Who decides, and how, each year's increase in the Canada Pension Plan's YMPE value?
I know the Canada Pension Plan's Yearly Maximum Pensionable Earnings value (YMPE) is used for the following:
to determine the annual limit for payroll contributions to the Canada Pension Plan for those currently employed, and
to calculate benefits when somebody elects to receive their CPP retirement pension.
My questions:
Who decides by how much the YMPE will increase each year?
Is the amount of the increase in YMPE defined exactly according to some other series, e.g. annual inflation data from Statistics Canada, or some other amount? If there is a specific series, where can it be referenced?
Are the increases in the YMPE identical, percentage-wise, to the annual indexing increases to those already receiving CPP benefits?
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Increases in the YMPE are calculated from a formula detailed in Section 18 of the Canada Pension Plan. The pattern is defined like this: the YMPE for 2014 is calculated by multiplying the current YMPE by (average monthly wage measure for the 12-month period ending June 30, 2012) / (average monthly wage measure for the 12-month period ending June 30, 2011).
The law also states that if the amount calculated by the above formula is less than the YMPE for the preceding year, the YMPE remains the same instead of shrinking.
The wage measure is the average weekly wages, salaries, and other earnings, measured monthly, of the Industrial Aggregate, as published by Statistics Canada. Although the law stipulates procedures for changing the definition of this measure, I couldn't find any sources that indicate it's changed since the law's passage.
The general data table has a breakdown by sector, and I believe it's the earnings value for "Industrial aggregate excluding unclassified businesses" that's used. I downloaded the raw data from the table and tried to match the published maximum to the data. I went to the download tab and used Option 2.
The calculated numbers are a fairly close fit.
For example, the 2011 estimate is calculated 47200 * 835.46 / 816.964 ? 48268, and the 2012 estimate is calculated 48300 * 866.645 / 835.46 ? 50100, etc.
Increases in the YMPE are technically different from increase in CPP payments; CPP payments amounts are linked to inflation. Although earnings theoretically grow at the rate of inflation, these growth rates aren't the same in practice.
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