Money Management Newsletter: Taxes
and Estate Matters
Look out for the PAR tax slip
If you have left a Deferred Profit-Sharing Plan
(DPSP) or Registered Pension Plan (RPP), check with your plan administrator
to see if you will be receiving a T10 slip (Pension Adjustment Reversal).
Why would you receive a T10? Individuals who are members of DPSPs and/or
RPPs have an amount reported in box 52 of their T4 slip called a Pension
Adjustment (PA) which reduces the amount of their RRSP contribution for
the following year. Basically the PA tries to make the RRSP contribution
limits equitable for both members and non-members of pension plans by
reducing the RRSP limits for pension plan members by the PA amount.
Of course the PA amount assumes you will actually
receive the pension. However, if you leave the plan early the lump sum
you receive may be less than the sum total of all the pension adjustments
that have been reported on your T4s while you were a member of the plan.
The T10 PAR, is used to restore RRSP room to make up for this difference.
* * *
For members of DPSPs and Money Purchase Pension Plans (defined contribution
plans), a PAR would only apply if you were not fully vested in the plan
at the time you ceased to be a member. In this case your RRSP room was
previously reduced by a PA but no corresponding dollars were received
when you left the plan. Vested contributions reported on PAs plus any
growth are returned at termination for these plans so there would be no
need for a PAR.
Defined Benefit Pension Plans on the other hand use a complicated funding
formula to determine future pension benefits so there can be a substantial
difference between their termination amount and their previously reported
PAs. Thus, any PAR can be quite large.
What should you do if you receive a T10? There is no panic to contribute
the amount of the T10 to your RRSP immediately as it will just be added
to your overall RRSP room and be available for future year RRSP contributions.
You should also be prepared for an initial rejection by Revenue Canada
if this PAR contribution exceeds your present RRSP deduction limit as
they might not have their records up to date when they process your current
tax return. In this case request that they update their records and amend
If you don't receive a T10 but feel you should, check with your plan administrator
to make sure they have your current address. You should still receive
a T10 even if you have not left your employer but have ceased to be a
member of the DPSP or RPP.
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