As part of the negotiated benefits through Doctors of BC, BC physicians have been able to claim matching RRSP contributions through the Contributory Professional Retirement Savings Plan (CPRSP). 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. For 2020, the maximum basic benefit is $5,000. The LOS benefit is based on the number of years in practice. The maximum LOS benefit is reached after 20 years of service and has currently been set at $4,000 for 2020. This means that for 2020, including the maximum LOS, a physician is able to be reimbursed up to $9,000 under the CPRSP program.
In April 2019, a new Physician Master Agreement was put in place that included two major changes to the CPRSP program. The first change was introduced in 2019 which allowed newly practicing physicians who started medicine between 2014 and 2018, to claim the CPRSP benefits without having to make any matching contributions. Once the benefit was claimed, either as part of the regular program or as part of the non-matching program, the CPRSP amount was then deposited into the RRSP account of the physician. The second change, which now supersedes the previous change, became effective April 1st, 2020, and has been outlined on recently received 2020 CPRSP benefit application forms.
Key Changes for 2020
- First, CPRSP has eliminated the requirement for all “matching contributions”. However, it is important to note that a full deposit, equal to the basic benefit and LOS amount must be made in order to be reimbursed by the CPRSP program.
- Second, the program now gives the option for an original contribution to be made to a tax-free savings account (TFSA), registered retirement savings plan (RRSP), or individual pension plan (IPP). You must submit a receipt showing this deposit in order to be reimbursed.
Given the current COVID-19 pandemic, and that there is no longer any matching requirement, Doctors of BC will no longer be issuing cheques to the investment companies and will instead reimburse the contribution (up to the CPRSP benefit available) by direct deposit to an affiliated bank account. Doctors of BC now has a simple online claim and direct payment process, which can be accessed through the physicians BCMA online portal. Paper claims will no longer be required or accepted.
As outlined above, before any reimbursement is made, proof of contribution to a TFSA or RRSP must be submitted. 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.
These changes provide more 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. Therefore, it is important to consider the personal tax consequences of the new options. As an example, when the CPRSP reimbursement contributions are made to an RRSP account, the additional income from CPRSP would be offset by the deduction received for the contribution. However, if a contribution is made to a TFSA, there will be no deduction to offset the income 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. Feel free to reach out to your TPC Financial Group Ltd. advisor for information and guidance specific to your station.
Doctors of BC CPRSP