Overview of the Amendment to the Coordination Formula of the Public Service (PS), Canadian Forces (CF) and RCMP pension plans with the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP)

1. Will this amendment to the coordination formula affect all plan members?

No.  This amendment will affect only plan members who turn age 65 in 2008 or later.

2. What is the financial impact of this amendment on my pension at age 65?

At age 65, public service plan members also qualify for CPP or QPP retirement benefits.  Because of the coordination between the public service plan and the CPP and QPP, benefits under the public service plan are reduced at age 65.  In June 2006, amendments to the coordination formula of the plans were approved to improve the benefits payable by the pension plans.

As a result of this new amendment, your pension will still be reduced at age 65 (due to the coordination with CPP/QPP) but by a smaller amount than it would have been under the existing reduction factor (0.7%).  

The following will give you examples of the pension reduction at age 65 with 30 years of pensionable service and a retirement date of 2007.

3. Why is the financial impact different from one individual to another?

There are many factors to consider when calculating your pension reduction at age 65. Because this change will be phased in from 2008 to 2012, the year you will reach age 65 will determine the reduction factor applied to your pension. The average maximum pensionable earnings under the CPP/QPP (or your average salary if it is lower)and your years of service at the retirement date are also factors used in the calculation of the pension reduction at age 65.

4. What are the tax implications due to the improvement?

A greater benefit will generate an increased Pension Adjustment (PA) which is an amount calculated by your pension administrator based on pension benefits earned. This PA is used in determining the amount of contributions you can make to a registered retirement savings plan (RRSP). As the PA value increases, the amount you can contribute to your RRSP decreases. Furthermore, your plan administrator has to calculate a Past Service Pension Adjustment (PSPA) when benefits relating to a previous period of pensionable service are improved. The PSPA represents the amount by which the original PA values have increased.

For more information about tax implications, please visit the Canada Revenue Agency (CRA) Web site at: www.cra.gc.ca or call your tax office at: 1-800-959-8281.

5. Where and when can I obtain information concerning my 2009 RRSP deduction limit?

Information about your RRSP deduction limit will be indicated on your 2008 Notice of Assessment that the Canada Revenue Agency will issue to you in 2009. You can also get information about your RRSP deduction limit online at www.cra.gc.ca/myaccount or by calling the income tax office at 1-800-959-8281.  As well, you can use the automated Tax Information Phone Service (TIPS) at 1-800-267-6999 available from mid-September to April 30.

6. How is my pension adjustment (PA) amount determined?

The amount is based on pensionable earnings for the previous calendar year. Amounts such as overtime are not pensionable and therefore not included in the determination of a PA.

7. Where can I get information about my Past Service Pension Adjustment (PSPA)?

Your pension plan administrator will calculate a PSPA amount for all pension plan members who will reach age 65 after 2007.  You will receive a T215 slip, Past Service Pension Adjustment (PSPA) Exempt from Certification, with your PSPA amount shown in Box 2.  If you want to know how your PSPA is calculated, contact your plan administrator.

8. Will all plan members receive the T215 slip?

No. The following individuals will not receive a T215 slip:

• you are reaching age 65 prior to 2008;
• you are a new employee with less than six months of employment and you are not contributing to the plan;
• your PSPA is less than $50; or
• you have already had PA's reported at the maximum (high earnings) for all the applicable years (1990-2007).

9. Can you give me examples of the PSPA amount I can expect?

The PSPA amount will vary depending on your pensionable earnings and when you reach age 65. Because of the amendment to the coordination formula, the PAs reported since 1990 must be revised and the difference will be reported in 2008 as a Past Service Pension Adjustment (PSPA). The following examples will give you estimated PSPA amounts based on pensionable earnings from 1990 to 2007, the year in which you will reach age 65 and on the assumption that you contributed to the pension plan since 1990.