What is Pooled Registered Pension Plan

What is Pooled Registered Pension Plan

POOLED REGISTERED PENSION PLAN (PRPP) 

Pooled Registered Pension Plans are similar to money purchase registered pension plans, allowing employers and employees, or self-employed individual to make tax-deductible contributions to those plans. PRPP contributions made by an employer, an employee, or a self-employed individual in the year reduce the plan holder’s PRPP contributions of that year. Most amounts withdrawn by the PRPP plan holder in the year must be included in his/her income for that year. This income may be used to claim a pension income tax credit.

The maximum annual contributions to a PRPP are the lesser of 18% of the employee’s or self employed individual’s earned income and the contributions limit to a PRPP for the year. The employee’s contribution room is thus reduced by his/her employer’s contribution, which is not the case for a self-employed individual.

The employer’s contribution must be paid within 120 days from the end of its taxation year to be deductible for the year. The employee’s contribution must be paid in the year to be deductible for that year.

Remember that, contrary to an RPP, an individual’s participation in the PRPP is not dependent on his/her employer’s involvement.

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