CPP & EI - Do you max out?

Last year, in December, I was pleasantly surprised on my last pay of the year with a bit of an increase.  It wasn't much, but it had me interested enough to look into it a little deeper.  As it turns out, I had maxed out my CPP contributions for the year.  As I got a raise this past April, I thought that I would hit the maximums sooner rather then later...so I did a few calculations.


Before I get into them, perhaps I should give a bit of background on CPP & EI and what the maximums mean for those folks who have no clue what I'm talking about.

Canada Pension Plan (CPP)

The Government of Canada established the CPP program in 1966. It is an earnings related social insurance program that provides basic benefits when a contributor to the plan retires or becomes disabled. When contributors die, the Plan provides benefits to their survivors. The benefit is meant to supplement an individuals personal savings, investments and retirement portfolio. The employer is required to contribute the same amount of CPP that is deducted from an employees pay to a maximum amount every year.

A CPP retirement pension is a monthly benefit paid to people who have contributed to the Canada Pension Plan. The pension is designed to replace about 25% of a person's earnings from employment.  Every employer is required to deduct CPP contributions from an employee's pay if that employee meets certain requirements (age, is in pensionable employment, is not currently receiving CPP benefit through retirement) to the annual maximum, which can change from year to year.

Employment Insurance (EI)

Employment Insurance provides temporary financial assistance for unemployed Canadians while they look for work or upgrade their skills.Typically, you will not be approved to receive an EI benefit if you quit or are fired your job with cause.  If you are laid off, this benefit is available for you to apply for.

Canadians who are sick, pregnant or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death, may also be assisted by Employment Insurance.

Every employer is required to deduct EI premiums from their employees insurable earnings on every dollar up to the yearly maximum. All employers must also contribute 1.4 times the EI premium withheld for each employee.

Back to the Math

I will max out my EI contributions on my second October pay.

I will max out my CPP contributions on my first November pay!

So, what does that mean?   It means that I'll net an additional $380.22 by Christmas.  

Combine that with savings from my recent insurance premium deduction, and we're not looking to shabby!