PRINCIPAL ISSUES:
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POSITION TAKEN:
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REASONS FOR POSITION TAKEN:
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LEGAL:
FINANCE OPINION:
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JURISPRUDENCE:
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RCT PUBLICATIONS:
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HAA NUMBER:
7217-1 December 1, 1993
Registered Plans Division
Deferred Income Plans S. M. Kotlar,DirectorFinancial Industries Division
957-8953
5-933320
Multi-Employer Pension Plan Pension Adjustment ("PA") Computation in Year of Termination of Employment
Attached is a copy of a letter from XXXXXXXXXX and our reply stating that the matter has been referred to your division.
One of XXXXXXXXXX concerns relates to the different methods, depending on whether a pension plan is a single-employer or multi-employer plan, of computing PAs for the year of termination of employment where the employee is entitled to only a refund of contributions. Given the discretionary authority in subsection 8301(9) of the Regulations where multi-employer plans are concerned and since questions concerning PA computations are normally addressed by your division, we thought it more appropriate that you reply directly to XXXXXXXXXX concerns in this regard.
XXXXXXXXXX
is incorrect in commenting that there is no PA in the year of termination where a single employer pension plan is concerned since, by virtue of subsection 8301(8) of the Regulations, the PA for that year would normally equal the employee's contributions to the plan in that year. It is appropriate that these contributions are included in the employee's PA for that year, thereby reducing the RRSP deduction room otherwise available, since they may be transferred on a tax-free basis to his/her RRSP.
However, as discussed with Hilde Sorensen, there could be situations where the terminated employee's overall RRSP deduction room has been reduced by an amount greater than the refund entitlement. This could occur, for example, where the employee had a PA for a year prior to the year of termination. The Pension adjustment reversal ("PAR") rules that had been proposed were intended to rectify any inequity resulting from such an occurrence. The PAR rules were of course never enacted and were replaced by $400 of the $1,000 referred to in paragraph 8301(6)(b) of the Regulations, thus effectively increasing by $400 annually the RRSP deduction room of employees who belong to a pension plan.
XXXXXXXXXXfor DirectorFinancial Industries DivisionRulings Directorate