# Sharing some good fortune, and a question.



## indexxx (Oct 31, 2011)

I wanted to share a piece of personal news with those on here whose wisdom and advice I have benefitted from, and ask a question of those whose employers do RRSP matching. It took me six months of searching for a good job, and this week I started with a company who will match my RRSP contributions at a rate of 150%. So this means that if I contribute my maximum of 4% of my salary, the company will then additionally kick in the equivalent of 6% my salary. So I automatically get a 150% return in my RRSP before any growth; 4% + 6% = 10% of my salary, right off my pay check. 

So my question is whether the employer's addition bites into my contribution yearly room. Meaning, if I'm allowed to contribute 18% yearly, and I put in 4% of my pay check and my employer adds their 6%, have I used up 10% of my room, or only 4%? Seems like an obvious question, until I thought about the fact that I, personally, am only contributing 4% of my salary. How does this work? Can I contribute 18% myself, and my employer can also pool 6% of my earnings into it? Or does it viewed that this already accounts for 10% of my room, leaving me only 8% more that I can put in.


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## Guban (Jul 5, 2011)

I believe that the answer is that your employer's contribution does decrease your maximum contribution. Their matching is a taxable benefit which will be removed from your taxable income when/if you deduct it.

For example, if you contribute $1,000 and your employer $1,500, the $1,500 gets taxed. This can be offset (and more) when you deduct $2,500 off your taxable income. 

Congrats on getting the job!


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## Homerhomer (Oct 18, 2010)

indexxx said:


> So my question is whether the employer's addition bites into my contribution yearly room.


Yes, anything that goes into your rrsp reduces your room.


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## MorningCoffee (May 8, 2013)

The above posters are correct - it's considered 10%. Just chiming in to add that it will all be calculated for you by your employer. Their contribution will be tracked on your t4 slip as a pension adjustment and you'll enter the number when you file your income tax. Once you've filed your taxes, the CRA will send you your available contribution room for next year.


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## CanadianCapitalist (Mar 31, 2009)

Good for you indexx. Sounds like you have a Group RRSP. First, you should check that you have enough RRSP room for your contribution + employer match. If you do, great. You enrol for Group RRSP. You'll contribute 4%, your employer will kick in 6%. The total of your and your employer contribution will reduce your RRSP contribution room by the same amount. Like Guban says, the 6% employer match is included in your total income in your T4. The Group RRSP provider will issue you with a RRSP receipt for the total contributions of 10%. You report both in your taxes.

Here's a really good advantage of Group RRSPs. There likely won't be any income taxes withheld on both your and your employer contributions. i.e. your Group RRSP contributions are made right off the top line.


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## liquidfinance (Jan 28, 2011)

Maybe someone can confirm but I believe I read that the employers portion will reduce the following years contribution room rather than decrease the existing room.

I need to set mine up. The company I work for will match 5%


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## HaroldCrump (Jun 10, 2009)

Don't think of employer contributions as any different than your own contributions when it comes to your RRSP room.
If your portion of the contribution is counting against your currently available room, so is their portion.
Next years room will be determined once you file the taxes for this year by next April.


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## Homerhomer (Oct 18, 2010)

MorningCoffee said:


> Their contribution will be tracked on your t4 slip as a pension adjustment and you'll enter the number when you file your income tax..


Pension adjustment (box 52) doesn't apply to RRSP matching, it only applies to registered pension plan. The employee will be issued rrsp slip (from bank, broker - wherever the funds are deposited) for the total amount of contribution including the portion contributed by the employer.


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## MorningCoffee (May 8, 2013)

Homerhomer said:


> Pension adjustment (box 52) doesn't apply to RRSP matching, it only applies to registered pension plan. The employee will be issued rrsp slip (from bank, broker - wherever the funds are deposited) for the total amount of contribution including the portion contributed by the employer.


Might depend on the plan? Spouse's comes on his t4 slip. It's an RRSP matching (he contributes 4%, company matches 4%). I just went to check the t4 slip in case I had the term "pension adjustment" term wrong, it was correct. It is box 20 (pension adjustment) and box 52 (employee PPIP premiums). 

But it is a registered pension plan.. aren't all RRSPs? (thus the registered part?)


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## andrewf (Mar 1, 2010)

That's pretty generous matching, congrats!

Also keep in mind the employer match is taxable income, which is offset by the RRSP income deduction. So enrolling in the program only reduces your taxable income by the 4% you contribute.


