Past-service pension adjustments (PSPAs)
The following is an overview of PSPAs. If you have questions about how your PSPA is calculated or why you have a PSPA, contact your employer or plan administrator.
A PSPA is an amount your RPP administrator calculates when benefits relating to a previous period of pensionable service are improved or when you are credited with a new period of pensionable past service. A PSPA only occurs if the improved benefits or the new past service benefits relate to a period of service after 1989. A PSPA is the sum of the additional pension credits that would have been included in your PA if the upgraded benefits had actually been provided, or the additional service credited in those previous years.
Types of PSPAs
The plan administrator calculates your PSPA and determines whether we have to certify the PSPA before the RPP can provide the past service benefits. There are two types of PSPAs: certifiable PSPAs, and PSPAs that are exempt from certification (exempt PSPAs). In most cases, the plan administrator has to report each PSPA to us, whether exempt or certifiable.
Exempt PSPAs – An exempt PSPA usually occurs when all or almost all plan members receive past service benefit upgrades. In most cases, when an employer provides past service benefits and there is an exempt PSPA that is more than zero, the plan administrator has to report the PSPA to us and to the plan member. For exempt PSPAs, the plan administrator has to complete a T215 slip, Past Service Pension Adjustment (PSPA) Exempt From Certification. Do not attach the T215 slip to your return.
An exempt PSPA will not reduce your RRSP deduction limit until the year following the year of the past service event. For details on how to calculate your RRSP deduction limit, see " Calculating your RRSP deduction limit".
Certifiable PSPAs – A certifiable PSPA usually occurs if you, as a plan member, decide to buy a period of past service that is pensionable service under your RPP.
We have to certify most PSPAs that are more than zero and do not meet the conditions for exemption outlined above. We have to certify the PSPA before you have the right to receive the benefits under the plan. A certified PSPA will reduce your RRSP deduction limit for the year in which it is certified.
Your plan administrator applies for PSPA certification by submitting a completed Form T1004, Applying for the Certification of a Provisional PSPA. Since the Income Tax Act has limits on the PSPA amount for past service benefits that we can certify, we will apply these limits to the information on Form T1004 and determine if we can certify the PSPA.
Cost of past service benefits
The amount it costs you to pay for past service benefits will likely not equal the PSPA associated with the benefits, since a PSPA measures the value of the past service benefits rather than how much it costs to fund the benefits. Usually, you can pay for the cost of past service benefits by:
- making a lump-sum contribution;
- making instalment contributions; or
- directly transferring amounts from certain other registered plans. In this case, transfers may reduce the PSPA amount your plan administrator has to report to us.
Qualifying transfers – In general, a qualifying transfer is a direct transfer of a lump-sum amount from an unmatured RRSP, a money purchase provision of an RPP, or a DPSP. You can make a qualifying transfer to pay for all or part of the cost of the past service benefits related to the PSPA. If you make a qualifying transfer, the amount you transfer will reduce the PSPA amount the plan administrator has to report. Do not report your qualifying transfer amount as income, and do not deduct it.
What happens if we cannot certify your PSPA?
If we cannot certify your PSPA because the PSPA amount is more than the allowable limit, you may still be able to obtain certification if you agree to make a qualifying RRSP withdrawal. We will send you Form T1006, Designating an RRSP Withdrawal as a Qualifying Withdrawal. Complete this form and return it to us within 30 days.
To speed up the certification process, your plan administrator can review the certification formula before sending Form T1004 to us. If your plan administrator knows that we will not certify the PSPA, the administrator may ask you in advance if you want to designate an RRSP qualifying withdrawal. If you choose to do so, the administrator may ask you to complete Form T1006, and will send it to us with the certification request. If you cannot or choose not to make an RRSP qualifying withdrawal, we will not certify the PSPA.
Qualifying withdrawal – In general, a qualifying withdrawal is an amount you withdraw from your RRSP and include in your income for the year you withdraw it. You have to meet a number of conditions before we will consider the amount to be a qualifying withdrawal. If you meet these conditions, you can designate the withdrawal and we can certify the PSPA. We outline these conditions in Part 3 of Form T1006, which you use to designate a qualifying withdrawal.
Net PSPA
Your net PSPA for the current taxation year reduces the amount of RRSP contributions you can deduct for the current taxation year. Your current taxation year’s net PSPA is the total of:
- your exempt PSPAs for the previous taxation year (total from box 2 of your T215 slips);
plus
- your certified PSPAs for the current taxation year (copy 2, Form T1004, Part 3, line A);
minus
- your RRSP qualifying withdrawals (Form T1006, Part 3).
Your RRSP deduction limit may be reduced by the net PSPA or similar amount for the year if you participated in a foreign plan or specified retirement arrangement and your past service benefits accruing under the plan were improved.
You can find your RRSP deduction limit for the current taxation year on your latest Notice of Assessment or Notice of Reassessment. If you receive a certified Form T1004 after we send you your notice, we may reduce your RRSP deduction limit for the current taxation year. In such a case, we will usually send you Form T1028, RRSP Information, and give you your revised RRSP deduction limit for the current taxation year once we have updated our records. If you do not receive Form T1028 and you want to confirm your RRSP deduction limit for the current taxation year, visit our Web site at www.cra.gc.ca/myaccount or call our Tax Information Phone Service (T.I.P.S.) at 1-800-267-6999.
The T.I.P.S. RRSP service is available from mid-September to April 30. For RRSP information, you will be asked to provide your social insurance number, your month and year of birth, and the total income you reported on line 15000 of your previous year tax return.