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Registered retirement accounts and your HOOPP pension

As a HOOPP member, you have the benefit of building a secure retirement income for life. You may want to add to that income through a registered retirement savings plan (RRSP) or another type of registered account. If you do, it’s important to know how your HOOPP pension works alongside those savings when planning your RRSP contributions.

Tax-assisted retirement savings

The tax system is intended to provide all Canadians with an equal opportunity to save for retirement, whether they participate in a pension plan, are saving on their own, or both. The system includes an overall limit on how much Canadians can save for retirement each year on a tax-deferred basis. This applies to various types of registered accounts, including workplace pensions and RRSPs.

The tax system uses three concepts to help keep this balance in your retirement savings limit:

  • pension adjustments (PAs)
  • past service pension adjustments (PSPAs)
  • pension adjustment reversals (PARs)

Below, we will explain how each of these can impact your RRSP room.

What is a PA?

There is an annual maximum you can contribute to your RRSP. Being a HOOPP member means you are already building a strong pension for your future, which will result in less RRSP room. That’s how the overall tax limit on retirement savings is maintained.

The PA reflects the value of the HOOPP pension you earn in a given year based on a formula set out in tax rules. It is different than the amount of lifetime pension you have earned and the contributions that you make under the Plan terms.

Your employer includes your PA on your T4 slip each year. If you’re on a health leave and getting free accrual, HOOPP will report the PA on your T4A slip instead of your employer. The PA reduces how much you can put into your RRSP for the next year, but it doesn’t affect your HOOPP pension.

What is a PSPA?

There may be times when your RRSP contribution room is reduced by a PSPA. A PSPA may occur when your pension is increased on a past service basis from a benefit improvement, or when you buy back service, contribute for a leave or re-enrol in the Plan.

In simple terms, the PSPA is the difference between the PA(s) before and after the improvement to your past service benefits. The Canada Revenue Agency (CRA) uses PAs and PSPAs to ensure that your retirement savings stay within the overall tax limit.

  • If you receive a benefit improvement PSPA, this reduces your RRSP contribution room in the following year.
  • If you have a PSPA when you buy back service, contribute for a leave or re-enrol in the Plan, the PSPA reduces your RRSP room immediately. In these situations, the PSPA must also be certified by the CRA, which may require you to withdraw funds from your RRSP.

HOOPP will report a PSPA to you and to the CRA on a T215 or T1004 tax slip. You may also receive personalized information from HOOPP and the CRA about your PSPA and any actions you might need to take. Please review these communications carefully to understand the impact to your RRSP contribution room and your pension.

For more information, visit Buying Back Service and Time Away From Work. Contact HOOPP Member Services if you have any questions or require support.

When you can see the impact of a PSPA on your RRSP room

When you can see the impact of a PSPA on your RRSP room

In calculating your annual RRSP deduction limit, CRA accounts for all PAs, PSPAs and PARs relevant to that year’s room. Your updated RRSP deduction limit is generally available once CRA has processed your tax return for the prior year. To learn more about how to check your RRSP limit, see about your RRSP deduction limit.

Understanding negative RRSP room

Understanding negative RRSP room

It’s possible that your RRSP room will be a negative amount. This can happen if you receive a PSPA that is larger than your unused RRSP room.

If you have negative RRSP room:

  • You can’t claim any tax deductions for new RRSP contributions. If you contribute to your RRSP when you have negative room, tax penalties may apply.
  • If you have previously made any RRSP contributions that you have not yet deducted on your tax return, you may need to withdraw those contributions to avoid any tax penalty. An accountant or other tax professional can advise you in this situation.

Provided you stay within your RRSP deduction limit, there is no issue with having negative RRSP room – by itself, it does not result in any additional tax.

In this situation:

  • You can retire with negative RRSP room.
  • If you have used your RRSP for the Home Buyer's Plan or the Lifelong Learning Plan, you can continue to make the required repayments.
  • You can also build new RRSP room, which may enable you to contribute to an RRSP in the future.

What is a PAR?

A PAR may occur if you leave your HOOPP employer and decide to take your benefits out of the Plan. In simple terms, a PAR will occur if the PAs reported for your HOOPP benefit exceed the amount you receive when you leave the Plan. A PAR is reported on a T10 tax slip and restores RRSP contribution room for the year indicated on the slip, which is often the current year.

Learn more about RRSPs and other registered plans on the Government of Canada website.

Did you know?

Being a HOOPP member does not impact your contribution limit under a Tax Free (TFSA). Learn more about TFSAs on the Government Canada website.

This document provides a simplified overview of HOOPP's benefits based on the terms of the HOOPP Plan Text at the time of publication. From time to time, HOOPP may amend the HOOPP Plan Text. In cases where the information provided in this document differs from that contained in the HOOPP Plan Text, the HOOPP Plan Text will govern. More details, including the full HOOPP Plan Text and a complete description of the Plan and its benefits, can be found on hoopp.com.