Contributions to a PRPP
Similar to RRSPs, the maximum amount that a member or employer can both contribute to a PRPP in a given tax year without tax implications is determined by the member's RRSP deduction limit. For more information on the RRSP deduction limit, see Contributing to a registered retirement savings plan (RRSP).
Any employer PRPP contributions, combined with a member's contributions to their PRPP, RRSP, SPP, and spouse or common-law partner's RRSP and SPP, that are above the RRSP deduction limit may be considered excess contributions. It is important for members to know how much unused contribution room they have available in a given tax year. For more information, see What happens if you go over your RRSP/PRPP deduction limit?
Any contributions made to a PRPP that are not deducted on the member's income tax and benefit return in a given year are referred to as unused RRSP contributions. If a member withdraws the unused contributions from his or her PRPP, an offsetting deduction may be claimed. For more information, see What do do with unused registered savings plan contribution and "Withdrawing unused contributions" in Guide T4040, RRSPs and other Registered Plans for Retirement.
A member can make voluntary contributions to their PRPP between January 1 in a given year and 60 days into the following year, up until the end of the year in which they turn 71.
Member contributions are deductible on their income tax and benefit return, but the deduction must not exceed the difference between their RRSP deduction limit and the employer's contributions to their PRPP.
Each year, Ben contributes the maximum amount to his RRSPs and deducts this amount at line 208 of his income tax and benefit return. In 2016, he becomes a member of a PRPP and he and his employer agree to make regular contributions throughout the year. Ben knows his RRSP deduction limit for 2016 is $10,000, so he agrees to contribute $5,000 and his employer agrees to contribute $5,000. When completing his 2016 income tax and benefit return, Ben must remember that he will not include all of the contributions ($10,000) at line 208 as he has done in prior years, he can only deduct up to $5000 of the contributions he made to his own PRPP. This is because only his PRPP contributions are deductible. Since the employer's contributions are not included in his income, they are not deductible on Ben's income tax and benefit return.
Any voluntary contributions made by the employer are not included in the member's income, and they are not deductible on the member's income tax and benefit return.
Contributions on tax-exempt income
For the purposes of contributing to a PRPP, the Income Tax Act allows tax-exempt income earned by an Indian (as defined by the Indian Act), to be included in the calculation of his or her RRSP deduction limit for the year. However, while PRPP contributions made with tax-exempt income are not tax-deductible, they can be used as a repayment under the HBP or the LLP. For more information, see "Lines 6 and 7 – Repayments under the HBP and the LLP" in Guide T4040, RRSPs and other Registered Plans for Retirement.
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