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 PRPP contributions you make that are not deducted on your income tax and benefit return are referred to as unused PRPP contributions.
It is important for you to keep track of your RRSP, PRPP and SPP contributions.
Employer PRPP contributions, combined with your PRPP, SPP and RRSP contributions, as well as contributions to your spouse or common-law partner's RRSP and SPP, that are above the RRSP deduction limit may be considered excess contributions. Combined contributions in excess of your RRSP deduction limit may be subject to a tax of 1% per month for every month they are left in the account. If you withdraw the unused contributions from your PRPP, an offsetting deduction may be claimed.
Unlike RRSPs and SPPs, you cannot contribute to your spouse’s or common-law partner’s PRPP.
You 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.
You can deduct your contributions on yoour 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, you contribute the maximum amount to your RRSPs and deducts this amount on line 20800 of your income tax and benefit return. In 2021, you becomes a member of a PRPP and you and your employer agree to make regular contributions throughout the year. You knows your RRSP deduction limit for 2021 is $10,000, so you agree to contribute $5,000 and your employer agrees to contribute $5,000. When filling your 2021 income tax and benefit return, you must remember to not include all of the contributions ($10,000) on line 20800 as you have done in prior years because you can only deduct up to $5000 of the contributions you made to your own PRPP. This is because only your PRPP contributions are deductible. Since the employer’s contributions are not included in your income, they are not deductible on your income tax and benefit return.
You can designate contributions you have made to your PRPP as repayments to the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP). Fill out and include with your income tax and benefit return a Schedule 7, RRSP, PRPP and SPP Unused Contributions, Transfers and HBP or LLP Activities.
Even if you are no longer employed, you can still contribute to your PRPP as long as you still have RRSP contribution room available.
An employer can make voluntary contributions to your PRPP. Contributions are not included in your income and are not deductible on your income tax and benefit return. Only your contributions to your PRPP are deductible on line 20800. Employer contributions that were made to your plan for the calendar year must be reported on line 20810.
Contributions made with 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 their 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 7 and 8 – Contributions designated as a repayment under the HBP and the LLP" in Guide T4040, RRSPs and other Registered Plans for Retirement.
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