Pooled Registered Pension Plan (PRPP) - Questions and answers for employees and self-employed individuals

• Q1. What is a pooled registered pension plan (PRPP)?
• Q2. How does a PRPP work?
• Q3. Who can open a PRPP account at this time?
• Q4. I fit the eligibility criteria, but right now I am unemployed. Can I participate in a PRPP?
• Q5. What tax rules apply to a PRPP?
• Q6. How do I open a PRPP account?
• Q7. How much can I contribute?
• Q8.  If my employer contributes to my PRPP account, does that amount affect my RRSP contribution room?
• Q9. If I am considered an Indian under the Indian Act, can I contribute to a PRPP based on my tax-exempt income?
• Q10. Can I transfer from a PRPP account to a different type of retirement vehicle on a tax-exempt basis?
• Q11. Can I contribute to my spouse’s or common-law partner’s PRPP or open a “spousal” PRPP, as I can with an RRSP?
• Q12. What happens if I over-contribute to a PRPP during the year?
• Q13. Are there any restrictions on withdrawals from a PRPP?
• Q14. Will withdrawals from PRPPs affect my old age security (OAS), guaranteed income supplement (GIS), or any other federal or provincial benefits?
• Q15. What kind of investments can an administrator offer in a PRPP?
• Q16. Where can I get more information on PRPPs?

Q1. What is a pooled registered pension plan (PRPP)?

A1. A PRPP is a new kind of deferred income plan designed to provide you with retirement income if you do not have access to a workplace pension.

Because your assets will be pooled with those of other individuals, the PRPP will offer investment and savings opportunities at lower administration costs.

Investment options in a PRPP are similar to those available in a registered pension plan.

Q2. How does a PRPP work?

A2. A PRPP is a defined contribution-style plan that is set up and administered by a corporation resident in Canada that has been licensed to act as an administrator. This means that, unlike most workplace pensions, the PRPP is not managed by an employer, but by an administrator.

Once you have a PRPP account, your contributions and any contributions made for you by your employer are credited to your account. Contributions made by your employer and you are deductible in calculating your respective incomes, in line with the requirements of the Income Tax Act. The funds in your account are pooled with the funds of other individuals in the plan.

The funds in the individual’s account accumulate tax-deferred and must be used to provide retirement income. Amounts paid to the individual must be included in his or her taxable income.

You can be enrolled in a PRPP by your employer, if your employer chooses to participate in the plan. If you are a self-employed individual or an individual whose employer chooses not to participate, you can open a PRPP account by approaching a PRPP administrator directly.

Q3. Who can open a PRPP account at this time?

A3. Right now, only an individual who falls under the authority of the Pooled Registered Pension Plans Act can participate in a PRPP. The Act applies to PRPPs offered to employees whose employment falls under federal jurisdiction, including banking and inter-provincial transportation, and Canadians who are employed or self-employed in the Yukon, Northwest Territories and Nunavut.

As provinces enact legislation governing PRPPs, the plans will become available in more jurisdictions.

For more information, visit the Pooled Registered Pension Plan Web page of the Office of the Superintendent of Financial Institutions Canada’s Web site.

Q4. I fit the eligibility criteria, but right now I am unemployed. Can I participate in a PRPP?

A4. Yes. Individuals can still participate in a PRPP if they have unused RRSP contribution room.

Q5. What tax rules apply to a PRPP?

A5. All contributions to your PRPP account are counted against your RRSP contribution room.  Contributions you make to your own PRPP account are deductible for income tax purposes. Any contributions your employer makes to your PRPP account are not included in your income and are deductible from your employer’s income. And just like for an RRSP, direct withdrawals from a PRPP are taxable.

For more information, go toRRSPs and related plans.

Q6. How do I open a PRPP account?

A6. If your employer participates in a PRPP, discuss the matter with them. If your employer does not participate in a PRPP, check with your local financial institution.

Q7. How much can I contribute?

A7. You can contribute up to your RRSP contribution limit for the year.  Contributions to your PRPP are counted against your RRSP contribution limit.  Contributions to your or your spouse’s or common-law partner’s RRSP will reduce the amount that you can contribute to a PRPP. More information about your RRSP contribution room can be found on your notice of assessment issued by the CRA, and also found inside My Account.

Q8. If my employer contributes to my PRPP account, does that amount affect my RRSP contribution room?

A8. Yes. Contributions your employer makes to your PRPP account in a given year count against your RRSP contribution limit for that year.

Q9. If I am considered an Indian under the Indian Act, can I contribute to a PRPP based on my tax-exempt income?

A9. Yes, for the purposes of making a contribution to a PRPP, the Income Tax Act allows tax-exempt income you earn to be included in the calculation of your RRSP contribution limit for the year. PRPP contributions made from tax-exempt income are not deductible for income tax purposes.

However, you cannot contribute to an RRSP based on your tax-exempt income.

Q10. Can I transfer from a PRPP account to a different type of retirement vehicle on a tax-exempt basis?

A10. Yes. Money can be transferred from a PRPP account to one of the following retirement vehicles without being taxed:

• another of your own PRPP accounts
• a registered pension plan
• an RRSP
• a registered retirement income fund
• the Saskatchewan Pension Plan
• a licensed annuities provider to get an annuity that meets certain conditions

For more information, go to Registered plans administrators.

Q11. Can I contribute to my spouse’s or common-law partner’s PRPP or open a “spousal” PRPP, as I can with an RRSP?

A11. No. This is not allowed.

Q12. What happens if I over-contribute to a PRPP during the year?

A12. PRPP over-contributions are taxed at the same rate as over-contributions to an RRSP.

For more information on RRSP contributions, go to RRSPs and related plans.

Q13. Are there any restrictions on withdrawals from a PRPP?

A13. Under the Income Tax Act, an individual can withdraw the value of his or her account at any time, and the amount withdrawn is counted as taxable income in the year that it is withdrawn. However, some jurisdictions put limits on withdrawals.  Please check with the appropriate pension benefit standards legislation in the appropriate province to verify the requirements that apply. The locking-in rules are consistent with the conditions that apply to funds transferred from pension plans under the Pension Benefits Standards Act, 1985.

Q14. Will withdrawals from PRPPs affect my old age security (OAS), guaranteed income supplement (GIS), or any other federal or provincial benefits?

A14. Income-based benefits may be affected if PRPP withdrawals make an individual’s income go over a threshold that would reduce or eliminate the benefits.

Q15. What kind of investments can an administrator offer in a PRPP?

A15. Generally, there are no restrictions on the types of investments an administrator can offer. Investments within a PRPP are similar to those available in registered pension plans.

Q16. Where can I get more information on PRPPs?

A16. Please check back at The Pooled Registered Pension Plan (PRPP) often, since our Web pages will be updated as more information becomes available.

More information is also available on the Pooled Registered Pension Plan Web page of the Office of the Superintendent of Financial Institutions Canada’s Web site.