We've prepared the following examples to show you how PAs are calculated in various scenarios.

Important: We prepared these examples using the methodology provided in Canada Revenue Agency's Pension Adjustment Guide.

Example 1: PA calculation for a full-time member

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and an annual salary of $80,000.00, the 2018 BE is: (2% x $80,000.00) - (0.7% x 55,900.00) = $1,208.70

Step 2: Calculate the pension adjustment (PA)

Using the BE calculated above, the 2018 PA is: ($1,208.70 x 9) - $600.00 = $10,278.30 (rounded to the nearest dollar)

Report the PA ($10,278), rounded to the nearest dollar, to CRA.

Example 2: PA calculation for a regular, part-time member

Details:

The member works 70% (RPT Ratio) of your organization's full-time equivalent. The salary rate at the full-time equivalent is $80,000.00.

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and a full-time annual salary of $80,000.00, the 2018 BE is: (2% x $80,000.00) - (0.7% x 55,900.00) = $1,208.70

Step 2: Calculate the pension adjustment (PA)

  1. Using the BE calculated above, the PA for a member paid at the full-time rate in 2018 is: ($1,208.70 x 9) - $600.00 = $10,278.30
  2. Prorate the PA using the member's RPT ratio: 70% x $10,278.30 = $7,194.81

Report the PA ($7,195), rounded to the nearest dollar, to CRA.

Example 3: PA calculation for an unclassified member

Details:

By year-end, you determine that a member employed on an unclassified basis (variable hours) has worked 57% of the hours of the full-time equivalent.

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and an annual salary of $80,000.00, the 2018 BE is: (2% x $80,000.00) - (0.7% x $55,900.00) = $1,208.70

Step 2: Calculate the pension adjustment (PA)

  1. Using the BE calculated above, the PA for a member paid at the full-time rate for 2018 is: ($1,208.70 x 9) - $600.00 = $10,278.30
  2. Prorate the PA by the number of hours the member worked compared to the full-time equivalent: 57% x $10,278.30 = $5,858.63

Report the PA ($5,859), rounded to the nearest dollar, to the CRA.

Example 4: PA Calculation for a member whose salary rate changes

Details:

The first salary rate, $80,000.00, is effective from January 1, 2018 to April 28, 2018. The second salary rate, $90,000.00, is effective from April 29, 2018 to December 31, 2018.

Step 1: Calculate the annual salary for benefit entitlement

Calculate the weighted average to determine the annual salary: (118/365) x $80,000.00 + (247/365) x $90,000.00 = $86,767.12

Note: Use 366 days for leap years.

Step 2: Calculate the benefit entitlement (BE)

Based on a full year of credit and an annual salary of $86,767.12, the 2018 BE is: (2% x $86,767.12) - (0.7% x 55,900.00) = $1,344.04

Step 3: Calculate the pension adjustment (PA)

Using the BE calculated above, the 2018 PA is: ($1,344.04 x 9) - $600.00 = $11,496.36

Report the PA ($11,496), rounded to the nearest dollar, to CRA.

Example 5: PA calculation for a partial year

Details:

A full-time employee terminated PSPP membership on July 12, 2018.

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and an annual salary of $80,000.00, the 2018 BE is: (2% x $80,000.00) - (0.7% x 55,900.00) = $1,208.70

Step 2: Calculate the pension adjustment (PA)

  1. Using the BE calculated above, the PA for a member paid at the full-time rate for 2018 is: ($1,208.70 x 9) - $600.00 = $10,278.30
  2. Prorate the PA by the number of calendar days the member participated in the Plan: (193/365) x $10,278.30 = $5,434.83

Report the PA ($5,435), rounded to the nearest dollar, to CRA.