2019 Change in CPP and EI rates AND the introduction of B.C. Employer Health Tax

Increase in CPP rates

CPP rates will increase gradually from 2019 to 2025.

In 2018 and prior years, CPP retirement benefits were intended to replace one quarter of a taxpayer’s average work earnings.  The purpose of the CPP rate increases is to have CPP retirement benefits replace one third of a taxpayer’s average work earnings.

Phase one of the CPP rate increase will have the current CPP rate of 4.95% increase by the following increments:

2019: 0.15%

2020: 0.15%

2021: 0.20%

2022: 0.25%

2023: 0.25%

By the end of the series of increases, the 4.95% contribution rate will have increased to 5.95%.

Phase two of the CPP rate increase will require a 4% premium to be paid on earnings in excess of the year’s maximum pensionable earnings (YMPE) up to 107% of the YMPE.

For example, if the YMPE is $70,100 in 2024, the additional limit will be $75,007.  The 4% rate will be applied to the difference between the $75,007 and the YMPE of $70,100 ($4,907) – resulting in $196.28 in additional premiums payable.

For 2025 and later calendar years, the 107% multiplier will be increased to 114%.

Change in EI Rates

Employment Insurance rates will be reduced to 1.62% in 2019.  This is a decrease of 0.04% from the 2018 rate of 1.66%.

The maximum insurable earnings for 2019 is $53,100.  The maximum insurable earnings in 2018 was $51,700.

The maximum employee premiums for 2019 will be $860.22 – this is an increase of $2.00 compared with 2018.  The maximum employer premium will be $1,204.31 – this is an increase of $2.80 compared with 2018.

Introduction of B.C. Employer Health Tax

The B.C. Employer Heath Tax (EHT) comes into effect on January 1, 2019.

The purpose of the B.C. EHT is to replace the revenue derived from Medical Service Plan premiums previously paid by residents of B.C.  Although residents of B.C. have had their MSP premiums reduced by 50%, it is the B.C. government’s intention to eliminate MSP premiums paid by residents of B.C. by 2020.

Employers with remuneration of $500,000 or less are exempt from EHT.

Employers with B.C. remuneration between $500,001 and $1,500,000 pay a reduced tax of 2.925% of the portion of B.C. remuneration that is above the $500,000 exemption.

Employers with B.C. remuneration greater than $1,500,000 pay tax at 1.5% of the total B.C. remuneration.

If you are associated with other employers, you must share the $500,000 exemption with the other employers.

How to register: Registration begins on January 7, 2019 and should be completed through your eTaxBC account.

When to remit: Using the lessor of your 2018 BC remuneration paid and your estimated 2019 BC remuneration, calculate your 2019 employer health tax liability.   If your employer health tax liability is greater than $2,925, you are required to make quarterly instalments on or before the following dates: June 15th, Sept 15th, Dec 15th and March 31st with the filing of the EHT return.

When to file the EHT return:  On or before March 31st each year.  The 2019 EHT return will be due on March 31, 2020.