December 12, 2016

2016 contribution reporting deadlines; 2017 contribution limits and YMPE/MPE

Please review the following important deadlines and changes that may affect plan sponsors. 

The year-end is fast approaching! Please ensure contributions are submitted for the 2016 calendar year by December 30, 2016 to take full advantage of all tax deferral opportunities.

The deadline to submit RRSP contributions for the March to December 2016 receipt period is December 30, 2016. Contributions submitted via the Plan Sponsor Services Website by an electronic file upload must have been received by 2 p.m. ET.

2016 Overcontribution Deadline
Any employer/employee overcontribution/administration errors made in 2016 to Deferred Profit Sharing Plans (DPSPs) or Defined Contribution Pension Plans (DCPPs) or Ancillary Contribution Pension Plans (ACPPs) must be reported to Sun Life Financial before December 30, 2016, to avoid tax implications.

The Canada Revenue Agency (CRA) shows no leniency to plan sponsors who are not aware of the contribution limits or have not monitored the contribution limits as they should.

Overcontributions/Administrative errors made to Deferred Profit Sharing Plans (DPSPs) in 2016
If you notify us about an overcontribution/administrative error before the end of 2016, we will refund the excess amount to you. We do not 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 notify us and the overcontribution/administrative error isn't discovered until 2017 we must issue you a T4A tax slip (and Relevé 2 for Quebec residents) and withholding tax will apply.

Overcontributions/administrative errors made to Defined Contribution Pension Plans (DCPPs) and Ancillary Contribution Pension Plans (ACPPs) in 2016
If you notify us about an employee or employer overcontribution/administrative error before the end of 2016, plan sponsors were able to:

  • Make an adjustment to future contributions for 2016, or
  • Obtain approval from the pension regulator for a refund on the excess amount, depending on where the plan is registered. We are not required to issue a T4A slip to plan sponsors or your plan members, and withholding tax will not apply.

If you don't notify us and the over-contribution/administrative error isn't discovered until 2017:

  • Plan sponsors must submit a letter to the CRA explaining the overcontribution or administrative error. Plan sponsors may also need to get approval for the refunds from the pension regulator, depending on where the plan is registered.
  • Depending on the situation and the tax year(s) involved, CRA may advise that a T4A/Relevé 2 tax slip be issued to the plan member for any refund for an employee over-contribution/administrative error, and to the plan sponsor for any refund of an employer over-contribution/administrative error. Special tax withholding rates would apply in those cases.

Any adjustments to plan sponsor contributions after December 30, 2016 may result in the withholding of taxes and delay in issuing a T4A slip in 2017. Sun Life Financial may charge a fee, as applicable.

Registered plan contribution dollar limits and year's maximum pensionable earnings
Effective January 1, 2017, the registered plan dollar limits increased as follows:

  • Defined Contribution Pension Plan (DCPP) – $26,230
  • Deferred Profit Sharing Plan (DPSP) – $13,115
  • Registered Retirement Savings Plan (RRSP) – $26,010

In addition, the maximum pension limit for a Defined Benefit Pension Plan (DBPP) increased to $2,914.44 per year of service.

What does this mean to plan sponsors?
If plan rules state that contributions over and above the DCPP, RRSP or DPSP contribution limits spill over into another product (usually a non-registered vehicle), the spills will now occur at a higher dollar limit, effective January 1st, 2017.

2017 YMPE and MPE limits
The yearly maximum pensionable earnings (YMPE) under the Canada Pension Plan (CPP) or maximum pensionable earnings (MPE) under the Quebec Pension Plan (QPP) for 2017 will be $55,300, up from $54,900 in 2016. Contributors who earn more than $55,300 in 2017 are not required or permitted to make additional contributions to the CPP/QPP. The basic exemption amount for 2017 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP/QPP.

Under the CPP, the employee and employer contribution rates for 2017 will remain unchanged at 4.95%. The maximum employer and employee contribution to CPP for 2017 will be $2,564.10, up from $2,554.30 in 2016.

Under the QPP, the contribution rate has increased for 2017 from 10.65% to 10.80%, which corresponds to a contribution rate of 5.40% for the employee and 5.40% for the employer. The maximum employer and employee contribution to QPP annual contribution to be withheld for any employee has therefore been increased from $2,737.05 to $2,797.20. 

TFSA contribution limits
The annual TFSA contribution limit for 2016 is $5,500. The contribution limit for 2017 has not yet been confirmed.

Please contact your Sun Life Financial Group Retirement Services representative.