Pension Adjustments

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Reporting Pension Adjustments

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 PAs 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. OPTrust will incorporate this PA into any Pension Adjustment Reversal the member may be eligible for upon termination. The data file submitted to 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 OPTrust by March 31 of the year following the tax-reporting year.

Calculating Pension Adjustments (PAs)

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 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 OPTrust directly). As a result, the Benefit Entitlement (BE) for these members should be calculated as follows:

For salary rates up to the Year’s Maximum Pensionable Earnings:

(1.345% x Annual Salary Rate) x Credit* = BE

For salary rates above the YMPE:

([1.345% x YMPE] + [2% x (Annual Salary Rate – YMPE)] ) x Credit* = BE

pro-rated 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).

 

icon Example  John’s annual salary rate for 2016 was $45,500 and he earned 365 days of credit in the OPSEU Pension Plan.

(1.345% x 45500) x (365/365) = 611.98
(611.98 x 9) – 600 = 4908 (PA)
icon Example  Michelle’s annual salary rate for 2016 was $60,200 and she earned 365 days of credit in the OPSEU Pension Plan.

([1.345% x 54900]+(2.0% x (60200-54900)] x (365/365) = 844.41
(844.41 x 9) – 600 = 7000 (PA)
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

icon Important!  It is the employer’s responsibility to calculate and report any amended PA to the CRA and to inform OPTrust of any changes.