Pension Plans Overview

The period of an employee's employment used to calculate retirement pension benefits.

An employee's irrevocable right to pension benefits.

Pension contributions are protected and cannot be withdrawn except in specific situations.

The ability to transfer pension credits/benefits to another pension plan.

A pension plan where both the employer and employee contribute.

A pension plan where only the employer contributes.

A national association of pension regulatory bodies that enhances safety and harmonizes regulations in Canada.

Tax-assisted savings plans (like RRSPs) and personal savings are meant to supplement retirement income to the level of comfort desired by the individual.

Contributions and investment income in registered plans like RRSPs or RPPs are not taxed immediately. Tax is only payable when the funds are withdrawn.

The Income Tax Act sets consistent rules for the accumulation and distribution of funds from registered pension plans across Canada.

Provincial laws govern the operation and administration of provincial pension plans, not the Income Tax Act.

The Canadian Association of Pension Supervisory Authorities (CAPSA) promotes and facilitates a strong pension system but doesn't have legislative power to change pension laws.

Defined benefit plans are the most prevalent type of registered pension plan in Canada. They guarantee a specific benefit at retirement, unlike defined contribution plans.

In a defined benefit pension plan, at least 50% of the benefit payable upon retirement, death, or termination must be attributable to employer contributions.

Generally, higher survivor benefits mean lower pension income. Similarly, longer guarantee periods lead to lower pension income.

If a spouse is entitled to benefits under a pension plan after the death of their partner, remarriage doesn't affect their benefits.

Payments from a registered pension plan must begin no later than the end of the year in which the member turns 69.

Under an Individual Pension Plan (IPP), unused assets upon the plan member's death stay within the plan, not going to the company.

The amount of income tax withheld from an employee's pay can be reduced to reflect the amount of their RRSP contributions made through payroll deductions.

Employer contributions to an employee's RRSP are treated as additional income for the employee and are subject to government deductions (CPP, EI, worker's compensation).

When an individual transfers property into their RRSP, they must report any capital gains arising from the transfer.

Capital losses incurred on an in-kind transfer to an RRSP are not deductible.

The RRSP administrator must indicate in-kind contributions on an individual's annual RRSP receipt.

If an RRSP purchases property from its owner at a price exceeding its fair market value, the excess amount is considered taxable income for the RRSP owner.

Taxable capital gains are not included in the definition of 'earned income' for RRSP contribution purposes.

Various other income sources are not considered 'earned income' for RRSP purposes, such as Old Age Security benefits, business income earned as a limited partner, dividends, interest, employment insurance benefits, and retiring allowances.

A 'Pension Adjustment' is a mechanism to align RRSP contribution room with pension benefits received from a registered pension plan (RPP), which helps maintain income tax fairness.

The Pension Adjustment for defined contribution plans is calculated as the employee's contributions plus the employer's contributions for the plan year.

An employer's contributions to a registered pension plan (defined benefit or defined contribution) are considered a tax-deductible business expense for the employer. These contributions are not considered taxable benefits for the employee and therefore are not included in the employee's taxable income.

An employee's contributions to a registered pension plan are tax deductible by the employee in the year the funds were contributed.

Since contributions to a registered pension plan and investment earnings on those contributions have not yet been taxed, amounts paid out to employees on a periodic basis are generally fully taxable to the recipient.

In certain circumstances, transferring funds from one registered pension plan to another plan is allowed on a tax-free rollover basis.

To qualify for an IPP, the plan member must be an employee of an incorporated company that is taxable under the Act and have T4 income.

RRSPs are designed to help individuals save for retirement, not provide income during retirement.

A matured RRSP is an RRSP that is paying out benefits to the annuitant, meaning the individual is receiving income from it.

There is no limit to the number of RRSPs a person can hold, but there are limits on the amount of money you can contribute each year.

Sales and administration fees for a self-directed RRSP are not tax-deductible.

The maximum RRSP contribution is 18% of earned income, with a dollar limit, less any pension adjustment, plus any unused contributions from previous years.

Employer contributions to your RRSP are considered employment income and do not generate a pension adjustment.

A PAR increases an individual's RRSP contribution limit for the year it's credited.

A taxpayer can carry forward unused RRSP contributions indefinitely.

Interest on loans taken out specifically for RRSP contributions is not tax-deductible.

There is a $2,000 over-contribution limit for RRSPs.