Declaring Intent or Paying Before April 30

To avoid the complication of needing approval from the Canada Revenue Agency (CRA) for your buyback, you need to do one of two things before April 30 of the year following the end of your leave:

  1. Complete payment for your buyback.
  2. Inform us of your intention to buy back your leave.

Either of these actions will secure your eligibility for a pension adjustment (PA). If you don't tell us that you intend to buy back and make payments after April 30, you'll be issued a past service pension adjustment (PSPA) and your buyback will be subject to CRA approval.

Why you need to declare intent

By telling us that you intend to buy back your leave, you essentially buy yourself time. You secure your eligibility for a PA, which avoids the complication of a PSPA which requires CRA approval. You don't commit yourself to a payment plan. 

Need help deciding?

You can speak to a personal tax advisor, an independent financial advisor or even one of our Pension Benefits Specialists. Whomever you decide to consult, keep in mind that you have until April 30 of the calendar year following the end of your leave to secure your eligibility for a PA.

What is a pension adjustment (PA)?

Every member of a registered pension plan receives an annual pension adjustment (PA). The PA, which appears on your T4 or T4A slip, represents the deemed value, for tax purposes, of the pension benefits you earn – or the pension benefits you buy back – during the calendar year.

When you buy back credit, you'll receive a PA for the service, just as you would if you worked during your absence. Your current RRSP contribution room will be reduced by the amount of your PA.

A PA can reduce your RRSP room to zero but it cannot make your RRSP room a negative number. Unused RRSP contribution room can be carried forward.

Unused RRSP contributions

Your unused RRSP contributions appear on line (B) of the RRSP Deduction Limit Statement section of your latest notice of assessment or notice of reassessment.

Payments before April 30 will trigger a PA

If you make any payments towards your buyback prior to April 30 of the year following the end of your leave, you’ll receive a PA. Your PA will be reported on your T4A, which is issued in February. The year in which the PA will be issued to you depends on when you made your payments.

Example

Radha takes one month off in November 2013. She makes two payments toward her buyback, one in December 2013 and one in March 2014. Both payments are made before the April 30, 2014 deadline. In February 2014, she will receive a T4A showing a PA that was triggered by her December payment. In February 2015, she will receive a T4A showing a PA that was triggered by her March payment.

Leaves spanning multiple years

For a leave that spans more than one calendar year, we'll issue you a PA for each of the tax years affected by your payment if you have informed us of your intent. You'll receive one T4A for each year in question. If you have already received a PA, or already filed your taxes, for one of your affected years, you'll receive an amended PA. You must file a form, called a T1 Adjustment Request (T1-ADJ), with the CRA for each year covered by a T4A.

Example

In March 2013, Martin makes a lump-sum payment to buy back a leave he took from September 1, 2010 to June 30, 2012. He receives a PA for each of the 2010, 2011 and 2012 tax years, which will affect his RRSP contribution room for 2011, 2012 and 2013, respectively. The PAs are reported on the T4As Martin receives from us. Martin will need to file a T1 Adjustment Request form for each of the 2010, 2011 and 2012 tax years. We'll also provide a tax receipt in February 2014 for Martin's 2013 tax return.

Lifetime limits

You can receive PAs for up to five years of credit for eligible leaves and up to three additional years for pregnancy and parental leaves (maximum one year for each child). Any leaves in excess of these limits will require approval from the CRA for a PSPA before the credit can be added to your service record. If approval isn't given, you'll be ineligible to buy back the leave.

RRSP overcontributions

If you over-contribute to your RRSP, the CRA will request that you withdraw funds from your RRSP. Your over-contributions may be subject to a penalty tax, and any money you withdraw from your RRSP will be taxed as income in the year it is withdrawn. You may find yourself in this position if, for example, you maximize your RRSP payments in the calendar year for which we subsequently issue a PA.