Pension Adjustment (PA)

For obsolete questions, visit the Archived FAQs.

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? (2006-09-19)
   
   
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.

2006-09-19
3. What should be done if we discover that PAs have not been reported for several years, or that incorrect PAs were reported?
Amended T4 slips must be issued 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, amended T4 slips must be issued. For information on issuing amended T4 slips, please refer to the RC4120, Employers' Guide, Filing the T4 Slip and Summary Form on our Web site.

If the unreported or incorrect PAs are for any year before the immediately preceding four years, a list is to be sent to us. For example, if the error was detected in 2006 for 2001 or earlier PAs, a list is required. The list is to include the names and social insurance numbers (SINs) of the individuals and the original PAs reported and the new PAs for each year. The list is to be sent to:

Canada Revenue Agency
Individual Returns and Payments Processing Directorate
Pensions Section
Ottawa ON  K1A 0L5

In either case, 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 more information about RRSP excess contributions and tax on those contributions, please refer to "Tax on RRSP Excess Contributions" in the T4040 Guide, RRSP and Other Registered Plans for Retirement on our Web site.

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