box 2) of RL1 form. Employer QPP contributions
are shown in Box B-S(SAP Box 2S) of RL1 form.

Exempting an Employee from CPP
If you want to exempt an employee from CPP deductions, then a relevant value has to be entered
in infotype IT0464 (Additional Tax Data Canada), under CPP.

See the selected box in the below figure.



And the possible options can be



Related OSS Notes
2011 Year End -- 1630315, 1644067 CPP Calculations for Employees aged 60 and above