# RRSP/PRPP limit confusion



## summer (Jul 7, 2011)

We just got my husbands notice of assessment.
I am confused about the RRSP/PRPP Deduction Limit Statement.

He has a company pension and last year he put 9000 on top of that into an RRSP. Going forward he will NOT do anymore RRSPs, just his company pension.

We just got the statement for 2013

RRSP/PRPP deduction limit for 2013 $17 270 
MINUS allowable contributions $15 662 (9000-was the RRSP)
Unused deduction limit------------------$1 608


Plus-18% of 2103 income $24 270 
minus pension adjustment $23 170
_______

$1100

RRSP/ PRPP deduction limit is 2708 for next year.

I dont understand. Even with making NO RRSP contributions he will be over the limit with his PRPP contributions.
I asked our tax lady and she said it will be fine as long as he makes no RRSP contributions.
Is she right??

his limit is 2700 but his company pension allowable contributions will likely be 6000.
I am so confused.


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## Eclectic12 (Oct 20, 2010)

[ Deleted regular pension but likely irrelevant PA info.]

Since this is a PRPP that I am less familiar with, it took a bit of searching.


I believe the tax lady may be wrong ... but I am learning as I go.

CRA's web site says:


> Any employer PRPP contributions, combined with a member's contributions to their PRPP, RRSP, SPP, and spouse or common-law partner's RRSP, that are above the RRSP deduction limit may be considered excess contributions.
> 
> These excess contributions may be subject to a tax of 1% per month for every month they are left in the account, ...


http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/prpp-rpac/cntrb-eng.html


Since he has $2700 of RRSP contribution room and there is the $2K over-contribution allowance so he should be fine for $4700 (though he can't claim the $2K over contribution until more RRSP room is granted to cover it).
http://business.financialpost.com/2012/01/11/did-you-over-contribute/ 

If the PRPP contributions are left at $6K, then he will be over by $1300 ... I am not sure if CRA charges the 1% on the full over amount (i.e. $3300) or just the $1300.


So I'd look into reducing the PRPP contributions for the next while, until more RRSP contribution room is earned.

Tip: If there is an employer contribution, I'd keep as much of that going as possible as the employer contribution is not included in income so that the tax refund is granted immediately. The down side is that it looks like you will have to track the reduction of RRSP contribution room to be aware of what is or is not available.


As I say, I have less experience so make sure you check other sources/books to confirm.


Cheers

*PS*

I will have to dig out more I am surprised the PA is so high so there may be wrinkles I am missing here.

Do you know what employer PRPP contributions are? 
Is the $6K what he is putting into the PRPP, in addition to the employer contributions?


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## summer (Jul 7, 2011)

the 15662 is that 9000 of RRSP plus what he contributed through his work program.
There were no otherRRSP contributions that were carried forward.

It seems his pension contributions are part of that 15600. 
So next year it will still be 6000 if all remains the same.
Can this be?

I just checked that 6600 or so difference is on his tax slip from the RSP through Sunlife.


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## summer (Jul 7, 2011)

Let me check with him tonight so that I can be sure. 
Looking through our forms it appears he put 6600 into RSP through Sunlife. Plus an RPP of 5500.


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## Eclectic12 (Oct 20, 2010)

summer said:


> the 15662 is that 9000 of RRSP plus what he contributed through his work program.
> There were no other RRSP contributions that were carried forward.


So the work plan is the PRPP, correct?




summer said:


> It seems his pension contributions are part of that 15600.
> So next year it will still be 6000 if all remains the same.
> Can this be?


I get the impression that PRPP allows him to vary his contributions from what little I have read so far.
So other than my calculator coming up with $6662 as the PRPP contribution as the RRSP is $9K, it looks right so far.


I don't believe PRPP's guarantee a set payout, so the PA should be exactly what the employer contribution is, dollar for dollar.
This is why I am nervous that I'm missing something as this would mean the employer contributed $23,170, which seems high to me.


Part of what I wrote earlier and deleted is that in a more traditional pension, no income tax is deducted from the contributions so that the pensions adjustment (PA) is used to reduce the RRSP contribution earned the following year. The contributions are not deductible because no income tax was taken and the PA adjusts the earned RRSP contribution room to a lower level to reflect than an equivalent to an RRSP contribution was made.

PRPP's make is confusing as the writeup says the both sets of contributions reduce RRSP room but "Any voluntary contributions made by the employer are not included in the member's income, and they are not deductible on the member's income tax and benefit return."

The employer contributions sound like they should generate a PA as this is the standard way of reducing RRSP contribution room where no income tax was taken from the contributions. The puzzling part is why the PA is such a large number.


IAC - his PRPP contributions are deductible on line 208 and will reduce the RRSP contribution limit so if he is the available RRSP contribution room is that much smaller than his PRPP contributions - the way I read it, as you are worried about, he will be over-contributing.


Maybe someone else who is in this type of plan can comment and clear things up.


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## summer (Jul 7, 2011)

Okay, I talked to dh and finally figured this out.

There are two things going on:

1) his defined benefit pension. That is the cause of the pension adjustment. Though this year the PA is 5000 more than last year. Income hasn't changed much. He will make a phone call to see why. It's unusual.

2) He has an employer profit sharing plan. However, he directs a portion of that into a RSP through his work. Thats where the 6600 comes from. This will need to stop because of contribution room limits. So he will switch that into a TFSA into the future--so instead of moving it into a RSP he will move it to a TFSA.

So, it makes sense now. 
If I am missing anything let me know.

Thanks Eclectic12!


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## Eclectic12 (Oct 20, 2010)

Hmmm ... I'm not familiar with the shortform "dh"? Maybe it's "Da Husband" or "Da Hubby"? 


For #1 ... that it is a DB pension is good news. This means that the DB pension contributions are being adjusted for by reducing *the following year* RRSP contribution through the pensions adjustment (PA). So in the line of your OP that talks about 2013 RRSP room - 2013 PA - the 2013 DB pension contributions have been factored in.

The 2014 DB pension contributions will be made in 2014 but as no income tax was taken in 2014, the same process of the PA being subtracted from the 2014 RRSP contribution earned will take care of it when the 2014 tax return is file.

(I was questioning the PA size as usually it's a DB pension that makes the PA so high, which didn't square with a PRPP.)


For #2 ... this is correct as the DB pension PA dramatically slows the accumulation of new RRSP contribution room.



So ... with more details, your tax is right - the full $2708 is available for RRSP contributions and as long as you don't exceed it, you are fine. 



Cheers


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## summer (Jul 7, 2011)

Oh sorry, DH is dear husband.
Thanks for your help.


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## Eclectic12 (Oct 20, 2010)

Thanks ... that's a new one for me ... :chuncky:


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