Calculating a pension adjustment correction

A pension adjustment correction (PAC) is calculated anytime a distribution under a money purchase provision of a registered pension plan occurs under subsection 147.1(19) of the Income Tax Act or subparagraph 8502(d)(iii) of the Income Tax Regulations for contributions made to the plan in the 10 immediately preceding years.

The PAC legislation is deemed to have come into force on January 1, 2021. Returns of contributions made during 2021, for overcontributions dating back to 2011, will result in a PAC for 2021.

Reporting and deadline

A PAC is reported on a T10, Pension Adjustment Reversal (PAR) or Pension Adjustment Correction (PAC), slip. If greater than nil, a PAC must be reported by the following deadlines:

• if the payment of over-contributions occurs in the first, second or third quarter of a calendar year: on or before the day that is 60 days after the last day of the quarter in which the distribution occurs
• if the payment of over-contributions occurs in the fourth quarter of a calendar year: before February of the next calendar year

The legislation for PAC reporting is deemed to have come into force on January 1, 2021. However, for a distribution made before the legislation received royal assent, a T10 return must be filed no later than 60 days after the legislation receives royal assent. So if a return of contributions occurred in 2021, 2022, or in 2023 before Bill C-47 Budget Implementation Act, 2023, No. 1 received royal assent, a T10 return must be filed no later than 60 days after the day the Act receives royal assent.

Impact on an RRSP deduction limit

A PAC forms part of a total pension adjustment reversal and restores a taxpayer’s registered retirement savings plan (RRSP) deduction limit as soon as it is reported. For more information, see Chart 3, Step 5, of Guide T4040, RRSPs and Other Registered Plans for Retirement.