The Contributory Professional Retirement Savings Plan (CPRSP) is one of several benefit programs administered by the BCMA that are available to BC physicians through the Physician Master Agreement.
The other benefit programs are the Physician Disability Insurance Program (PDI), the Continuing Medical Education (CME) Fund, the Canadian Medical Protective Association (CMPA) Rebate Program, and the Parental Leave Program (PLP). These additional benefits will be the subject of future posts.
The CPRSP assists physicians with saving for retirement by providing additional contributions to a doctor’s personal or spousal RRSP. If the physician is incorporated and has an Individual Pension Plan (IPP), the payment is made to the medical corporation.
The CPRSP benefit has 2 distinct parts:
The basic benefit is only paid after a physician has made a matching contribution to their RRSP or IPP. Physician contributions up to the entitlement amount are matched by the CPRSP. Eligible matching payments include payments to the physician’s RRSP or spousal RRSP, IPP, or registered pension plan.
Length of Service (LOS)
The length of service component is based on the number of years a physician has worked in BC. This benefit does not require a matching RRSP contribution, and is paid once the full basic benefit entitlement has been used.
For example, the maximum benefits for 2013 are $4,204 basic and $3,396 LOS for a total of $7,600. If you make an RRSP contribution of $4,204, the payment will be matched and the LOS will also be paid. You end up with $11,804 in your RRSP, but have only contributed $4,204 yourself.
The benefit amounts are determined by income and length of service. The maximum basic benefit is obtained when a physician earns more than $120,000 in eligible income after adjustment for an overhead factor. Different practice types have different overhead factors.
Eligible income consists of fee-for-service income from the Medical Services Plan, non-salaried earnings under a service contract with a government agency or health authority, and sessional fees.
The maximum LOS benefit is obtained when a physician has worked for 20 years in BC, and has earned $50,000 of eligible income in the previous year. A year of service is earned when a physician works in BC for 9 months out of a year.
The BCMA sends a notice in October to each doctor notifying them of the benefit amounts that they are eligible to claim.
Important Dates – 2013
Claims received by December 2, 2013 will be processed and paid by December 31, 2013.
Claims received after December 2, 2013 will be processed and paid after January 1, 2014.
Applications must be received by January 20, 2014 for payment to be made in time to qualify as an RRSP deduction for the 2013 personal income tax return.
Benefit entitlements are only available for three years. The 2011 benefit must be claimed by March 1, 2014 or it is lost.
The payment of the CPRSP benefit to a physician’s RRSP or spousal RRSP is taxable income to the physician in the year the payment is made. The BCMA will issue a T4A slip with the amounts to be reported. The financial institution holding the RRSP will issue an RRSP receipt for deduction on the personal tax return. A doctor will report the amount of the benefit received as income, and get an offsetting RRSP deduction along with an additional RRSP deduction for the matching contribution.
If the CPRSP payment has been made to a corporation, the payment is income to the company, and is offset by a deduction for the contribution to the IPP. A T4A slip is not issued to the corporation.
RRSP Overcontributions / CPRSP Withdrawals
The amount of RRSP that can be deducted in a year is a function of earned income (includes salary, self-employment income, alimony received, and rental income, but does not include items such as investment income). The 2013 contribution limit is the lesser of $23,820 and 18% of 2012 earned income, plus any unused contribution room carried forward from prior years.
As discussed earlier, to claim the maximum CPRSP benefit of $7,600 for 2013, a physician must contribute $4,204. However, the doctor must have $11,804 of contribution room to accommodate the CPRSP payment in addition to the personal contribution, which requires $66,000 of earned income in the previous year.
For incorporated physicians, earned income is usually salary received from the medical corporation. If only drawing a small salary or using a dividend only strategy, there may not be enough contribution room for the full benefit amount. RRSP overcontributions are taxed at 1% per month until withdrawn or until enough contribution room has been generated.
Care must be taken when withdrawing overcontributions. Under the terms of the CPRSP, withdrawals of CPRSP payments, personal matching contributions, and accumulated investment earnings cannot be made until a physician is no longer practicing in BC or has retired. Physicians who withdraw funds early will not be eligible for future benefits.
It is very important that a physician’s remuneration strategy be managed in conjunction with the requirements of the CPRSP.
Withdrawals of CPRSP amounts are also not permitted for the Home Buyers’ Plan and Life Long Learning Plan.
All BC physicians are entitled to receive the benefit, but physicians who are not members of the BCMA must pay an administration fee equal to the lesser of 50% of the benefit or the balance of the equivalent BCMA dues, plus GST.
A T4A income slip is received for the full amount of the benefit and an RRSP contribution receipt is received for the net amount after deduction of the administration fee. The BCMA will also issue a receipt for the administration fee. It is very common for the administration fee to be missed as a deduction when income tax returns are prepared.
If you have any question son the CPRSP, please give me a call or email, or you can contact the BCMA benefits department.