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 $90,000.00, the 2021 BE is: (2% × $90,000.00) − (0.7% × 61,600.00) = $1,368.80

Step 2: Calculate the pension adjustment (PA)

Using the BE calculated above, the 2021 PA is: ($1,368.80 × 9) − $600.00 = $11,719.20 (rounded to the nearest dollar)

Report the PA ($11,719), rounded to the nearest dollar, to CRA.

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

Details:

The member works 75% (RPT Ratio) of your organization's full-time equivalent. The salary rate at the full-time equivalent is $90,000.00.

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and a full-time annual salary of $90,000.00, the 2021 BE is: (2% × $90,000.00) − (0.7% × 61,600.00) = $1,368.80

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 2021 is: ($1,368.80 × 9) − $600.00 = $11,719.20
  2. Prorate the PA using the member's RPT ratio: 75% × $11,719.20 = $8,789.40

Report the PA ($8,789), 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 63% 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 $90,000.00, the 2021 BE is: (2% × $90,000.00) − (0.7% × $61,600.00) = $1,368.80

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 2021 is: ($1,368.80 × 9) − $600.00 = $11,719.20
  2. Prorate the PA by the number of hours the member worked compared to the full-time equivalent: 63% × $11,719.20 = $7,383.10

Report the PA ($7,383), 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, 2021 to April 28, 2021. The second salary rate, $90,000.00, is effective from April 29, 2021 to December 31, 2021.

Step 1: Calculate the annual salary for benefit entitlement

Calculate the weighted average to determine the annual salary: (118 ÷ 365) × $80,000.00 + (247 ÷ 365) × $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 2021 BE is: (2% × $86,767.12) − (0.7% × 61,600.00) = $1,304.14

Step 3: Calculate the pension adjustment (PA)

Using the BE calculated above, the 2021 PA is: ($1,304.14 × 9) − $600.00 = $11,137.26

Report the PA ($11,137), 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, 2021.

Step 1: Calculate the benefit entitlement (BE)

Based on a full year of credit and an annual salary of $90,000.00, the 2021 BE is: (2% × $90,000.00) − (0.7% × 61,600.00) = $1,368.80

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 2021 is: ($1,368.80 × 9) − $600.00 = $11,719.20
  2. Prorate the PA by the number of calendar days the member participated in the Plan: (193 ÷ 365) × $11,719.20 = $6,196.73

Report the PA ($6,197), rounded to the nearest dollar, to CRA.