Newsletter no. 18-1, Repayments to Registered Pension Plans
This newsletter is for registered pension plan administrators and plan members.
This newsletter provides guidance when repayments are made to a registered pension plan and paragraph 60(n.1) of the Income Tax Act applies.
Registered pension plan administrators must make sure that retirement benefits paid from their plans are based on the plan as registered. An administrative error can sometimes result in over-payments from the plan. If this happens, the Canada Revenue Agency (CRA) requires future pension payments to be reduced to the correct amount, but does not require that the pension plan recover the excess amounts.
Registered pension plan administrators have a duty of care in administering their plans. Consequently, the administrator may be required to recover excess payments made from a pension plan as part of its fiduciary duty to all plan members. If this happens, the individual may be able to claim a deduction for the amount they repaid.
No Canada Revenue Agency approval needed
Registered pension plan administrators can allow individuals to repay amounts to a registered pension plan without our approval in cases where paragraph 60(n.1) of the Act applies.
Seeking assurances before receiving a repayment
If you are concerned that a repayment may cause the registered pension plan to become revocable, you can ask for our approval before you accept the repayment. Send us a complete and accurate description of the situation by mail or fax. The contact information is at the end of this newsletter.
After we have completed our review, we will notify you of our decision.
Conditions under paragraph 60(n.1)
An individual can claim a deduction under paragraph 60(n.1) of the Act for the amount paid in the year to a registered pension plan, if:
- the amount is a repayment of an amount received from the plan that was included in computing the individual’s income for the year or preceding year, if
- it is reasonable to consider that the amount was paid as a result of an error and not as a right to benefits, or
- the individual was not entitled to the amount as a result of a settlement of a dispute about the individual’s employment
- no part of the amount is deductible under paragraph 8(1)(m) and subsections 146(5) to (5.2) of the Act in computing the individual’s income for the year
The administrator can require that interest be included in the repayment. If interest is included, the administrator must use a reasonable rate, such as the pension fund’s rate of return or the Chartered bank - 5 year personal fixed term listed in Statistics Canada Table 10-10-0145-01/ vector V80691336 or 10-10-0122-01/ vector V122515.
Reporting the repayment
The CRA does not have a slip to report the repayment. The plan administrator must give a letter to the individual outlining:
- the reason for the repayment
- the amount of the repayment (including interest, if paid)
- the year of the repayment
Claiming the deduction
If the individual meets the above conditions, he or she can deduct the amount repaid in the tax year on line 232, Other Deductions, on his or her income tax and benefit return. If filing the tax return on paper, the individual would specify the type of deduction in the space to the left of line 232. The letter received from the plan administrator should not be sent with the return. Instead, the individual should keep a copy in case we ask to see it later. For more information, see reporting deductions or call 1-800-959-8281.
How to contact us
If you have questions about this newsletter, contact us at the Registered Plans Directorate.
Our telephone enquiries service is available Monday to Friday from 8:00 a.m. to 5:00 p.m. Eastern time. There is a voice mailbox system to take messages outside of these hours. We will return calls on the next business day.
In the Ottawa area, call: 613-954-0419.
If you are elsewhere in Canada, call toll free: 1-800-267-3100.
You can find more information at: canada.ca/registered-plans-administrators.
You can also send a letter:
Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5
Our fax number is 613-952-0199.
We welcome your feedback. Send comments by email to firstname.lastname@example.org.
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