28 Oct Contributory Professional Retirement Savings Plan (CPRSP)
Practicing physicians in the province of BC can be eligible for a benefit program administered by Doctors of BC, called the Contributory Professional Retirement Savings Plan (CPRSP).
The CPRSP is a retirement benefit and is made up of two components:
- The Basic Benefit, which has a maximum in 2020 of $5,000 reached at eligible income of $120,000. The amount of the benefit is calculated based on the physician’s billings from the previous year.
- The Length of Service (LOS) benefit, which has a maximum in 2020 of $4,000. The LOS is calculated primarily on the numbers of years the physician has been practicing. The maximum is met when the physician has practiced in BC for 20 LOS years or more and meet the minimum income threshold.
In years past, the benefit was a dollar-for-dollar matching contribution of the basic benefit. If the full basic amount was contributed, the physician was eligible for the LOS benefit as well.
Two improvements were recently made, starting in 2020:
- The matching requirement was eliminated
- The contributions can now go to a TFSA, as well as the RRSP
More detailed information found at Doctors of BC: https://www.doctorsofbc.ca/your-benefits/negotiated-benefits/cprsp#tab-0-2
Tax Planning Considerations
While these are positive changes that allow more flexibility for physicians to plan their retirement, it is important to consider the personal tax implications of the new options. The CPRSP is a taxable benefit; when contributions go into a RRSP, an equal deduction offsets this income inclusion. However, if a contribution is made to a TFSA, there is no offsetting deduction and the physician could see an increase in personal taxes.
If a physician has incorporated as a medical corporation, they have flexibility in planning for salary and/or dividends. Careful planning should be considered as dividends do not build RRSP room. Without proper planning, a physician has the potential to miss out on receiving the maximum contribution of $9,000 if they don’t have sufficient RRSP contribution room. Even with the option for the benefit to go into a TFSA, the maximum TFSA contribution limit for 2020 was only $6,000 and up to 1/3 of the maximum benefit could go unused.
While some of these decisions seem minor, over several years they can add up to significant amounts. And with the government already taking more and more of our hard-earned money, we work with our clients to ensure they keep as much of their money as possible.
Call us today to discuss tax planning options available to you.