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What is Pension Adjustment?

What is Pension Adjustment?

PENSION ADJUDTMENTS (PA, PAR, PSPA)

The Pension Adjustment (PA), the pension adjustment reversal (PAR), and the past service pension adjustment (PSPA) have an impact on the RRSP deduction limit.

Pension Adjustment

The PA reduces the RRSP deduction limit for the following year, but has no effect on the taxpayer’s income. It measures the value of all pension benefits accumulator by a taxpayer during the year with respect to an RPP or DPSP (but not a PRPP) and ensures that all deferred income plans to which an individual contributes are integrated.

For DPSP the pension adjustment equal is to the total amount of contribution paid for the benefit of the employ by the employer during the year.

For money purchase RPP (but not PRPP) the pension adjustment is equal to the total employer/employee contributions made during the calendar year. For defined benefit RPP, the pension adjustment is equal to nine times the individual’s benefit entitlement, less a $600 lump sum. In most cases, the individual’s benefit entitlement for the year must be determined by an actuary.

Pension Adjustment Reversal

The Pension Adjustment Reversal is added to the current years RRSP deduction limit. The amount of determined by the plan administrator.

Past Service Pension Adjustment

The past service pension Adjustment (PSPA) reduces the RRSP deduction limit. The amount of determined by the administrator of the plan

CONTRIBUTION LIMIT FOR THE YEAR

The following shown the yearly contribution limit for the application of various deferred income plans

Year          RPP
                  PRPP                                                    DPSP                                                          RPSP
                 Limit                                                     Limit                                                           Limit

2016       26,010                                                   13,005                                                        25, 370
2017       indexed1                                               indexed1                                                    26,010
2018       indexed1                                              indexed1                                                    indexed1

1. The previous year’s limit is indexed to the average wage increase.

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