Newsletter no. 18-1, Repayments to Registered Pension Plans

November 12, 2018

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 23200, 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 23200. 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.

Where to get help

Registered Plans Directorate

You can find more information at Savings and pension plan administration.

By telephone

Toll-free in Canada and the United States: 1-800-267-3100.

If you are calling from outside of Canada or the United States, call us collect at 613-221-3105. The Registered Plans Directorate accepts collect calls.

By mail and courier

Due to a building refit spanning multiple years, the Registered Plans Directorate’s mailing address has been temporarily changed. Please use the following address for all correspondence until further notice:

Registered Plans Directorate
Canada Revenue Agency
2215 Gladwin Cres
Ottawa ON  K1B 4K9

We welcome feedback on this bulletin. Send comments by email to RPD.LPRA2@cra-arc.gc.ca.