Changing Jobs? Your Pension May Be Affected

When an employee moves from one employer with a pension plan to a new employer with their own pension plan, pension adjustments can get confusing.

When a contribution is made to a registered pension plan (RPP), the result is a Pension Adjustment (PA) which reduces the employee’s RRSP contribution room. The PA is shown either on the employee’s T4 slip or on a T4A slip.

When the pension contribution is forfeited because the employee leaves the plan, the pension administrator will issue a Pension Adjustment Reversal (PAR), which reinstates the employee’s RRSP contribution room. The PAR will be shown on a T10 slip.

When the employee leaves one employer who has an RPP and joins a different employer with an RPP, each of the employers will issue PAs for the contributions made to the respective plans. The former employer will subsequently issue a PAR if some of the RPP contributions made were forfeited as a result of leaving the former plan.

Most software does not include the T10 slip in the program but does include a line on the form for computing the RRSP contribution limit where the PAR shown on the T10 slip may be entered. In any case, the CRA will receive the T10 slip and the taxpayer’s RRSP contribution limit will be adjusted automatically and be available through Autofill My Return.

Additional educational resources: Knowledge Bureau’s Tax Efficient Retirement Income Calculator can help tax and financial advisors prepare their clients for the future. A free trial of this tool, as well as retirement planning courses are available.

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