In today’s world we are faced with constantly changing work realities. People change jobs/careers more than ever before and with uncertainty in the job market we are also susceptible to lay-offs and downsizing. If a person needs to take on some more training or education the Government of Canada has an option for that person, the Lifelong Learning Plan.
The Lifelong Learning Plan
The Lifelong Learning Plan (LLP) allows you to withdraw money from your RRSP to help pay for the cost of full time education or training. Under the LLP, you can withdraw up to $10,000 per year to a maximum of $20,000. Much like the HBP(home buyers plan), you don’t have to include the withdrawal as part of your income nor will the RRSP issuer withhold any tax on these withdrawals. Repayment must be completed within 10 years and any amount that you do not repay will be included in your income for that year. In this article, we are going to cover how the LLP works and some of the details you will need to know if you ever decide to pursue this avenue with your training and education. This information can be easily found on the CRA web site and at any financial institution.
In order to take part in the LLP you need to a resident of Canada and own a RRSP. Locked-in RRSPs (LIRA) do not qualify for usage in this program nor can you participate after you turn 71. You can remove funds from your RRSP and put that money towards your education or the education of your spouse or common-law partner. You can’t use your children as the LLP student under this program.
Qualifying Education Program
A program qualifies if it is offered by a designated institution. The program in question has to be offered at a post-secondary level, last for 3 consecutive months or longer and that the student is spending 10 hours or more per week in the program.
Full or Part time
The institution will determine who is a full time or part time student. For example, the student may be spending 10 + hours per week in the program but the institution consider him/her part-time. They cannot take part in the LLP. If a student meets the disability conditions they can be enrolled in a part-time basis. They have to meet one of these conditions:
- “Student can’t be reasonably expected to be enrolled full-time because of mental or physical impairment, and a medical doctor, an optometrist, speech-language pathologist, a physiotherapist or a psychologist has certified this on form T2202.”
- “Student is entitled to the disability amount on line 316 of their tax return for the year of the LLP.”
In this program you can withdraw $10,000 per year to a maximum of $20,000. The $10,000 is considered your annual limit. To make this withdrawal there is a form CRA requires you to fill out. Form RC96 must be filled in every time you do a withdrawal.
For each year that you have to pay back your amount you have to repay 1/10 of your total. This continues to be repaid until your LLP balance is zero. Any repayment that is less than required will be included in your income and any amount that is over the required will lessen the amount you have to repay in the future. You, as a participant in the LLP, will receive information from CRA every year with your NOA (notice of assessment). This will show your withdrawals, what has been repaid to date, your balance and what amount you will need to pay back next year.
This is a quick overview on how the Lifelong Learning Plan works. You should consult your Advisor and go to the CRA website for more detailed information.