Last updated: June 18 2008
Where the employer funds the RRSP contribution directly, the employer can take the amount of the contribution into account in determining the amount of income tax to be withheld from the employee's net pay. In this event, however, the CRA requires that the employer have "reasonable grounds" to believe that the RRSP contribution will be deductible to the employee involved (remember that RRSP deduction room is based on the employee's overall earned income, not just employment income.) CRA suggests that an employer will have reasonable grounds where the employee has provided an assurance or, better yet, a copy of his or her RRSP deduction limit statement, which accompanies each year's Notice of Assessment.
The RRSP contribution is deducted from net pay otherwise determined in the same way that union dues and employee pension plan contributions are.