Past Service Pension Adjustment (PSPA)

A PSPA arises in a defined benefit provision of a registered pension plan (RPP) in conjunction with a "past service event".

A past service event is broadly defined as any transaction, event or circumstance that causes a member's post-1989 benefits to increase. A past service event normally occurs when an individual is being credited with additional post-1989 pensionable service, or where the plan is being amended to retroactively increase the benefit formula (i.e., 1% of earnings to 1.5% of earnings) for post-1989 years of pensionable service.

A PSPA is required to ensure that the overall limit on tax-assisted retirement savings of 18% of income is maintained. It achieves this goal by reducing an individual's RRSP contribution room by the amount of the PSPA.

In general terms, the PSPA is the sum of the additional pension credits that would have been determined for prior years if the RPP had provided for the upgraded benefits or additional period of pensionable service at the time each pension credit was first required to be determined.

Where the PSPA is greater than zero the Income Tax Act requires that certification of the Minister be obtained. Generally, certification depends on whether the PSPA exceeds the individual’s unused RRSP deduction room at the end of the previous year by more than $8,000. In certain circumstances, certification is not required (for example where an amendment to the DB provision is made that results in the benefits of substantially all the members being increased). In cases of non-certified PSPAs the individual need not have sufficient RRSP room available. For further information on certification and non-certification of PSPAs, see the PSPA Guide (T4104).

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