How to pay a bonus or commission as an RRSP lump sum contribution in Canada?
Employees in Canada may occasionally request that their bonus or commission be paid directly into their Registered Retirement Savings Plan (RRSP) rather than as regular pay. This is a common and tax-efficient approach that helps employees grow their retirement savings.
To support this request, the employee's managers and admin users of the Horizons platform can process the payment as a lump sum RRSP contribution through the Horizons platform. Here's how to do it:
Why employees may request this:
RRSP contributions are pre-tax and not subject to immediate tax withholdings
It helps employees maximize retirement savings
Contributions may provide immediate tax deferral benefits
How to process it:
When entering the variable pay amount (e.g., bonus or commission) in the platform:
Input the amount under Variable Pay
Select "RETIREMENT BENEFITS" as the type of payment
That’s it, no extra steps or costs are involved. The employee receives their compensation in the form of an RRSP contribution rather than regular taxable income.
Does this raise additional fees?
No. There are no additional fees or administrative requirements. It is simply an alternative way to deliver compensation.
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