What is a government-sponsored retirement arrangement (GSRA)?
A government-sponsored retirement arrangement (GSRA) is a Canadian retirement plan for non-government employees who receive public funds. Due to non-registration with the Canada Revenue Agency (CRA), this retirement plan does not qualify for tax-deferred status or deductions.
Government-Sponsored Retirement Plans
People who work for a private entity that receives federal funding can apply for government-sponsored retirement plans. GSRA contributions are non-deductible. Additionally, Canadian restrictions restrict GSRA-holders’ RRSP contributions, similar to American tax-advantaged retirement accounts like 401(k)s and IRAs.
Canadian Savings Plans
Canadian law enables various tax-advantaged schemes and services, but GSRAs don’t.
Registered Retirement Savings Plans
RRSPs are retirement savings plans you create, the government registers, and you or your spouse or common-law partner contribute to. Tax deductions are available for RRSP contributions. RRSP income is normally tax-free as long as the funds stay in the plan, but you must pay tax on plan contributions.
Tax-Free Savings Accounts
The Tax-Free Savings Account (TFSA) scheme started in 2009. This program allows anyone 18 and older with a valid social insurance number to save tax-free throughout their lives. Income tax deductions do not apply to TFSA contributions. Account contributions and revenue (such as investment income and capital gains) are tax-free even when withdrawn. Administrative costs, interest, or money borrowed to contribute to a TFSA are not deductible.
Registered Pension Plans Pooled
Self-employed people can save for retirement using a pooled registered pension plan (PRPP). A PRPP’s members benefit from decreased administrative expenses from a large, pooled pension plan. It’s portable, so its members can switch jobs.
Since PRPP investment options are similar to those of other registered pension plans, members have more freedom in managing their funds and attaining their retirement goals.
Registered Disability Savings Plans
Parents and other savers can use a registered disability savings plan (RDSP) to secure the financial future of a disability tax credit recipient.
The recipient can make non-tax-deductible RDSP contributions until age 59. An RDSP recipient does not get income from withdrawn contributions.
The beneficiary’s income for tax purposes includes the Canada disability savings grant, bond, investment income, and rollover profits when paid out of the RDSP.
Conclusion
- Government-Sponsored Retirement Arrangements (GSRAs) are Canadian retirement plans for non-government or civil employees who receive public funds.
- GSRA contributions are non-deductible.
- GSRA-holders can only contribute so much to their tax-advantaged registered retirement savings plans in Canada.