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## Y3LLoWF3LLoW (Sep 30, 2013)

it will be deducted from your next year's contribution room


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## liquidfinance (Jan 28, 2011)

andrewf said:


> That's pretty generous matching, congrats!
> 
> Also keep in mind the employer match is taxable income, which is offset by the RRSP income deduction. So enrolling in the program only reduces your taxable income by the 4% you contribute.



Just looking into this and it depends on the type of plan. 

My employers plan is a deferred profit share plan. 

For example:

Any amount out of profits may be contributed to a DPSP. If profits fall, DPSP contributions can be reduced or suspended. It is entirely up to the employer
Contributions to a DPSP made by an employer are not subject to payroll taxes (EI, CPP).
A vesting period can be implemented so that in order for an employee to leave the company and take their accumulated DPSP value with them they would have to have been with the company for 2 years, for example. 

So in the case of the OP is it a straight RRSP match or DPSP?


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## Feruk (Aug 15, 2012)

liquidfinance said:


> Maybe someone can confirm but I believe I read that the employers portion will reduce the following years contribution room rather than decrease the existing room.


Negative, it'll be treated same as if you put that money in yourself. I worked for a company that did 150% matching for a few years and that's how it worked.


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## liquidfinance (Jan 28, 2011)

Feruk said:


> Negative, it'll be treated same as if you put that money in yourself. I worked for a company that did 150% matching for a few years and that's how it worked.



It must depend on the plan you had then

But this is from the horses mouth. I knew I had read it somewhere. 

http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#P2722_98650



> What does your PA affect?
> Your PA for a year reduces your RRSP deduction limit for the following year. Your PA does not affect your income. If you contribute to an RRSP, or an SPP, your PA may indirectly affect the income taxes you pay or the refund you receive for the following year, because it reduces your RRSP deduction limit for the following year.


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## Homerhomer (Oct 18, 2010)

MorningCoffee said:


> But it is a registered pension plan.. aren't all RRSPs? (thus the registered part?)


Registered pension plans and rrsp are not the same, while the goal is the same (saving for retirement) RPP are governed by different rules and some of the benefits of RRSP don't apply (ie home byers plan and so on) to rpp. When company contributes to employee RRSP the amount of contribution is included in box 14, the employee gets RRSP slip for the full amount of contribution, nothing shows on any pension boxes on T4.


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## MorningCoffee (May 8, 2013)

Homerhomer said:


> Registered pension plans and rrsp are not the same, while the goal is the same (saving for retirement) RPP are governed by different rules and some of the benefits of RRSP don't apply (ie home byers plan and so on) to rpp. When company contributes to employee RRSP the amount of contribution is included in box 14, the employee gets RRSP slip for the full amount of contribution, nothing shows on any pension boxes on T4.



Thanks. I guess that goes to show there are different work-matching plans. I've never come across DPSPs. My spouse's must be considered RPP, although his papers say RRSP. How confusing...


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## MoneyGal (Apr 24, 2009)

Employers sometimes use terms with defined meanings for the CRA in their own ways. A registered pension plan IS a registered retirement savings plan. However, CRA uses that term to mean a plan that meets the requirements set out in the Income Tax Act. However, if a plan gives rise to a pension adjustment, it is an RPP for CRA purposes, not an RRSP for CRA purposes.


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## MoneyGal (Apr 24, 2009)

Feruk said:


> Negative, it'll be treated same as if you put that money in yourself. I worked for a company that did 150% matching for a few years and that's how it worked.


I don't know why the quoted quote doesn't show, but whatevs: that is how RRSP contributions work. They reduce the available contribution room for the following calendar year. A contribution in 2013 will affect the available contribution room for 2014.


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## andrewf (Mar 1, 2010)

I think the forum software takes out nested quotes so that TRM's head doesn't explode (I kid!). It could get out of hand unless people manually stripped out nested quotes.


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## MoneyGal (Apr 24, 2009)

My other fave forum uses nested quotes and ... no head exploding as far as I can tell...


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## Homerhomer (Oct 18, 2010)

andrewf said:


> I think the forum software takes out nested quotes so that TRM's head doesn't explode (I kid!). It could get out of hand unless people manually stripped out nested quotes.


I am pretty sure MG has reached her quoting quota for the month;-) her quoting was simply getting out of hand (kidding).


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## MoneyGal (Apr 24, 2009)

My quoting quota is an unknown unknown!


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## CanadianCapitalist (Mar 31, 2009)

MoneyGal said:


> My other fave forum uses nested quotes and ... no head exploding as far as I can tell...


Unfortunately, it looks like the forum software we use doesn't have a setting for nested quoting.


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