# (PSPA) Past Service Pension Adjustment



## drpap (Nov 10, 2015)

Hey guys,

My wife was recently offered a pension buy-back for previous service which will amount to some PSPA determined by the CRA. I''m completely unfamiliar with what any of this entails, so if someone could offer me guidance and advice I would appreciate it. 

She was recently offered to buy-back her past service for say 15k (principal amount) plus interest of say 1k for a total cash value of 16k.

We have till April 30th, 2019 to submit the lump sum amount, but reading the fine print states that if there's not enough eligible room in her RRSP limit, then the CRA would refuse to approve it.

For 2018, her available contribution room was say 10k, of which we used 5k.

For 2019 her new contribution room will be another 10k.

I know the CRA will approve a PSPA as long as its the contribution room plus an extra 8k, but I am not entirely sure if that includes the interest, any potential interest that it would have accrued, or just the actual cash value.

Would it take the contribution room of 2019 into consideration, or would it take the previous year (2018)?

Also, seeing as we're not going to be owing any taxes (expecting refund), would it behoove us to postpone our tax filing till this resolves itself for any reason?

I am mostly asking this in case after having that 5k reduced from the 10k for 2018 would hurt us in getting the approval for the PSPA.

We were also given the option to move some of her RRSP into this pension fund, but i'd rather avoid that if possible. If the CRA denies the PSPA with the lump sum payment, would it be possible to move a small portion of the RRSP and then pay the rest as a lump sum? Or is it really all or nothing?

The pension fund and her company said to consult a financial manager for all this, but the managers we visited at our banks were simply clueless. 

Any advice is greatly appreciated. I'd like to cut the cheque for the 15k and send it to the pension fund for her so we dont waste any more time, but I don't want the CRA to deny the PSPA either.

Many thanks.


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## Gruff403 (Jan 30, 2019)

How solid is this pension as not all pensions are created equal? I question the ability of the pension fund if they tell you to go for outside help with this. Surely the pension fund ha people who can walk you through different scenerios - that's their job. I have a rock solid db pension with teachers and did not hesitate to buy back some pensionable service by transferring from my RRSP directly into fund. Main reason was that I believe this pension is solid and will be there long term. If you are hesitant to transfer RRSP to the pension fund does that indicate that you have cause for concern with the fund? If there is any concern that this pension could become insolvent in the future it may be a poor choice to add to it.


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## drpap (Nov 10, 2015)

Gruff403 said:


> How solid is this pension as not all pensions are created equal? I question the ability of the pension fund if they tell you to go for outside help with this. Surely the pension fund ha people who can walk you through different scenerios - that's their job. I have a rock solid db pension with teachers and did not hesitate to buy back some pensionable service by transferring from my RRSP directly into fund. Main reason was that I believe this pension is solid and will be there long term. If you are hesitant to transfer RRSP to the pension fund does that indicate that you have cause for concern with the fund? If there is any concern that this pension could become insolvent in the future it may be a poor choice to add to it.


I have no concerns about the fund and its a db pension as well.

My only hesitation of moving her RRSPs to it is that her RRSPs are invested somewhere very solid at the moment and would rather not remove them from there.

I'd much rather pay into it in a lump sum for cost effective purposes. Mostly concerned if the PSPA would be approved by the CRA and how it is calculated with regards to the RRSP contribution limits my wife has at the moment.

I'd appreciate any advice if you have any. Thanks.


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## Thal81 (Sep 5, 2017)

Not quite sure what you're talking about for "interest" on a buyback value, there's only one amount and it's what it cost you to buy back those X past years at your wife's current salary. 

Either way, when I did mine in 2015, the pension buyback value was 8.7k, which I paid as a lump sum. However, processing the buyback itself took about 3 years for the pension fund administration and CRA parts, and so the PSPA adjustment didn't occur until 2018. Even then, the RRSP contribution room was only reduced by 6.4k, which I believe is because the 8.7k was "after tax" money. So it was the same as if I had contributed 6.4k to my RRSP one year and received a tax return so the total would be 8.7k.

Interestingly, after paying for the buyback in 2015, I received a receipt from the pension fund which I could use to reclaim taxes in 2015, which I did, since buying the services with after-tax money was the same as contributing to the pension plan or doing an RRSP contribution, so I was owed a tax return. But the RRSP contribution room was only adjusted through the PSPA 3 years later in 2018, so the delay between these 2 events was a bit strange, but it worked out.

Anyways, the thing is you probably don't need as much RRSP room as you think, and also administrative delays may cause this to take many years so you might be able to pile up some extra RRSP room before it all gets done. In my case, I was at the federal government and my experience was not an exception. Pretty much all my colleague's pension buybacks took a long time. Maybe ask around in your work unit...


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