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Pension Plan
Limits - Pension Adjustment
Defined Benefit Pension Plans (DBPP's) have annual Pension
Adjustment (PA) amounts which limit or eliminate your RRSP contribution room.
Click HERE for more on Pension Plans and
HERE for more on RRSP Contribution Limits.
Typically, DBPP's are 2% plans and the calculations below
assume this type of plan. The related Pension Adjustment formulas are:
-
Total Gross
Salary X 2% = Annual Benefit Entitlement
-
(9 X Annual
Benefit Entitlement) - $600 = Pension Adjustment (PA)
For example, a $100,000 per year gross salary yields a PA of
$17,400. This PA directly reduces the amount of RRSP Contribution Limit. In this
example for 2005, the RRSP Contribution Limit is $16,500 and since the PA is in
excess of this limit, there is no ability to contribute to an RRSP in that year.
The PA is subject to a maximum figure and changes each year. The following are
the Maximum Pension Adjustments:
| Year |
Maximum PA |
Earnings which maximize the PA |
| 2004 |
$15,900 |
$91,667 |
| 2005 |
$17,400 |
$100,000 |
| 2006 |
NA |
NA |
| 2007 |
NA |
NA |
| 2008 |
NA |
NA |
| 2009 |
NA |
NA |
| 2010 |
NA |
NA |
Contact Keith Anderson CA
at (780) 447-5830 if you have
further questions, concerns, or the need for advice.
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