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Ottawa, October 2, 1998
1998-098

Revised Proposals Announced Concerning Pension Adjustment Reversals (PARs)

Related document:  

• Backgrounder.

Finance Minister Paul Martin and National Revenue Minister Herb Dhaliwal today announced measures to facilitate the implementation of the pension adjustment reversal (PAR) proposals announced in the 1997 budget. Draft regulations to implement these proposals were released for comment on June 26, 1998.

PAR restores RRSP contribution room for individuals who receive termination benefits from a registered pension plan (RPP) or deferred profit sharing plan (DPSP) that are less than the amount of RRSP contribution room given up over the years because of their participation in the RPP or DPSP. The RRSP room generated by PAR can be used by the individual to make RRSP contributions in the year of termination or it can be carried forward for use in future years.

"We received a number of helpful submissions following the release of the draft regulations in June," Mr. Martin explained. "In light of those representations, we are proposing to extend the initial deadline for reporting PARs to give plan administrators more time to make the necessary system changes to calculate and report PARs." Plan administrators will now have until March 31, 1999 to report PARs for terminations in 1997 and 1998 and until September 30, 1999 to report PARs for terminations in the first two quarters of 1999.

Details of the changes to the PAR reporting rules, as well as other technical changes, are contained in the attached backgrounder. Every effort will be made to finalize the PAR proposals by the end of November 1998.

"Because of the change in time frame for plan administrators to report PARs, I am pleased to advise affected individuals that they will be allowed additional time to make RRSP contributions for 1998," said Mr. Dhaliwal.

Individuals with a 1998 PAR will receive a T10 slip, Pension Adjustment Reversal (PAR), from the plan administrator. Since plan administrators have until March 31, 1999 to report PARs, the deadline for affected individuals for making RRSP contributions deductible in the 1998 tax year will be April 30, 1999. Only individuals with a 1998 PAR will be eligible for this deadline extension. The RRSP contribution deadline for people who do not have a 1998 PAR will remain unchanged, that is, March 1, 1999.

Information on RRSPs, RPPs, DPSPs and PARs is available at all Revenue Canada Tax Services Offices. The location and phone number of the office nearest you can be found in the Government of Canada listing of your telephone book. Information is also available on Revenue Canada's Internet site - Deadline extension for contributing to an RRSP for individuals with a pension adjustment reversal (PAR).

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For further information:

Concerning the changes to the PAR proposals:

Concerning the extension to the RRSP deadline:

Backgrounder

This backgrounder describes proposed changes to the draft amendments to the Income Tax Regulations that were released on June 26, 1998. The changes concern the implementation of the pension adjustment reversal (PAR) proposals.

1. Extension of PAR reporting deadline

The PAR reporting rules will be modified in three ways. First, the rules will be changed to extend the deadline, from December 31, 1998 to March 31, 1999, for filing PAR information returns in respect of individuals who terminate from a DPSP or a benefit provision of an RPP in 1997 or 1998. Second, the deadline for filing PAR information returns for terminations in the first two quarters of 1999 will be postponed until September 30, 1999. Finally, on an on-going basis, PAR information returns for terminations in the fourth quarter of a calendar year will be required to be filed before February of the following year, instead of within 60 days after the end of the quarter. Proposed subsections 8402.01(1) and (2) will be modified to reflect these changes.

These changes are being made to give pension plan administrators more time to make the necessary changes to their systems to calculate and report PARs. The delay in reporting 1999 PARs will enable plan administrators to focus their efforts on reporting PARs for 1997 and 1998 terminations in time for individuals to use the RRSP room generated by PAR to make RRSP contributions for the 1998 taxation year. (Note that Revenue Canada will extend the 1998 RRSP contribution deadline from March 1, 1999 to April 30, 1999 for these individuals.) The change to the PAR reporting deadline for terminations in the fourth quarter of a calendar year is to ensure that individuals have enough time to make RRSP contributions based on PAR before the RRSP deadline for that year.

2. Hybrid pension plans

The special rules for calculating PAR for an individual who terminates from a defined benefit provision under which benefits are offset by money purchase or DPSP benefits will be eliminated. Specifically, the variable E ("excess money purchase offset") will be eliminated from the defined benefit PAR formula in subsection 8304.1(5). Proposed subsection 8300(11) will also be eliminated, which means that an individual who participates in a hybrid arrangement will not have to terminate from all offset provisions in order for a defined benefit PAR to be determined. These relieving changes will significantly simplify the calculation of defined benefit PARs for individuals participating in hybrid arrangements.

3. Other technical changes

• The special PAR termination rule in proposed subsection 8300(12) for an individual who participates in more than one defined benefit provision will be modified to clarify that it applies only if the individual's benefits under one of the provisions is dependent on the individual's benefits under the other provisions.

• The PSPA certification rules in subsections 8307(2) and (3) will be modified to recognize current-year PARs.

• The PAR termination rules dealing with annuity contracts in proposed paragraphs 8304.1(14)(b) and (15)(c) will be replaced with a general rule in section 8300 deeming the individual to continue being a member.