How Pension Adjustments Affect Contribution Limits, Part II

No. 50

Effective November 1, 1999

This Pension Bulletin applies to non-CORPAY employers only

In Pension Bulletin No. 46 we explained how the pension adjustment (PA) affects the maximum amount that a member can contribute to a registered defined benefit pension plan.

The contribution maximum is calculated as 70% of a member's PA, plus an additional $1,000. The PA is based on a member's annual pension credit. However, if a member joins or leaves the Public Service Pension Plan (PSPP) during the year, the PA will be based only on the number of days of pension credit accrued in that year. As a result, the PA - and, in turn, the contribution maximum - will be lower.

An employer has raised the question of whether, in these situations, the $1,000 supplement would also be affected. We have received confirmation that, regardless of whether the member accrues a full or partial year of PSPP pension credit, the $1,000 is not pro-rated.