Personal Finance

RRSP / RPP over contribution

  • Last Updated:
  • Sep 16th, 2015 8:11 pm

Poll: What should I do?

  • Total votes: 2. You have voted on this poll.
Enroll now, over-contribute >2000$, pay penalty.
 
1
50%
Wait some time for over-contribution to be <2000$ after 4% match then enrol
 
0
0%
Wait for Jan 1 2016 to enroll, ensure you have no over-contribution
 
1
50%
Newbie
Sep 15, 2015
12 posts
2 upvotes
Montreal, QC

RRSP / RPP over contribution

Hi guys, new member here with a question regarding RRSP/RPP limits.

I maxed out my RRSP contribution for 2015 and recently took a new job that offers a RPP with a 1:1 match of a 4% bi-weekly salary contribution

I have not enrolled in the plan yet, as I have a few more weeks to do so. Since I have already maxed out my limit for the year, that means whatever I add to the account will be over contributing.

I read there is a 2000$ grace amount for over contributing, on which you are not penalized, but on which you also cannot claim a tax deduction.

1- Should I enroll in the plan right away, taking advantage of the 4% match, even though it will take me above the 2000$ grace limit, and I will end up paying penalty on that amount, and having to go through the hassle of filing whatever docs I have to file
2- Should I wait a few weeks before enrolling (effectively ensuring I do not over contribute more than 2000$), taking advantage of the 4% match while paying taxes on the complete amount I over contributed?
3- Should I wait for Jan 1 2016 to enroll, therefore not exceeding my contribution limit, forgoing a 4% employer match on the 6-7 remaining paychecks this year

I'm leaning towards option 2, but I'm not sure whether there are other implications I did not consider, or that I am not aware of...

What would you do?

Thanks guys!
4 replies
Jr. Member
Sep 15, 2015
100 posts
33 upvotes
Montreal, QC
Since you are enrolling to an RPP, any contributions made count towards the space you are accruing this year. So even if your notice of assessment says 0, you can contribute to your RPP.

Group RRSP contributions would be different however, so be certain it's an RPP.
Newbie
Sep 15, 2015
12 posts
2 upvotes
Montreal, QC
Thanks for your answer!

It is a registered pension plan. I just checked. I'll go ahead and register right away then!

Can you please clarify how my RPP contribution will count towards space you are accruing this year?

Thanks again!
Jr. Member
Sep 15, 2015
100 posts
33 upvotes
Montreal, QC
techjunkie wrote: Thanks for your answer!

It is a registered pension plan. I just checked. I'll go ahead and register right away then!

Can you please clarify how my RPP contribution will count towards space you are accruing this year?

Thanks again!
Basically, RRSP room is created based on earnings from the prior year. So say you earn 100,000 $ in 2015 and your notice of assessment read 0 at the end of 2014. You would be able to contribute 18,000 $ in 2016.

However, with an RPP, the contributions reduce what space was being created. In your case 8% or 8000 $. You would then be able to contribute 10,000 $ in 2016 as 8,000 $ was used up in your RPP.

Hopefully this clarifies everything.
Newbie
Sep 15, 2015
12 posts
2 upvotes
Montreal, QC
So using your assumptions, if I understand correctly, my NOA will show 18% x 100k = 18000 (RRSP 2016 contrib room) - 8000 (actual RPP contrib in 2015) = 10000.

Thanks, it does clarify!

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