Chapter 13

Retirement Savings And Other Special Income

Arrangements
Planning For Retirement

© 2007, Clarence Byrd Inc. 2

Retirement Savings Vehicles

 RRSP - All Individuals

 RPP - Employees Only

 RRIF - All Individuals

 DPSP - Employees Only

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 Tax Deferred Retirement
Savings

Contributions: Contributions
Employer
Taxable
Employee Plus Withdrawals
Other Individuals
Earnings Accumulated
Tax Free

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 Tax Free Accumulation
 Contribute $5,000
For 30 Years At 10
Percent To RRSP
 $822,470 Before
Taking Out
 $452,359 After
Taxes At 45%
 Save $2,750 For 30
Years At 5.5 Percent
 $199,198

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 Types Of Plans
 Money Purchase (a.k.a.
Defined Contribution)
 Employer Agrees To

Contribute Some % Of
Annual Salary
 Employee At Risk

© 2007, Clarence Byrd Inc. 6

 Types Of Plans
 Defined Benefit
 Employer Agrees To Provide

Benefit Of Some % Of
Employee’s Average
Earnings For Each Year Of
Service
 Employer At Risk

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 Registered Retirement
Savings Plans (RRSPs)
 Basic Concepts
 Deduct Contributions
 Tax Free Earnings

 Taxed On Withdrawal

 Registration
 Various Financial
Institutions

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 Registered Retirement
Savings Plans (RRSPs)
 Investment Options
 Managed Plans
 Self-Administered Plans
 Qualified Investments
 Capital Gains And Dividends –
Lose Tax Benefits
 Financing Costs – Not
Deductible

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 Overview Of System
 RRSP Deduction Limit
 Pension Adjustments (PAs)
 Past Service Pension
Adjustments (PSPAs)
 Pension Adjustment
Reversals (PARs)

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 RRSP Deduction Limit
ITA 146(1)
 Formula  Where
 A = Balance at end of
last year
 B = lesser of RRSP
Dollar Limit and 18
percent of Earned
A+B+R–C Income for previous
year, reduced by the PA
of previous year
 R = Pension Adjustment
Reversal for the year
 C = Past Service Pension
Adjustment for the year

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RRSP Dollar Limit
Year Money Purchase RRSP Dollar Limit
Limit
2006 $19,000 $18,000

2007 $20,000 $19,000

2008 $21,000 $20,000

2009 $22,000 $21,000

2010 Indexed $22,000

2011 Indexed Indexed

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 Earned Income - ITA 146(1)
 Employment Income
 Business Income (Loss)
 Disability Payments
 Royalties (Some)
 Net Rental Income (Loss)
 Net Research Grants
Received
 Spousal Support Received
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 Integration
 PAs - Money
Purchase Plans
 Employee +
Employer
Contributions
 RPPs And DPSPs
 PAs - Defined
Benefit Plans =
(9)(Benefit)
 PSPAs
 PARs
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 Carry Over Provisions
 Undeducted
Contributions
 Carry Over Until Death

 Unused RRSP Deduction

Room
 Meaning
 No Time Limit

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 Excess Contributions
 General Rules
 Meaning Of Excess
Contributions: Contributions
That Are More Than $2,000
Greater Than Unused
Deduction Room
 Penalty Of 1% Per Month

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 Excess Contributions

 Tax Planning
 If Withdrawn Within One Year After
The Year Assessment Received For
Year Of Contribution: Can Deduct
Under ITA 146(8.2)

 Otherwise: Taxed When Withdrawn

 Can be deducted in any future year

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 Options At Retirement
 Age 71 - Must Collapse
 Lump Sum Withdrawal
 Annuities
 Life Annuity
 Fixed Term
 RRIF

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 Other Plan Terminations
 Departures
From Canada
 No Automatic
Collapse
 Collapse After
Departure
 Continue After
Departure

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 Other Plan Terminations
 Departures From Life
 Rollover To Spouse Or
Infirm Child
 Other Transfers
 Involuntary At Age 71

