A.2 What are PAs, PSPAs and PARs?

PAs, PSPAs, and PARs create a link between the tax-sheltered pension benefits people build in registered pension plans, such as HOOPP, and the contributions they are eligible to make to registered retirement savings plans (RRSPs).

PAs and PSPAs were introduced under the ITA in 1990 as part of an effort designed to give all Canadians the same opportunity to build their retirement savings, regardless of the type of registered plan they participate in. A PA represents the deemed value of pension benefits earned by an employee in a year, while a PSPA represents the deemed value of pension benefits credited to an employee for a previous year or years.

A PSPA arises when a lifetime pension benefit is improved for prior years, or when a new period of past service is credited to a member. A PSPA is the additional pension credit that would have been included in the PA if the upgraded benefits had actually been provided, or the additional service credited, in those previous years. A PSPA must be calculated and approved by the CRA whenever past service benefits are transferred into HOOPP from another pension plan or RRSP, or when a member buys back past service. If the PSPA amount is nil, no PSPA needs to be reported or approved.

A certifiable PSPA will reduce a member’s RRSP contribution room for the current year (i.e., when it is processed by the CRA). The amount a member pays for past-service benefits will not likely equal the PSPA associated with the benefits because the PSPA measures the value of the past-service benefits, rather than how much it costs to pay for the benefits. A PSPA may also be triggered when the Plan benefit is improved for past service, as occurred for the benefit improvement effective January 1, 2018, April 1, 2021 and January 1, 2023, for service prior to those dates. This type of non-certifiable, or exempt, PSPA does not require CRA approval and reduces RRSP room in the year after the PSPA event occurs.

Pension adjustment reversals (PARs) are designed to make the PA system fairer by restoring some RRSP contribution room to terminating members who transfer their benefits out of a registered pension plan before retirement, where the total PAs exceed the lump-sum value they receive. A PAR will result if the value of a member's termination benefit for years of service after 1989 is less than the sum of the PAs and PSPAs they received for that service.