In the year that I set up my INTEGRIS PPP, can I also make a contribution to my RRSP?

by INTEGRIS Pension Management Corp. September 20, 2014 (Revised July 02, 2018)
Normally, yes… however, please note that the full RRSP contribution amount may not be available in that year if you are considered a connected person[1]. Moreover, if you are also purchasing past service, a Past Service Pension Adjustment could further reduce the amount of RRSP contributions available.

For connected persons, the Canada Revenue Agency will adjust your RRSP contribution room as provided in the previous year’s Notice of Assessment. This is called the “prescribed amount” and can be found in Income Tax Regulation 8308(2).

The adjusted amount that you can contribute to your RRSP in the first year that you earn benefits under the INTEGRIS PPP can be estimated as follows:

(C) = (B) – (A)

where (C ) is the adjusted amount that can be contributed to the RRSP and
where (B) and (A) are defined as follows:
  • (B) equals your yearly RRSP contribution limit[2] (provided on the most recent Notice of Assessment) and
  • (A) equals the lesser of 18% of your Earned Income from any source[3] in the year 1990, and $11,500.

Example 1
2016 RRSP Contribution room (assumes you earn more than $140,944)$25,370
1990 Earned Income (if any)$75,000
  
“B” Your RRSP Contribution Room$25,370
“A” Lesser value between $11,500 and 18% of Earned Income in 1990$11,500
The amount “C” that the member can contribute to the RRSP in the year of Plan setup  $13,870


Example 2
2016 RRSP Contribution room (assumes you earn more than $140,944)$25,370
1990 Earned Income (if any)$50,000
  
“B” Your RRSP Contribution Room$25,370
“A” Lesser value between $11,500 and 18% of Earned Income in 1990$9,000
The amount “C” that the member can contribute to the RRSP in the year of Plan setup  $16,370


Example 3
2016 RRSP Contribution room (assumes you earn more than $140,944)$25,370
1990 Earned Income$0
  
“B” Your RRSP Contribution Room$25,370
“A” Lesser value between $11,500 and 18% of Earned Income in 1990$0
The amount “C” that the member can contribute to the RRSP in the year of Plan setup$25,370


Example 4
2016 RRSP Contribution room (assumes you earn $100,000)$18,000
1990 Earned Income$100,000
  
“B” Your RRSP Contribution Room$18,000
“A” Lesser value between $11,500 and 18% of Earned Income in 1990$11,500
The amount “C” that the member can contribute to the RRSP in the year of Plan setup  $6,500


In subsequent years, because contributions to the INTEGRIS PPP generates a pension adjustment amount, the RRSP Contribution room for the next year will typically be greatly reduced, and only $600 would be available to be contributed to an RRSP.

In addition to the erosion of RRSP room due to the prescribed amount, where past service is also purchased, the Past Service Pension Adjustment calculated to reflect the tax assistance one is deemed to have received in previous years would also further reduce the available RRSP room.

Those who have large carried forward RRSP room can continue to utilize this contribution space at any time in the future. The Pension Adjustments created by the participation in the PPP® impact new RRSP room created, not existing room. Therefore, while one can sometimes contribute to an RRSP in the year a PPP® is established, this extra RRSP contribution can be deferred into the future as well, and isn’t lost if one fails to take advantage of the "double dip" at plan inception.

[1] Someone who owns 10% or more of any class of shares of the employer corporation that sponsors the Personal Pension Plan directly or indirectly, in conjunction with a spouse or child/parent.
[2] The yearly RRSP contribution limit is 18% of Earned Income or $25,370 (in 2016), whichever is less.
[3] The source of earned income in 1990 does not need to be the current sponsor of the INTEGRIS PPP in fact, a self-employed individual with earned income would qualify.