4.10 Income Tax Requirements

Member Contributions Are Tax-Deductible
Employee required contributions are fully tax-deductible in respect of the year in which the contributions are remitted to HOOPP, within the limits imposed by the ITA.

Retirement Compensation Arrangement (RCA)
HOOPP’s retirement compensation arrangement (RCA) formalizes the funding and payment of benefits that exceed the ITA limit for registered pension plans (RPP). When you calculate HOOPP contributions, you are using a single formula that does not differentiate between contributions to the RPP or the RCA.

The RCA allows members and employers to make tax-deductible contributions based on the member's entire annualized earnings. This means the member receives benefits based on their full earnings, regardless of ITA limits.

In accordance with the ITA, in order for a member's regular RCA contributions to be deductible they cannot exceed those made by the employer on their behalf in a given tax year. Further, the Canada Revenue Agency (CRA) considers monies used to complete an RCA buyback as a contribution by the member. Therefore if a member completes an RCA-related buyback, the transaction may render their regular RCA contributions ineligible for a tax deduction in the year of purchase. When this occurs the member's RCA contributions should not be reported on their T4. Please contact HOOPP if you have any questions.

When you issue T4s to members who contribute to the RCA, the member's total required contributions for the current year should be reported in Box 20, Registered Pension Plan Contribution. The member’s pension adjustment should be reported in Box 52, Pension Adjustment. You are required to issue the employee a contribution notice that provides the amount of RCA contributions. The RCA Notice Report produces these notices, along with details on the split between RPP and RCA contributions, for distribution to members who make RCA contributions. This report is available on HOOPP Insight. This report should be run after the MDC member data has been submitted to HOOPP.

Reporting
You must report the following information on the member’s T4 slip:

The total annual member contributions in the RPP contribution box (box 20), including those contributions made to HOOPP, up to the maximum contribution limit in the applicable year
HOOPP’s RPP registration number 0346007
The member’s Pension Adjustment (PA) that you calculated

Employer contributions are not reported on a member’s T4.

Leaves/Periods of Reduced Earnings
Any leaves or periods of reduced earnings (also referred to as an Approved Work Schedule Reduction) where a member has made contributions are subject to ITA limits. Under the ITA, there is a five year lifetime limit on the amount of pension service a member can build when making contributions while away from work on leave, or topping up contributions during a temporary period of reduced earnings. There is an additional limit of up to three years on the amount of service a member can build during pregnancy/parental leaves. These limits do not apply to periods of disability (i.e. health leaves).

If the member applies to make contributions for a leave or to “top up” contributions during a temporary period of reduced earnings/approved work schedule reduction and has already reached these limits while participating in HOOPP, the contributions will be returned.

Impact to PA/PSPA

Where a member makes contributions following the end of the period of leave, either a revised Pension Adjustment (PA) or a certifiable Past Service Pension Adjustment (PSPA) will be required depending on when you submit the contributions to HOOPP.

When lump sum contributions are submitted to HOOPP	Expected result

When lump sum contributions are submitted to HOOPP

Expected result

On or before April 30 of the year following the end of the period of leave/period of reduced earnings*

The additional contributory service for the leave period should be included in the member’s PA for the applicable year(s).

Report an amended PA for any prior year(s), if applicable.

The member’s RRSP room will be reduced.

After April 30 of the year following the end of the period of leave/period of reduced earnings*

A certifiable PSPA is required.

HOOPP will report a certifiable PSPA to CRA and the member.

The member’s RRSP room will be reduced.

If the member doesn’t have enough unused RRSP contribution room to accommodate the PSPA, it’s possible that they will need to deregister RRSP funds before CRA will certify the PSPA.

*This PA or PSPA treatment is determined at the end of the completed period of leave, which may include more than one uninterrupted and consecutive period of leave. Consecutive leaves are also addressed in section 7.1 Free Accrual (Click Here).

In addition, HOOPP has temporarily extended the timeline for members to make pension contributions following a leave of absence. The regular timeline of six months from the end of a leave has been extended to 12 months for any leave of absence periods starting on or before December 31, 2021. Contributions for leaves starting on or after January 1, 2022 will be due within six months from the end date of the leave period.