Reporting a pension adjustment reversal

From: Canada Revenue Agency

As noted, employees who are beneficiaries of a deferred profit sharing plan (DPSP) have a pension adjustment (PA) amount which is reported in box 52 of their T4 slip. The PA reduces the amount that the employee can contribute to a registered retirement savings plan (RRSP) in the following year. However, the PA assumes that the employee will actually receive the amounts that were contributed into the DPSP on their behalf.

A DPSP can have up to a two year vesting period before a beneficiary can receive the money that the employer contributed to the plan. If the employee leaves the plan before the vesting period, the employee forfeits the employer contributions. This means that the employee got less than the sum of the PAs that were reported to the Canada Revenue Agency (CRA). To make up the difference, the trustee will issue a pension adjustment reversal (PAR) on a T10 slip and send it to the CRA. The purpose of the PAR is to restore RRSP room in the year it is reported to us.

Reporting

The Income Tax Act requires a trustee to report a PAR to us. However, the Act also deems a participating employer to be a trustee of the plan. Therefore, the employer can file the T10 slip with us.

A PAR only happens when an employee is not fully vested at the time they are no longer members of the plan. Therefore, a DPSP that has immediate vesting in its plan terms would not be required to calculate a PAR because the vested contributions that were reported in the employee’s PA, plus any growth on those contributions, would be paid to the employee for his or her benefit.

Filing

A PAR that is greater than zero must be filed on a T10 return when an individual terminates from a DPSP. If the termination occurs in the first, second, or third quarter of the calendar year, the T10 return must be filed no later than 60 days after the end of the calender quarter in which the termination occurred.  If the termination occurred in the fourth quarter of the calendar year, the T10 return must be filed before February of the following calendar year.

The first quarter of a calendar year is January 1 to March 31, the second quarter is April 1 to June 30, the third quarter is July 1 to September 30, and the fourth quarter is October 1 to December 31.

 A T10 return consists of:

You can make changes to the T10 slip by filing an amended slip. You should mark the slip with an “A” in box 5, and enter the revised PAR amount, not an additional amount.

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