Plan on buying back a leave from 2013? The tax deadline is April 30
April 23, 2014
Were you on a leave of absence (such as a maternity leave) that ended in 2013? If so, you may be able to buy back credit in the plan for the time that you were away. Buying back credit can maximize your pension and in some cases help you qualify for a pension sooner.
If you are planning on buying back credit for that leave of absence, the deadline to claim intent of your buy back and receive a pension adjustment (PA) is Wednesday, April 30, 2014. However, if you decide to buy back for that leave but choose not to claim your intent by Wednesday, April 30, 2014, you will receive a past service pension adjustment (PSPA).
What is the difference between a PA and a PSPA?
Every member of a registered pension plan receives an annual PA. The PA, which appears on your T4 or T4A slip, represents the deemed value, for tax purposes, of the pension benefits you earn during the calendar year.
If you choose to pay for your buy back by the April 30 deadline of the calendar year following the year your absence ended, you will 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.
If your purchase is made after April 30 of the calendar year following the year your absence ended, you will receive a PSPA. The CRA will approve or deny the PSPA based upon your available RRSP room in the year that it is issued. If the PSPA is denied, you may still qualify for a reduced buyback.
You can increase the chances of CRA approval of a PSPA by paying for your purchase of credit through an RRSP transfer. An RRSP transfer will lead to a corresponding reduction in your PSPA.
What do I?
If you are thinking about buying back credit or wish to declare your intent to purchase a buyback, visit iAccess Web, our secure member website. All the tools, personalized information and advice you need to make your decision can be found in the ‘My Buybacks' section. You can also contact our Client Services Department directly.
For more on buying back credit, read our Tax Implications.