# US Citizen, Resident in Canada, RPP (Registered Pension Plan) and IRS Reporting Requirements



## TaxPerplexed (Mar 15, 2020)

Situation: US citizen living and working in Canada on permanent resident status
Canadian employer offers both an RRSP (Registered Retirement Savings Plan) and an RPP (Registered Pension Plan).
In 2021, I've begun taking part in the company *RPP only*.

I've read that RRSPs are "individual retirement plans," while RPPs are "plans established by companies to provide pensions to their employees"
and that the two plans are comparable to "defined-contribution savings plans" and "defined-benefit pension plans" in the United States (whatever that means). 

Anyway, my concerns are more about* reporting requirements to the IRS, as well as to FinCEN (the annual FBAR).
*
First, the good news is it seems that the IRS recently eliminated the annual Form 8891 reporting requirement that used to apply to U.S. individuals holding Canadian RRSPs and RRIFs plans.
SOURCE: Canadian Retirement Plans and US Taxes. All you need to know!
SOURCE: https://www.hutcheson.ca/irs-eliminates-requirement-to-file-form-8891-for-canadian-retirement-plans/

However, no mention is made of RPPs. Just RRSPs and RRIFs. 

*Q: Does anyone know if an RPP is treated the same way as an RRSP for US tax reporting purposes? 
(That is, is there now NO Form 8891 required annually for an RPP, too?)*

I've yet to find a clear explanation about this RRSP/RPP distinction and the US tax reporting obligations for an RPP (as opposed to an RRSP).

Also, I assume the RPP account should be disclosed on my annual FBAR for 2021 (and beyond). Right?


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## 255 (Sep 8, 2018)

TaxPerplexed -- Nobody has answered yet, so I'll throw in my two cents. First off, a Canadian Registered Pension Plan (RPP,) can be either a defined benefit plan or a defined contribution plan. The RPP is owned and controlled by your employer -- the employer controls the trustee, the investments and is responsible to make payouts in accordance with the plan and provincial laws. In some provinces, the law states you are immediately vested, in others, the plan controls. As you say, the RRSP is an "individual" retirement plan, where you have control. As far as U.S. -- Canada treaty purposes, an RRSP is a subset of an RPP and treated the same for reporting.

As far as the differences between the two types of plans: a defined benefit plan makes a payout, at retirement, of a benefit defined by a schedule in the plan, usually based on longevity, positions held, and earnings. The payout is usually made monthly, but often have provisions for a lump sum payment or an annuitization. You'd usually achieve the same amount each month and may have cost of living adjustments and possibly survivor's benefits for your spouse. The alternative is a defined contribution plan, where you make contributions from salary and the ultimate payout will be based on the total value (contributions and earnings,) that are currently in the plan. Any distributions reduce the plans assets.

In the U.S., a defined benefit plan is the traditional pension plan of our fathers, which has been mostly replaced by the 401K (a defined contribution plan.) There have been many horror stories of employers under-funding defined benefit plans and going belly-up. Whatever type of plan you have, you should obtain a copy and read it. Also be aware of your employers financial health and that of the RPP! In general, the defined pension plan is considered more favorably, because of the "so called" guaranteed payout. Although defined contribution plans have often generated out-sized growth, with the frenzy in the markets. 

You can make an election to defer any gains until retirement. In review, it appears filing the IRS form 8891 used to be how this was done. The annual requirement is no longer (per your sources,) but I would perhaps be on record notifying the IRS for the first year, with the 8891, or a statement claiming your deferral rights. Internal Revenue Bulletin: 2014-44 | Internal Revenue Service (irs.gov) Article XVIII covers pensions: CANADAWEB.PDF (irs.gov) You might also have a look at IRS Pub. 597 Publication 597 (Rev. October 2015) (irs.gov) and The Taxation of Foreign Pension and Annuity Distributions | Internal Revenue Service (irs.gov) 

As far as annual reporting to the IRS, form 8938 is the ticket 2020 Form 8938 (irs.gov) along with an annual FBAR filing, when your assets grow to reporting levels. As I'm sure you know the FBAR is now filed on-line. Both of these forms are for information purposes only, no tax paid on "reporting." Cheers, 255


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## TaxPerplexed (Mar 15, 2020)

255 said:


> > As far as U.S. -- Canada treaty purposes, an RRSP is a subset of an RPP and treated the same for reporting...
> > You can make an election to defer any gains until retirement...
> > ...it appears filing the IRS form 8891 used to be how this was done. The annual requirement is no longer...
> > but I would perhaps be on record notifying the IRS for the first year, with the 8891, or a statement claiming your deferral rights.


Thank you. Your reply has been extremely helpful, especially your suggestion of being on record by notifying the IRS for the first year with Form 8891. 
I will plan to do that.

This morning I also found the following online, but, like every other tax-related site I've visited, it does not specifically mention Canadian RPPs for some odd reason. 
It does state, however, that "*all* plans are covered by the treaty," so I find that reassuring. 



> U.S. Tax Treatment of Canadian RRSPs and RRIFs: Article 18, Paragraph 7, explicitly states that *income and gains within any U.S. or Canadian retirement plan* (RRSP, RRIF, TFSA, RESP, and RDSP) is exempt from taxation in both countries during the growth phase prior to retirement. Other firms that have stated differently on their websites are completely and utterly wrong. *All plans* are covered by the treaty. SOURCE: U.S. Tax Treatment of Canadian Registered Retirement Savings Plans and Registered Retirement Income Funds | Castro & Co.


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## Moulard (Feb 3, 2017)

Personally, I would not rely on anything that Castro writes based on the purely on some pretty clear flaws in what he says about Australian superannuation. 
When you get fundamentals about Super and the Australian-US treaty wrong, it doesn't engender much confidence on other opinions.


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## Nononymous (Jul 12, 2011)

Moulard said:


> Personally, I would not rely on anything that Castro writes based on the purely on some pretty clear flaws in what he says about Australian superannuation.
> When you get fundamentals about Super and the Australian-US treaty wrong, it doesn't engender much confidence on other opinions.


The statement about TFSA is also false. Wouldn't recommend taking any advice from this site.


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