Retirement Compensation Arrangement (RCA)
On January 1, 2022, the existing Public Service Supplementary Benefits Account (PSSBA) was replaced by a new Retirement Compensation Arrangement (RCA) which provides additional tax benefits and portability options for members. OPB will be the administrator of the RCA and administrator and trustee of the RCA trust fund.
Please note that this change does not affect the amount of any supplementary benefits currently paid to retired members, the formula for calculating supplementary benefits or the overall amount of pension contributions.
About the RCA
Who contributes to the RCA?
Contributions to the RCA are made if your salary exceeds the level that corresponds to the annual limit on pension benefits under the federal Income Tax Act (ITA) which is $198,643.50 in 2023. This does not apply to Associate Judges.
Who receives benefits from the RCA?
The PSPP pays pension benefits up to the average annual salary that corresponds to the ITA benefit limit in the year you start your pension. Pension benefits in excess of the ITA benefit limit in that year are paid from the RCA. Please note, different rules apply for Associate Judges.
Your entitlement to RCA benefits, if any, will be determined when your pension begins, based on your average annual salary and the ITA benefit limit in place at that time. The ITA limit changes annually, so the limit in effect the year in which you retire, will be used for calculating your RCA benefit.
RCA benefits will be paid to you by the Ontario Pension Board (OPB) from the RCA trust fund on the same day as your Public Service Pension Plan (PSPP) pension in a single payment. This means the deposit that you receive will be the combined PSPP and RCA benefit amounts.
What is the current ITA benefit limit?
The ITA benefit limit, which changes annually, is reached when your average annual salary is at least $197,861.83 in 2023 based on the PSPP benefit formula. The corresponding 2022 ITA limit was $192,606.67.
What are the benefits?
Regular contributions – regular member contributions to the RCA will be entirely tax deductible in the year they are made. Your 2022 RCA regular member contributions will be reported as a combined amount, together with your PSPP contributions, in Box 20 of your annual T4. Your employer will provide you with a separate breakdown of your PSPP and RCA contributions for tax reporting purposes.
Contributions for leaves and other absences – tax deductible contributions to the RCA can be made during a leave of absence, or for buybacks of PSPP credit, where those contributions are employer matched in the year that they are made. Please contact us if you require further information.
Transfers and portability – if you terminate your PSPP membership and are entitled to RCA benefits at the time of termination, you may be able to transfer your RCA benefits to another RCA (if both plans agree to the transfer). This means that if you move to an employer that also has an RCA, you may be able to transfer your RCA benefit to your new employer's RCA. Please contact us if you are considering a transfer of your RCA benefit.
Income-splitting – for retired members with a spouse or common-law partner, RCA benefits are eligible for pension income splitting provided certain conditions are met, including that the retired member is at least age 65. Income splitting allows the higher-income spouse to allocate some of their income to the lower-income spouse, which may lower the total amount of income tax paid by you and your spouse/partner. Our Advisors, who are Certified Financial Planners (CFP®), can provide additional information on how this could be incorporated in planning for your retirement.
Tax-Deductibility for retirees – as a retired member, you may be able to deduct your past PSSBA contributions from your RCA benefits as part of your annual tax filing. Those PSSBA contributions made prior to the January 1, 2022 introduction of the RCA may be deductible from RCA benefits paid to you in retirement (i.e. supplementary benefit paid to you after December 31, 2021). We encourage you to speak with a tax advisor/specialist for any specific questions about your taxes.
What are the key points I need to know about the RCA?
For active members:
- Your Annual Pension Statement (APS) will provide information about your estimated RCA benefit.
- Your annual T4 from your employer will display your total PSPP and RCA contributions starting in 2023 for the 2022 tax year. You will also receive a letter from your employer setting out the breakdown of PSPP and RCA contributions.
For retired members and survivors:
- You will receive one monthly deposit which will combine your PSPP pension and RCA benefit.
- Your Retired Member Statement (RMS) or Cost-of-living-adjustment (COLA) statement will provide information about your RCA benefit.
- Starting in 2023, your tax forms for the payments you receive in 2022 will be reflected in a T4A for your PSPP benefit and a separate T4A-RCA for your RCA benefit.
For deferred members:
- Your Deferred Pension Statement will provide information about your estimated RCA benefit.
Takeaways and advice
You should consult with a tax advisor/specialist for any specific questions about your personal tax circumstances or tax planning. If you have questions about your pension, including your RCA benefit, please contact us toll-free at 1-800-668-6203 or at 416-364-5035 or email us at email@example.com.
RCA Tax deductions and Transfers
Whether you are considering transferring your RCA benefit or deducting your past Public Service Supplementary Benefits Account (PSSBA) contributions, please speak with a tax advisor/specialist for any specific questions.Read More RCA Tax deductions and Transfers