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 Spousal RRSPs
 Benefits
 Income Splitting
 Additional Pension
Credits

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 Spousal RRSPs
 Attribution Rules
 The Problem
 The Rule
 In The Year Or The Two
Following - ITA 146(8.3)
 Attributed To
Contributor

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 Home Buyers’ Plan (HBP)
 General Rules
 Up To $20,000 Per Individual
 Purchase Of A “Qualifying
Home” By October 1 Of Year
Following Withdrawal
 Limit On RRSP Deductions
 Balance $10,000
 Add $5,000
 Withdraw $15,000 Within 90 Days
Of Addition
 No Deduction Allowed For The
$5,000 Contribution

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 Repayment
 Withdraw $15,000

Balance $15,000
1/15 ( 1,000)
Balance $14,000
1/14 ( 1,000)
Balance $13,000

etc.

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 Repayment
 Departures From
Canada

 Death Of Registrant

 Tax Planning Aspects

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Lifelong Learning Plan (LLP)
 General Rules
 How Much?
 $10,000 In Any One Calendar Year
 $20,000 Maximum Over Four

Calendar Years

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Lifelong Learning Plan (LLP)
 General Rules
 Who Qualifies?
 Full Time Enrollment - Qualifying
Educational Program In Year Of
Withdrawal
 Entitled To Enroll Prior To March Of

Year Following Withdrawal

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Lifelong Learning Plan (LLP)
 Limit On RRSP Deductions
 Same As Home Buyer’s Limit
 Repayment – When?
 Must Begin Within Six Years
 Repay Over 10 Years Straight Line
 Like Home Buyer’s Plan

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Lifelong Learning Plan (LLP)
 Other
Considerations
 Repeat Participation
 Residency
 Death Of Taxpayer
 Into Income
 Spousal Rollover

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Registered Pension Plans
(RPPs)
 Types Of Plans
 Defined Benefit
 Money Purchase

 Registration Of The Plan

 Employer Contributions
 General Rules
 Limitation – Lesser Of
 18 % employee compensation
 money purchase limit for the year

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Registered Pension Plans
(RPPs)
 Employee Contributions
 Same overall limit

 Options At Retirement
 Generally governed by plan document

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 Registered Retirement
Income Funds (RRIFs)
 Establishment  Withdrawals
 No Maximum
 Minimum (Under
71)
 FMV ÷ (90 - Age)
 Minimum (71+)
 7.38% At Age 71
 20% At Age 94 And
Subsequent

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 Registered Retirement
Income Funds (RRIFs)
 Death Of  Evaluation
Registrant  Continuing Tax
Deferral
 Flexibility

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 Deferred Profit Sharing
Plans (DPSPs)
 Contributions
 Earnings In The
Plan
 Withdrawals
 Evaluation

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 Profit Sharing Plans
 Contributions
 Earnings In The
Plan
 Withdrawals
 Evaluation

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 Retirement Compensation
Arrangements

 The Problem
 Unregistered Pension Arrangements
 Arrangements Defined - ITA 248(1)
 Part XI.3 Refundable Tax
 Payable On Contributions And Earnings
(50%)
 Refundable When Paid Out And Taxed

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 Salary Deferral
Arrangements
 The Problem
 Arrangements
Established To Defer
Taxation
 The Solution
 Tax Employee When
Benefits Are Earned

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Transfers Between Plans

Tax Free
Transfers
From From From
RPPs RRSPs DPSPs

To To To
Different RPP Different RRSP Different DPSP

To To To
RRSP RPP RPP

To To
To RRSP
DPSP RRIF

To Spouse: To Spouse:
Marriage Marriage
Breakdown Breakdown

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 Retiring Allowances
 Total Allowance In Income
 Rollover To RRSP
(Maximum)
 $2,000 For Each Year Prior To
1996
 $1,500 For Each Year Prior To
1989 (If No Vested
Contributions To RPP Or DPSP
By Employer)

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