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Contributions to savings and pension plans

Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.

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Determine if the benefit is taxable

Generally, if you pay administration fees or you make contributions to your employee’s savings or pension plan, the benefit is taxable.

Non-taxable situations

  • You withhold contributions from the salary

    If you withhold contributions to any savings or pension plan from your employee’s salary, the benefit is not taxable.

    It is not considered a taxable benefit provided by the employer because these contributions are made by your employee.

  • You make contributions

    If you make contributions to the following plans for your employee, the contributions are not considered a taxable benefit:

Taxable situations

Depending if you pay administration fees or you make contributions to the following plans for your employee, the benefit is taxable:

Calculate the value of the benefit

If the benefit is taxable, the value of the benefit is equal to:

  • Total amount of the benefit
  • minus Any amounts your employee reimbursed you
     
  • equals Value of the benefit to be included on the T4 slip in code 40 and in box 14

The amounts must be included in the pay period they were received or enjoyed.

Example - Calculations

Melodie’s employer makes an annual RRSP contribution on behalf of their employees to their group RRSP program of $1,000. These contributions are not withheld from their salary, but made on their behalf.

  • $1,000 is the total amount contributed to the RRSP
  • minus $0 because Melodie does not reimburse the employer
     
  • equals $1,000 is the value of the benefit to be included on Melodie's T4 slip in code 40 and in box 14

Withhold payroll deductions and remit GST/HST

The withholding and remitting requirement depends on the type of remuneration: cash, non-cash, or near-cash.

You must withhold the following deductions:

  • Non-cash and near-cash: Option 1

    Withhold:

    • Income tax
    • CPP
    • EI (do not withhold)

    Remit:

    • GST/HST in certain situations

    What is a considered a non-cash benefit

    The administration fees that you pay directly for your employee are considered non-cash benefits.

    For an RRSP, contributions you make are considered non-cash benefits only if your employee cannot withdraw the amounts from a group RRSP before your employee retires or ceases to be employed.

  • Cash: Option 2

    Withhold:

    Do not remit:

    • GST/HST (do not remit)

    What is considered a cash benefit

    The contributions you make are generally considered cash benefits.

    For an RRSP, the contributions are considered cash benefits if your employee can withdraw the amounts from a group RRSP (except for withdrawals under the Home Buyers’ Plan or Lifelong Learning Plan) before your employee retires or ceases to be employed.

Exception: RRSP or FHSA contributions

For RRSP or FHSA contributions, if you have reasonable grounds to believe the employee can deduct the contribution for the year, do not deduct income tax on the contributions you make to your employee’s RRSP or FHSA. Generally, we consider you to have reasonable grounds when your employee has given you confirmation that the contribution can be deducted for the year or you have a copy of the employee’s FHSA participation room or RRSP deduction limit statement from their notice of assessment.

The amounts must be included in the pay period they were received or enjoyed.

Learn how to calculate deductions and the GST/HST to remit: How to calculate - Calculate payroll deductions and contributions

Report the benefit on a slip

If the benefit is taxable, you must report the following amounts on the T4 slip:

  • Non-cash and near-cash: Option 1

    Report on:

    • Box 14 - Employment income
    • Box 26 - CPP/QPP pensionable earnings
    • Code 40 - Other taxable allowances and benefits

  • Cash: Option 2

    Report on:

    • Box 14 - Employment income
    • Box 24 - EI insurable earnings
    • Box 26 - CPP/QPP pensionable earnings
    • Code 40 - Other taxable allowances and benefits

Learn how to report on a slip: Fill out the slips and summaries - File information returns (slips and summaries).

References

Legislation

ITA: Section 6
Amounts to be included as income from office or employment
ITA: 6(1)(a)
Value of benefits
ITA: 6(1)(b)
Personal or living expenses (allowances)
ITA: 60(i)
Premium or payment - FHSA, PRPP, RRSP or RRIF
ITA: 60(j.1)
Transfer of retiring allowances
ETA: 173
Taxable benefit is considered a supply for GST/HST purposes
CPP: 12(1)
Amount of contributory salary and wages
IECPR: 2(1)
Amount of insurable earnings
IECPR: 2(3)
Amounts not included in insurable earnings
IECPR: 2(3)(a.1)
Amounts not included in insurable earnings when excluded as income under paragraph 6(1)(a) or (b), or subsection 6(6) or (16) of the ITA

Exception: RRSP or FHSA contributions

What is the CRA's administrative policy for the purpose of taxable benefits

Cash

Near-cash

Non-cash

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