Pension Adjustment (PA)

Frequently asked questions

1. In 2000 an employee in a defined benefit provision receives a PA of $14,900, the money purchase limit for 2000 is $13,500. Does the member lose $13,500 or $14,900 in RRSP room in 2001?
    
2. An employee terminates unvested during the year. Must a PA still be reported?
    
3. What should be done if we discover that PAs have not been reported for several years, or that incorrect PAs were reported? 
    
4. I have a group RRSP for my employees. How does this factor into the PA calculation?
    
5. I am an employee who lives in Canada and works in the USA and participates in my employer's plan in the US. Does this affect my RRSP limit? If so how?

1. In 2000 an employee in a defined benefit provision receives a PA of $14,900, the money purchase limit for 2000 is $13,500. Does the member lose $13,500 or $14,900 in RRSP room in 2001?
A member who receives a PA that is higher than the money purchase limit will never have more than $13,500 in RRSP room deducted. However, the higher PA (i.e. $14,900) must still be reported.

2. An employee terminates unvested during the year. Must a PA still be reported?
Yes a PA must be reported. However, the employee may be entitled to a Pension Adjustment Reversal in order to restore all of the lost RRSP in the year of termination.

3. What should we do if we discover that PAs have not been reported for several years, or that incorrect PAs were reported?
You must file amended T4 slips if the unreported or incorrect PAs are for any of the immediately preceding four years. For example, if the error was detected in 2006 for 2002 PAs, you must file amended T4 slips. For information on how to file amended T4 slips, go to RC4120 Employers' Guide – Filing the T4 Slip and Summary.

If the unreported or incorrect PAs are for any year before the immediately preceding four years, you must send us a list. For example, if the error was detected in 2006 for 2001 or earlier PAs, you must send us a list. The list must include the names and social insurance numbers (SINs) of the individuals and the original PAs reported and the new PAs for each year. Depending on your province, send your list to one of the addresses below.

You must also advise employees involved that if they deducted RRSP contributions for the year(s) in question, their tax returns may be reassessed, and that this may result in additional tax owing, and a requirement to pay tax on RRSP excess contributions and to withdraw those contributions from their RRSPs. For information on RRSP excess contributions and tax on those contributions, go to T4040 RRSPs and Other Registered Plans for Retirement and select Tax on RRSP Excess Contributions under Chapter 2.

4. I have a group RRSP for my employees. How does this factor into the PA calculation?
Contributions to an RRSP do not generate a PA. When a member claims a deduction for a contribution to an RRSP on their tax return, the limit will be directly reduced.

5. I am an employee who lives in Canada and works in the USA and participates in my employer's plan in the US. Does this affect my RRSP limit? If so how?
If you are a Canadian resident who is primarily employed outside Canada and accruing benefits under a foreign pension plan, then you must self report on line 206 of your tax return the lesser of

For years after 2004, the individual's prescribed amount is the lesser of;

• the money purchase limit for the preceding year minus the previous year's PA offset, and
• 10% of the resident compensation for the preceding year.