CPP2 and QPP2 Explained: What Canadian Employers Need to Know

Key Takeaways:

As of January 1, 2024, Canadian employers now must deduct and remit a second Canadian Pension Plan (CPP) or Québec Pension Plan (QPP) contribution - called CPP2 or QPP2 - for employees whose annual earnings exceed the first earnings ceiling Year’s Maximum Pensionable Earnings (YMPE). In 2026, the YMPE is $74,600 and the second earnings ceiling Year’s Additional Maximum Pensionable Earnings (YAMPE) is $85,000. The CPP2/QPP2 rate is 4% on income earned between the two ceilings, up to a maximum employee contribution of $416. Both ceilings are indexed annually and announced each November.

Source: CPP contribution rates, maximums, and exemptions — Canada Revenue Agency

What we’ll cover in this article:

• Acronyms you should know
• What are CPP and QPP enhancements
• What’s the second earning ceiling and who it affects
• What are the current CPP2 and QPP2 contribution rates?
• Are there exceptions to CPP2 and QPP2 contributions?
• What Canadian employers need to do for payroll
• Frequently Asked Questions 

Acronyms you should know:

What is the CPP and QPP enhancement?

The CPP (Canada Pension Plan) and QPP (Québec Pension Plan) enhancement is a multi-year government initiative to increase retirement pensions for Canadians. Mandatory contributions from eligible employees, employers, and self-employed persons have been in place since 1966. Employees in Québec contribute to QPP; employees in all other provinces and territories contribute to CPP.

The enhancement rolled out in two stages. Between 2019 and 2023, contribution rates on earnings up to the YMPE gradually increased from 4.95% to 5.95% - the "first additional contribution." Starting January 1, 2024, a second earnings ceiling (YAMPE) was introduced, creating a new band of pensionable earnings that didn't previously attract CPP contributions at all.

Definition:

CPP2 / QPP2 is the second Canada Pension Plan or Québec Pension Plan contribution, introduced January 1, 2024. It applies to employees whose annual earnings exceed the Year's Maximum Pensionable Earnings (YMPE) and requires both the employee and employer to contribute 4% on income earned between the YMPE and the Year's Additional Maximum Pensionable Earnings (YAMPE).

Example: an employee earning $85,000 in 2026 pays the standard 5.95% CPP rate on the first $74,600, then an additional 4% on the $10,400 between the two ceilings.

What is the second earnings ceiling (YAMPE), and who does it affect?

The YAMPE is a second annual threshold, above which no further CPP or QPP contributions apply. Any employee earning above the YMPE owes CPP2 or QPP2 on the income earned between the two ceilings. Employees earning at or below the YMPE are not affected.

Both ceilings are indexed to average wage growth and announced by the Government of Canada each November. The YAMPE is legislated at 14% above the YMPE from 2025 onward - it was 7% above in 2024 only, the first year.

Earnings ceiling history: 2024–2026

Source: CPP enhancement — Canada Revenue Agency

What are the current CPP2 and QPP2 contribution rates?

The tables below reflect current 2026 figures. Check back each December for updated numbers after the government's November announcement.

CPP2 rates – 2026

The $3,500 basic annual exemption applies to CPP (first ceiling) only. CPP2 has no exemption; the 4% rate applies to every dollar earned between $74,600 and $85,000. Self-employed persons began paying CPP2 in 2025 (one year after employees) and pay both the employee and employer share, for a maximum CPP2 contribution of $832 in 2026.

Source: Second additional CPP contribution rates and maximums — Canada Revenue Agency

QPP2 rates – 2026

The QPP maximum is shown as approximate because Revenu Québec uses a slightly different basic exemption than the federal $3,500 used for CPP. The exact figure may vary marginally based on your situation. For precise amounts, refer to Revenu Québec.

The QPP first-ceiling rate (6.40%) is higher than CPP's (5.95%), but both plans share the same CPP2/QPP2 rate of 4% and the same 2026 YAMPE of $85,000. QPP2 is administered by Revenu Québec, not the CRA.

Are there exceptions to CPP2 and QPP2 contributions?

Yes, CPP and QPP contributions are prorated when an employee becomes eligible or stops contributing mid-year - for example, when they turn 18, begin receiving a retirement pension, or reach the age-out threshold (age 70 for CPP; January 1 of the year they turn 73 for QPP).

