How do you calculate pension adjustments?
As of early December, the 2011 MDC Reporter was available for download by your organization’s MDC download contact.
One of the key dates approaching in early 2012 is the PA for Health Leaves Report, which is due on January 13.
The information on the report is used by HOOPP to calculate pension adjustments (PAs) for members who received free accrual during 2011.
January is also the month you need to start calculating PAs for all the other HOOPP members in your organization who aren’t receiving free accrual.
Why is calculating PAs so important?
Ultimately, it impacts a member’s RRSP contribution room.
It’s important to remember that, in a defined benefit plan, the PA is the deemed value of pension benefits accrued during the year. This differs from defined contribution plans, where the PA is the amount contributed by an employee and/or employer to an employee.
While a detailed, in-depth PA Guide is available in HOOPP’s Administration Manual, here’s a quick snapshot look at PAs:
A primer on PAs
What are PAs?
A pension adjustment (PA) is the deemed value of the benefits a member earns every year in a registered pension plan such as HOOPP.
Why are PAs important?
A PA impacts the amount of room that a member has to make contributions their registered retirement savings plan (RRSP)
What does the employer have to do?
You must calculate the PA for each employee who contributed to HOOPP throughout the reporting year. The PAs are then reported to employees on their annual T4 slips. They are also reported to HOOPP and Canada Revenue Agency on an annual basis.
How do you calculate PAs?
Use the PA calculator found under "Tools" on ESE2.
Deadlines to remember
December: MDC Reporter available for calculating PAs for members who receive free accrual during the year.
January: Employers calculate PAs for all members aren't receiving free accrual while on a health-related leave. Employers use the pension calculator. For members who are receiving free accrual, employers submit the PA for Health Leaves Report through MDC process.
February: Deadline for employers to issue T4s which show, among other things, PA amounts.
April: Deadline for members to file their income tax returns.
Late spring: The CRA calculates and notifies Plan members of current year's RRSP contribution room via their Notice of Assessment.
