Retroactive pay increases, year-end employer RRSP contributions, retiring allowances (Ask an expert)

Plus reporting retroactive pay increases on a ROE if transferred to RRSP
By Annie Chong
|Canadian Payroll Reporter|Last Updated: 01/07/2014

Question: We are paying a retroactive pay increase to an employee. The increase should have occurred at the end of November 2013, but due to an oversight we are just processing it now. For year-end reporting, do I include the payment on the employee’s 2013 or 2014 T4?

Answer: Employers must report retroactive earnings in the year they pay them. In your case, report the payment in box (14) on the employee’s 2014 T4. If the employee is located in Quebec, you must also report it in box (A) on an RL-1 for 2014 year end reporting.

Reporting employer RRSP contributions at year end

Question: Do we have to report employer contributions to an employee’s RRSP on the employee’s T4? We make the contribution directly into the RRSP and have received proof from the employee she can deduct the contribution for the year.

Answer: Employer contributions to an employee’s RRSP are a taxable benefit to the employee and must be reported on a T4 in box (14) and in the "Other Information" area using code (40). For Quebec, report the benefit in boxes (A) and (L) on an RL-1.

As a taxable benefit, the contribution is also subject to C/QPP contributions and EI and QPIP premiums. No income tax deductions are required if the employer makes the contribution to the RRSP and has reasonable grounds to believe that the employee can deduct the contribution for the year.

Note: If the employee is not allowed to withdraw amounts from a group RRSP until retirement or termination of employment (excluding withdrawals allowed under the Home Buyers’ Plan or Lifelong Learning Plan), the Canada Revenue Agency (CRA) will consider the employer RRSP contributions to be non-cash and, therefore, not subject to EI premiums.

How to report retiring allowances on a record of employment

Question: When completing a Record of Employment (ROE), do we have to report a retiring allowance or severance pay paid on termination if the entire amount of the payment is transferred to the individual’s Registered Retirement Savings Plan (RRSP)?

Answer: Yes. When completing an ROE you must report the full amount of a retiring allowance or severance pay in Block 17C (other monies) even if the employee transfers all of the payment to an RRSP.

In Block 17C write, "Retiring allowance," followed by the amount. Do not include the retiring allowance or severance pay in the totals reported in Blocks 15B (total insurable earnings) and 15C PP1 (total insurable earnings by pay period) since retiring allowances and severance pay are not insurable.

Annie Chong is the manager of the payroll consulting group at Carswell, a Thomson Reuters business. She can be reached at

annie.chong@thomsonsreuters.com

or (416) 298-5085. Visit www.carswell.com for more info.