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Tax Reporting and Pension Adjustments |
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The PA reflects the value of pension benefits the member accrues in the
Plan for a year. The PA represents the theoretical equivalent of one year of
pension plan benefits to contributions made to a money purchase pension plan
such as an RRSP. Maximum pension contributions are prescribed by the ITA and its
regulations that can be tax sheltered. A PA would reduce the maximum pension
contribution room to determine the amount of, if any, contributions that can be
made to an RRSP. The PA reduces the members RRSP room for the following year by
the value of the PA. The employer must report all current service PA’s by the
end of February in the year following the benefit accrual. For more information
on PA reporting responsibilities please refer to the PA reporting chart on the
Forms and Tools page in the Buyback section
of the Employer Manual.
In addition to reporting the members’ PA to the CRA, the employer must report
the PA to the OPTrust. The OPTrust will incorporate this PA into any Pension
Adjustment Reversal the member may be eligible for upon termination. The data
file submitted to the OPTrust should be a standard text file that has the
following data fields (see the Forms and Tools page
for a sample):
- Year
- Member's SIN
- Member's First Name
- Member's Last Name
- Member's PA
This file must be submitted to the OPTrust by March 31 of the year following the
tax-reporting year.
The employer must report the Pension Adjustment (PA) on the members T4 every
year that a pension benefit is accrued. The PA represents the theoretical value
of one year of pension benefit accrual.
Due to the implementation of gains in December 2002, the Plan changed the CPP
offset portion of the PA formula. The change in the Plan’s CPP offset affected
the way employers calculated the PA for members who contributed to the OPSEU
Pension Plan.The member’s PA for the OPTrust is calculated using the following formula:
Pension Adjustment=(Benefit Entitlement x 9) - $600*
* prorated for partial years if the member moves between employers of the Plan
(the offset is not prorated for part-time, unclassified, or partial year service
due to plan termination or enrolment). |
The benefit entitlement is calculated according to the OPSEU Pension Plan’s
benefit formula, which incorporates the CPP offset.
For members of the Plan as of December 1, 2002, employers should use the CPP
offset factor of 0.655% (for former members that terminated prior to December
01, 2002 please contact the OPTrust directly). As a result, the Benefit
Entitlement (BE) for these members should be calculated as follows:
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 Example
John’s annual salary rate for 2003 was $35,500 and he earned 365 days of credit
in the OPSEU Pension Plan.
(1.345% x 35500) x (365/365) = 477.48
(477.48 x 9) – 600 = 3697 (PA)
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Example
Michelle’s annual salary rate for 2003 was $44,200 and she earned 365 days of
credit in the OPSEU Pension Plan.
([1.345% x 39900]+(2.0% x (44200-39900)] x (365/365) = 622.66
(622.66 x 9) – 600 = 5003 (PA)
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Transfers to the PSPP
When a member has a mandatory transfer between the OPSEU Pension Plan and the
Public Service Pension Plan (administered by the Ontario Pension Board) the
employer must calculate the PA separately for the benefit accrual in each Plan
(reported as one figure on the members T4).
Amended PA
A members’ Pension Adjustment will need to be amended whenever the members’
entitlement to a benefit is changed for a prior tax-reporting year.
There are several events that could give rise to the amendment of a member’s PA:
- Retroactive salary award
- Grievance settlement
- Incorrect/inaccurately calculated PA
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Important!
It is the employer’s responsibility to calculate
and report any amended PA to the CRA and to inform the OPTrust of any changes.
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Revised January 28, 2005
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 For
details on how to calculate a PA for a member of the
Plan that terminated prior to December 01, 2002, please
contact the OPTrust directly. |
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