Pension Adjustments

Pension adjustments are calculated annually by your employer and reported on your T4 form.  Pension adjustments are one of the factors used by the Canada Revenue Agency (CRA) to determine your Registered Retirement Savings Plan (RRSP) contribution limit.

 

The pension adjustment is the deemed value of the pension plan benefits earned in a year and is calculated by using the following formula:

 

      PA = (9 x pension entitlement for the year) minus $600.

 

Example Calculation:

 

                              2017 Annual Salary is $57,800

                              Base Salary: $55,300 (2017 YMPE)

                              Excess Salary: $2,500 ($57,800 - $55,300)

 

                              Pension Adjustment (PA):

                              9 x 1.35% x $55,300 = $6,718.95

                              9 x 2.00% x $  2,500 = $   450


                                                                  $7,168.95

 

                              Less:                           $   600

 

                              2017 Pension Adjustment = $6,568.95

 

 

 

Pension Adjustment Reversal

The pension adjustment reversal is intended to restore RRSP contribution room which may have been lost while you were a member of the Plan.

 

If you leave your employer for any reason other than retirement or death, and cease membership in the Plan, a pension adjustment reversal is calculated at the time your benefit is paid.  The pension adjustment reversal is the difference between the sum of the pension adjustments reported for all years after 1989 and the amount of termination benefits refunded from the Plan.  If the benefit paid is less than the sum of the pension adjustments, the difference will be reported to CRA and the RRSP contribution room will be restored.