# Negative RRSP Room/Pension Adjustement Larger Than RRSP Room



## Woz (Sep 5, 2013)

My wife was on mat leave for part of 2015. During her mat leave she had the option to continue making contributions to her defined benefit pension, which she used. Because of this she had low employment income and a high pension adjustment. When I calculate her RRSP contribution room for 2016 it's -$1,811. This has me worried that we accidentally over contributed to her DB pension.


Did we overcontribute to her RRSP by making the DB pension contributions?
Is the amount you can contribute to a DB pension limited by your RRSP contribution room?
What happens if your RRSP contribution room is negative? Does the negative amount carry forward or is it considered 0?


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## NorthernRaven (Aug 4, 2010)

I don't think that a PA amount can drag contribution room negative (although a PSPA can), so your hand calculation may be missing a $0 cutoff that CRA would do. If not, there's a $2000 over-contribution buffer that would likely cover this particular case.


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## Woz (Sep 5, 2013)

That helps. To complicate things a bit, she also made an RRSP contribution in 2015 and will be going on mat leave again later this year so will likely have negative RRSP room again in 2016 or 2017. The $2,000 over contribution limit probably wouldn’t be sufficient at that point, but it shouldn’t be an issue if a PA can’t reduce RRSP room below $0. 

From what I can tell, a PA can only impact future RRSP contribution room. It can’t impact 2015’s contribution room, so the RRSP contribution in 2015 won’t be an over contribution. A PA can’t reduce future RRSP room below $0, so her 2015 notice of assessment should show RRSP contribution room for 2016 of $0.


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## Eclectic12 (Oct 20, 2010)

Won't whether the 2015 RRSP contribution is an over-contribution depend on what the amount was and whether it is equal to or less than the 2014 tax return NOA where it lists the 2015 RRSP deduction limit?

The PA in 2015 from pension contributions will be subtracted from the "earned income x 18%" calculation for the same year and as you say, change the 2016 RRSP deduction limit that will arrive as part of the 2015 tax return NOA.


Does her mat leave pay count as earned income?
Or is this factored into the "low income, high PA" referred to?

What does her employer's HR or benefits department say?


Cheers


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## NorthernRaven (Aug 4, 2010)

Eclectic12 said:


> Won't whether the 2015 RRSP contribution is an over-contribution depend on what the amount was and whether it is equal to or less than the 2014 tax return NOA where it lists the 2015 RRSP deduction limit?


I don't think the payments into the DB plan would be RRSP "contributions" at all - they shouldn't take 2015 room, as they wouldn't have either while on full employment. There won't be any RRSP receipts. The DB plan is an RRP and produces the PA adjustment for the next year. Unless some unmentioned RRSP contributions were also done privately, there will be nothing consuming 2015 room to account for. The PA will work against the 2016 room calculation.


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## NorthernRaven (Aug 4, 2010)

I think basic maternity leave goes through the EI program (55% of EI max salary?), and unlike regular EI, the amounts DO qualify as earned income for RRSP room calculations. There can sometimes be employer topups, which would probably also count for room purposes.


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## Eclectic12 (Oct 20, 2010)

NorthernRaven said:


> ... The DB plan is an RRP and produces the PA adjustment for the next year. Unless some unmentioned RRSP contributions were also done privately, there will be nothing consuming 2015 room to account for. The PA will work against the 2016 room calculation.


True.

Looking at the detailed calculation "chart 3" for working out the 2015 RRSP, step three is to determine the lower of "18% x earned income" or "the RRSP limit for 2015 ($24,930)"

Step four is subtract the PA from step three. It has a note.


> If the amount is negative, enter "0".


So it looks like worst case is $0 new RRSP contribution room is added.
http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#chrt_3


It would seem the way to run into trouble is to guess that there will be RRSP contribution room granted when the PA is zeroing out the new allotment.


Returning to the OP's questions, for #2 I believe I have read that the pension legislation will set what is allowed for the pension contributions where the PA is the only balancing factor.


Cheers


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## Woz (Sep 5, 2013)

Eclectic12 said:


> Won't whether the 2015 RRSP contribution is an over-contribution depend on what the amount was and whether it is equal to or less than the 2014 tax return NOA where it lists the 2015 RRSP deduction limit?
> 
> The PA in 2015 from pension contributions will be subtracted from the "earned income x 18%" calculation for the same year and as you say, change the 2016 RRSP deduction limit that will arrive as part of the 2015 tax return NOA.
> Cheers


She made an RRSP contribution in 2015 which was equal to the amount listed on her 2014 NOA. Under normal circumstances it definitely wouldn’t have been considered an over contribution. She didn’t account for any contributions to her DB pension being counted as an RRSP contribution, but I’m fairly confident now that they won’t be. The DB pension contribution creates a PA for 2016, but it won’t impact her 2015 RRSP contribution room. If it was a PSPA then it would’ve reduced her 2015 RRSP contribution room.



Eclectic12 said:


> Does her mat leave pay count as earned income?
> Or is this factored into the "low income, high PA" referred to?
> 
> What does her employer's HR or benefits department say?
> Cheers


Mat leave doesn’t count as earned income so it doesn’t increase RRSP room. That’s part of the low income, high PA. She only had earned income for part of the year but contributed to her DB pension for the entire year.

Haven't talked to the benefits department. They were pretty slow and unhelpful to her when she initially processed the mat leave, so I'm not particularly optimistic that they'll help.


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## Woz (Sep 5, 2013)

NorthernRaven said:


> I don't think the payments into the DB plan would be RRSP "contributions" at all - they shouldn't take 2015 room, as they wouldn't have either while on full employment. There won't be any RRSP receipts. The DB plan is an RRP and produces the PA adjustment for the next year. Unless some unmentioned RRSP contributions were also done privately, there will be nothing consuming 2015 room to account for. The PA will work against the 2016 room calculation.


I agree now. Was worried for a bit though .


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## Woz (Sep 5, 2013)

Eclectic12 said:


> So it looks like worst case is $0 new RRSP contribution room is added.


Yeah, that seems to be the case. I'm a bit surprised it doesn't carry forward, as it seems like free RRSP contribution room.


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