Reminder about reporting DCPP and DPSP overcontributions before year endQ4 - 2011
As we approach the end of another calendar tax year, we'd like to bring to your attention a couple of issues that could affect you and your members. Once we cross into 2012, any overcontribution errors made in 2011 with respect to employee and/or employer contributions cannot be returned without tax reporting issues. The CRA shows no leniency to plan sponsors who are not aware of the contribution limits and filing deadlines or have not monitored the contribution limits as they should have.
Overcontributions made to Deferred Profit Sharing Plans (DPSPs) in 2011
If you tell us about an overcontribution before the end of 2011, we'll refund the excess amount to you. We don't need approval from the CRA if the plan text provides for the refund (either as a specific plan amendment or if the plan has been amended using CRA Form EP97-10). If you don't tell us and the overcontribution isn't discovered until 2012, we'll have to issue a T4A slip to you, and withholding tax will apply in 2012.
Overcontributions made to Defined Contribution Pension Plans (DCPPs) in 2011
If you tell us about an employee or employer overcontribution before the end of 2011, we'll either (1) make an adjustment to future contributions for 2011, or (2) refund the excess amount to you. We may need to get approval for the refund from the pension regulator, depending on where the plan is registered. We're not required to issue a T4A slip to you or your member, and withholding tax will not apply.
If you don't tell us and the overcontribution isn't discovered until 2012, we'll have to issue a T4A slip to the member for any refund for an employee overcontribution, and to you for any refund of an employer overcontribution. We may need to get approval for the refunds from the pension regulator, depending on where the plan is registered. Special tax withholding rates will apply in 2012.
Please make any necessary adjustments to your contributions before the end of 2011 to avoid the necessity of withholding taxes and issuing a T4A slip in the new year. Sun Life Financial may charge a fee, as applicable.