What's new for RRSPs and related plans

Postdoctoral fellowship income

The 2021 Budget proposes to include postdoctoral fellowship income in “earned income” for RRSP purposes. This would provide postdoctoral fellows with an increase in their RRSP deduction limit in order to make RRSP, PRPP and SPP contributions. This measure would apply in respect of postdoctoral fellowship income received in the 2011 and subsequent taxation years, where the individual will need to request an adjustment for years 2011 to 2020, as applicable.

Fixing contribution errors in defined contribution registered pension plans (DC RPP)

Budget 2021 proposes to provide more flexibility to plan administrators of DC RPP to correct for both under-contributions and over-contributions. The proposals would permit:

  • certain types of errors to be corrected via additional contributions to an employee’s account under a DC RPP to compensate for an under contribution error made in any of the preceding five years, subject to a dollar limit
  • plan administrators to correct for pension over-contribution errors in respect of an employee for any of the five years prior to the year in which the excess amount is refunded to the employee or employer, as the case may be, who made the contribution

Additional contributions to correct for under-contributions would reduce the employee’s RRSP contribution room for the taxation year following the year in which the retroactive contribution is made. To the extent this results in negative RRSP room, it would only impact the employee’s contributions in future years. Refunds of over contributions would generally restore the employee’s RRSP contribution room for the taxation year in which the refund is made.

This measure would apply in respect of additional contributions made, and amounts of over-contributions refunded, in the 2021 and subsequent taxation years.

Basic personal amount (BPA)

Consequential to the 2020 changes to the Basic Personal Amount change and effective for the 2021 taxation year and subsequent, the income test for a financially dependent child or grandchild in receipt of a refund of premiums from an RRSP will be based on the income of the child or grandchild exceeding the unreduced maximum BPA for the preceding taxation year plus, if the financial dependence is due to mental or physical infirmity, the disability amount.

Notice for budget proposal

As the legislation for budget proposal may not be finalized at the time the guides and forms were printed, the CRA will publish electronically, if necessary, the revised guides and forms once the applicable legislation has been finalized. Please check the CRA website at canada.ca/cra-forms-publications. If you file your return prior to the revised forms becoming available, you may need to change your return.

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