REGISTERED PENSION PLAN (RPP)
Registered pension plans allow individuals to accumulate retirement funds by means of at-source deductions against their salary. The employer and employee may contribute to an RPP with respect to services rendered by the employee in the year of during a previous taxation year.
For more information on RPPs, see CRA Guide T4099.
Maximum Contributions for Current Service (Employees and Employers)
Defined benefit Contributions required under the terms of the plan
Pension plan: (including employer contributions based on actuarial
Calculations)
Money purchase plan: The lesser of 18% of earned income and the contribution
Limit to an RPP for the year (see table on page 58)
For the employer, contributions to an RPP with respect to current services must to paid with in 120 days of the taxation year end in order to be eligible for a deduction in the year. For the employee, the contribution must be paid in the year to provide entitlement to a deduction in the year.
Past Service Contributions
Past Service Contributions are Contributions with respect to services rendered in the course of employment in a preceding year and that provide entitlement to a pension under the defined benefit provisions of a registered pension plan.
The Past Service Contributions for services rendered in 1990 or later must be fully claimed in the current year’s return. They cannot be carried forward.
The Past Service Contributions for services rendered in 1989 or before may be claimed over several years talking the following limits into consideration:
- For services rendered while the taxpayer did not contribute to the plan, the total deductible amount is limit to $3,500, multiplied by the number of years of services purchased;
- For services rendered while the taxpayer did not contribute to the plan, the deductible amount is equal to $3,500, minus the total amounts deducted for the year for current services and pre- 1990 past services contributions while not a contributor.