RRSP Lifelong Learning Plan
Canada boasts one of the world’s best educated workforces, and its taxation policies recognize the need for people of all ages to obtain schooling.
For working-age adults, that policy goal manifests in the form of the Lifelong Learning Plan (LLP), which allows people with RRSPs to make pre-retirement withdrawals to fund their educations. While the plan extends to an RRSP holder’s spouse or common-law partner, it doesn’t apply to their children.
To participate, you must have an RRSP, be a Canadian resident, and have either enrolled, or been accepted to enroll into a full-time program that starts before March of the following year at a qualifying educational institution
While there’s no limit on how many times an account holder can participate, you do have to repay the borrowed LLP sum before starting the program again. Spouses and partners can participate in the program simultaneously.
Setting up the plan
Withdrawal amounts are limited to a total of $20,000, and an account holder can only withdraw $10,000 in a single calendar year. A separate Form RC96 is required for each withdrawal—the account holder fills out one half and then turns it over to the RRSP issuer to complete the remainder. The issuer will send a statement of RRSP income showing the amount of the withdrawal, which must be included in your income tax form via Schedule 7
You can withdraw the full amounts even if your program tuition is less. But if you withdraw in excess of either the annual or total limits, the overage will be included in your income for that year. RRSP owners also aren’t permitted to set up an RRSP and then immediately make an LLP withdrawal (your contribution must remain in the RRSP for at least 90 days). You can participate in the LLP if you’ve withdrawn from your RRSP under the Home Buyers’ Plan (HBP)—even if that borrowed sum hasn’t been fully repaid.
Repaying the LLP
The Canada Revenue Agency (CRA) actually provides some handy examples to explain how repayments should be made. But the upshot is you have 10 years to repay loans from an RRSP or PRPP and you’ll be expected to pay at least one-tenth of the withdrawn amount annually until you’ve fully repaid.
An annual account statement will keep you up to date on your balance and how much you have left to repay. Five years after your first LLP withdrawal is the outside limit of when you can commence repayment, though most RRSP owners are expected to begin repayments sooner. This is usually the second year after you can’t claim the education tax credit as a full-time student for at least three months.
Repayments are made by contributing to an RRSP or pooled registered pension plan (PRPP) during the repayment year, or within the first 60 days of the next year (in that way, it mimics the tax treatment for contribution terms of conventional RRSP contributions). You can open a new RRSP to do this, or contribute to an existing plan, but either way you have to complete Schedule 7
CRA doesn’t view amounts designated by taxpayers as LLP repayments to be RRSP or PRPP contributions; so, you can’t claim it as a deduction on your tax return.
In cases where repayments are below the required minimum, taxpayers are expected to include the difference on their tax returns. The stated amount must be the sum you were required to pay, minus what you actually paid. The difference is treated as income and CRA reduces your LLP balance by what you repaid, plus the sum included as income.
Certain types of contributions aren’t calculated as repayments to an LLP, including PPRP payments made by an employer, contributions you make to a spouse’s RRSP, funds transferred to your RRSP from a registered pension plan, and several others