In those prorated situations, the maximum CPP or QPP contribution is recalculated for the partial year. This can mean an affected employee reaches the second earnings ceiling and owes CPP2 or QPP2 earlier than expected, and employers must match that contribution.

For CPP exception details, visit the Government of Canada's guidance on starting and stopping CPP deductions. For QPP exceptions, visit Revenu Québec.

What do Canadian employers need to do for payroll?

Employers are responsible for deducting and remitting both CPP/QPP and CPP2/QPP2 contributions for any employee whose earnings exceed the YMPE. The two tiers must be tracked independently, they have separate annual maximums and separate stop points.

T4 reporting requirements

Three separate boxes apply at year-end:

• Box 16 - base CPP or QPP contributions plus first enhanced contributions
• Box 16A - second CPP contributions (CPP2)
• Box 17A - second QPP contributions (QPP2)

For complete T4 filing instructions, see the CRA Employer's Guide to Filing the T4 Slip. For RL-1 slips and QPP2 reporting, refer to Revenu Québec's RL-1 filing page.

What to watch for in your payroll system

• CPP deductions stop when the employee reaches $4,230.45 in CPP contributions. CPP2 deductions continue separately until the employee reaches $416 - these must be tracked independently.
  • Note: Payworks paystubs do show CPP2/QPP2 as a separate line item, making it easier to verify these contributions.
• For higher earners, CPP often maxes out in summer or fall. CPP2 deductions may continue closer to year-end depending on the employee's salary and pay frequency.
• Both ceilings are updated each November. Confirm your payroll system is using the current year's YMPE and YAMPE before January 1.

Payworks Pro-Tip: Once an employee's earnings cross into the second earnings ceiling, Payworks automatically surfaces additional lines on your Payroll Reports - CPP2/QPP2 Employee and CPP2/QPP2 Employer - and reflects these values in Stat Deduction Pay Element descriptions throughout the system. Payworks calculates and remits both CPP and CPP2 (and QPP and QPP2) to the CRA and Revenu Québec on your behalf and generates T4 and RL-1 slips at year-end.

Frequently Asked Questions

What is CPP2?

CPP2 is the second Canada Pension Plan contribution tier, which came into effect January 1, 2024. It applies to employees whose annual earnings exceed the YMPE ($74,600 in 2026). Both the employee and employer contribute 4% on income earned between the YMPE and the YAMPE ($85,000 in 2026), up to a maximum employee contribution of $416 in 2026.

What is the difference between CPP and CPP2?

CPP) covers earnings from the $3,500 basic exemption up to the YMPE ($74,600 in 2026) at a rate of 5.95% for both employee and employer. CPP2 is an additional 4% contribution on income earned between the YMPE and the YAMPE ($85,000 in 2026). Employees earning at or below the YMPE owe no CPP2.

Do Québec employees pay CPP2 or QPP2?

Employees in Québec pay QPP2, not CPP2. QPP2 follows the same second earnings ceiling structure - 4% on income between $74,600 and $85,000 in 2026, up to a maximum of $416 - but is administered by Revenu Québec. QPP2 contributions are reported on the Relevé 1 slip, not the T4.

How does CPP2 appear on a T4?

Second CPP contributions (CPP2) are reported in Box 16A on the T4 slip. Second QPP contributions (QPP2) are reported in Box 17A on the Relevé 1. Standard first-ceiling CPP and QPP contributions continue to be reported in Box 16.

Does CPP2 apply to self-employed Canadians?

Yes, but self-employed persons began paying CPP2 in 2025 - one year after employees. They pay both the employee and employer share, for a maximum CPP2 contribution of $832 in 2026. The employer-equivalent portion is tax-deductible; the employee-equivalent portion generates an income deduction on the T1 return.

When are the YMPE and YAMPE updated?

Both ceilings are announced by the Government of Canada each November and take effect January 1 of the following year. They are indexed to average wage growth in Canada. We publish updated figures in the Payroll Guide for Canadian Businesses each December, so you can stay informed!

Tracking two separate CPP contribution tiers - with different maximums, different stop points, and annual ceiling updates - adds real complexity to every pay run. Our Payroll solution calculates and remits CPP2 and QPP2 contributions automatically, keeps pace with annual ceiling changes, and generates the correct T4 and RL-1 slips at year-end. Learn more at payworks.ca/solutions/payroll.