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Canada’s Income Tax Act limits the total amount of tax-sheltered
retirement savings individuals may accumulate. Under the act, pension benefits
earned after 1989 reduce the individual’s available RRSP contribution room. The
amount of this reduction is referred to as a “pension adjustment” (PA). Each
year, the PA for an employee’s current employment service credit is reported on
the T4 issued by the employer.
Certain types of buybacks for post-1989 service also reduce the employee’s RRSP
room. In some cases, the buyback will result in an additional PA. Depending on
the circumstances, OPTrust will either:
- calculate the buyback-related PA, report it directly to the Canada Revenue
Agency (CRA) and issue a T4A to the employee, or
- send the employer a request to amend the PA amount reported on the
employee’s annual T4.
Beginning with the 2003 income tax reporting, OPTrust assumed responsibility for
calculating Pension Adjustments (PAs) for the following LOA purchases and
reporting them to CRA.
For CORPAY employers:
- The LOA must end in the tax-reporting year.
- OPTrust must receive the member’s signed Agreement to Purchase Credit
(OPTrust
1017) before April 30th of the following year.
For non-CORPAY employers (agencies, boards and commissions):
- The LOA must end in the tax-reporting year.
- OPTrust must receive the member’s signed Agreement to Purchase Credit
(OPTrust
1017) before April 30th of the following year.
- The member must pay for the buyback in a lump sum.
For all other cases where a PA is required, OPTrust will continue to send a
request to the employer to amend the PA reported on the individual employee’s
T4.
For purchases of prior non-contributory service, OPTrust will continue to
provide the necessary information to the employer to amend the PA.For more
information on PA reporting, please see the "Tax Reporting and Pension
Adjustment" section.
Revised September 3, 2004
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For more
information on PA reporting, please see the "