The Contributory Professional Retirement Savings Plan (CPRSP) is a program offered by Doctors of BC that helps practicing physicians fund their retirement by providing contributions up to specific annual limits. Over the past few years there have been a number of changes to the CPRSP program, most significantly, the removal of the matching component that was previously required.
The CPRSP program calculates a basic benefit and length of service (LOS) benefit available to each physician. The basic benefit is calculated by using billings from the previous year up to a maximum benefit amount. To receive the full basic benefit a physician must have at least $110,000 in MSP billings for the previous calendar year. For 2021, the maximum basic benefit is $5,000. The LOS benefit is based on the number of years in practice, and based on a percentage of maximum LOS. This percentage starts at 20% for years 1-4 and works upwards (in 20% increments every five years) until a physician reaches 20 years or more of service, when the benefit received will be 100% of the LOS. The maximum LOS benefit has been set at $4,000 for 2021. This means that for 2021, including the maximum LOS, a physician is able to receive up to $9,000.
Key Changes for 2021
For RRSP and TFSA claims, a physician is no longer required to attach a deposit confirmation (to their RRSP or TFSA) with an online claim. However, it is important to note that Doctors of BC may request proof of contribution in the future, up to two years after receiving the CPRSP benefit. This new rule will also apply to any unclaimed 2019 and 2020 CPRSP benefit that may be claimed starting in 2021.
For Individual Pension Plan (IPP) claims, a pension plan deposit confirmation will still be required when submitting an online claim.
As was previously introduced in 2020, Doctors of BC will not be issuing cheques to investment companies, but will instead deposit the CPRSP benefit (up to the CPRSP benefit available) by direct deposit to the bank account affiliated with the physicians Doctors of BC member profile. The deposit can be made to a personal or corporate bank account; however, a T4A will still be issued regardless of where the deposit was made, unless the benefit is paid to a corporate bank account for a corporate IPP only.
How to Claim
To claim the CPRSP benefit there is a simple online claim and direct payment process, which can be accessed through the physicians Doctors of BC online portal. Paper claims will no longer be required or accepted.
As outlined above, starting for 2021, proof of contribution to a TFSA or RRSP is no longer required. However, it is important to retain an RRSP/TFSA deposit confirmation for a two-year period should Doctors of BC request proof of contribution. Documents that will be sufficient to prove a contribution include but are not limited to, a copy of contribution receipt, a statement showing “contribution” amount and date contribution made, online deposit confirmations, a letter from a financial planner providing a letter or email with their company letterhead or electronic signature, last notice of assessment showing over contributions not applied for income tax purposes, etc.
Tax Implications
The changes that have been made to the CPRSP now provide greater flexibility when it comes to saving for retirement; however, this CPRSP benefit is still taxable and must be included as personal income in the year received (unless contributed to a corporate IPP). Therefore, it is important to consider the personal tax consequences of the benefit received. As an example, if the CPRSP benefit received by a physician is contributed to an RRSP account, the additional income from CPRSP would be offset by the deduction received for the contribution. However, if the CPRSP is contributed to a TFSA, there will be no deduction to offset the income received and there will be an increase in personal taxes.
When it comes to choosing which account to contribute the CPRSP benefit, it will be important to carefully consider the tax consequences of each option and ensure that no over contributions are made to either RRSP or TFSA account. Please feel free to reach out to your TPC Financial Group Ltd. advisor for information and guidance specific to your station.