Making a permitted corrective contribution

Permitted corrective contributions (PCCs) may be made for missed contributions for a money purchase (MP) provision of a registered pension plan (RPP) during the previous 10 years.

The PCC legislation is deemed to have come into force on January 1, 2021. A PCC made in 2021 can reflect missed contributions to the MP RPP back to 2011. A PCC made in 2023 can reflect contributions back to 2013.

Missed contributions that exceed the limits

Any missed contributions for years before the previous 10 years, or missed contributions that exceed the PCC limits, have to be made up within the PA limit under subsection 147.1(8) of the Income Tax Act in future years. Alternatively, the plan administrator can make up for the missed contributions exceeding the limits outside of the MP RPP.

Reasonable interest rate for missed contributions

The legislation allows interest to be calculated for missed contributions at the rate required by the Pension Benefits Standards Act, 1985, or a similar law of a province. If the relevant law does not impose a requirement, the PCC legislation allows a reasonable rate. That rate would be the fund rate of return during the relevant period of missed contributions.

Does the MP RPP have to be amended to allow for PCCs

MP RPPs will not need to be amended before allowing PCCs. The prescribed conditions for registration for RPPs under subsection 8501(1) of the Income Tax Regulations were not amended with the introduction of PCCs. PCCs may be paid under subsection 147.1(20) of the Income Tax Act.

PCC reporting and deadline

A PCC is reported on a T215, Past Service Pension Adjustment (PSPA) Exempt from Certification or Permitted Corrective Contribution (PCC), slip and must be filed no later than 120 days after a PCC is paid to the plan.

The legislation for PCC reporting is deemed to have come into force on January 1, 2021. However, for a PCC that is made before the legislation receives royal assent, the T215 return must be filed no later than 60 days after the legislation receives royal assent. If a PCC occurred in 2021, 2022, or in 2023 before Bill C-47, Budget Implementation Act, 2023, No. 1 received royal assent, the T215 must be filed no later than 60 days after the day the Act receives royal assent.

PCC impact on an RRSP deduction limit

A PCC made in a preceding year forms part of a total net past service pension adjustment and reduces the taxpayer’s RRSP deduction limit for the year after the year the PCC is made. For more information, see Chart 3, Step 6, of Guide T4040, RRSPs and Other Registered Plans for Retirement.