6 August 2008 External T.I. 2008-0279631E5 - Employment Insurance Premiums and CPP Contribution

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether an employer should make further deductions for CPP contributions and employment insurance premiums once an employee has paid the maximum insurable earnings.

Position: 1. No; for employment insurance premiums.

2. Yes; for contributions to the Canada Pension Plan.

Reasons: 1. S. 82(2) Employment Insurance Act.

2. S. 21 Canada Pension Plan.

XXXXXXXXXX 								2008-027963
									Lindsay Frank
August 6, 2008							(613) 948-2227

Dear XXXXXXXXXX :

Re: Deductions for Employment Insurance Premiums and Contributions to the Canada Pension Plan in Excess of Yearly Maximum

This is in reply to your email of May 27, 2008, wherein you requested assistance with respect to your paying Canada Pension Plan contributions and employment insurance premiums twice in the same year.

You indicated that this double payment has arisen due to a change of jobs within the same organisation (XXXXXXXXXX ). As explained below, you are eligible for relief from such overpayment, in regards to employment insurance premiums; however, relief with respect to Canada Pension Plan contribution overpayment would require an amendment to the enabling statute.

Up until 1996, the Canada Pension Plan and the then Unemployment Insurance Act required an employer to deduct, respectively, contributions and premiums for each contract of service that the employer had concluded with an employee. If an individual had more than one contract of service with the same employer, the employer was required to deduct up to the yearly maximum contributions to the Canada Pension Plan, and unemployment insurance premiums, on each separate contract of service entered into with that individual.

With the introduction of the Employment Insurance Act, an employer is no longer required to deduct up to the yearly maximum on such separate contract of service. This is spelled out in subsection 82(2) of the Act, which states, "The employer shall not make any deduction as or on account of the person's premiums for a year if in that year the insurable earnings paid by that employer to the person have reached the maximum yearly insurable earnings." Similar amendments to the Canada Pension Plan have not been tabled. In light of the provisions of subsection 82(2) of the Employment Insurance Act, your employer should not make any further deductions, once you have paid the maximum insurable earnings. On the other hand, the current state of the law obliges your employer to continue to make Canada Pension Plan deductions, despite your having already paid the maximum insurable earnings.

Notwithstanding the above, the maximum that you will be required to pay on account of contributions to the Canada Pension Plan and employment insurance premiums is not increased. When you file your 2008 tax return, the excess withholdings will be refunded to you.

We trust you are satisfied with this explanation.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Business and Partnerships Division
Income Tax Rulings Directorate