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Update--PAR: Pension Adjustment Reversal

by Vern Beattie

Revenue Canada recently published draft regulations outlining the details of how PARs are to be calculated as well as the reporting timeline. Here are the main points:

Definition
The basics are much the same as originally reported in our summer 1997 edition with some additional clarification:

For Defined Benefit Plans
The PAR is defined as the total of all Pension Adjustments (and Past Service Pension Adjustments, if any) reported since 1990, minus the transfer value of the post-1989 accrued benefit. For final average plans, the post-1989 accrual may be calculated on a pro-rata basis. For career average and fixed benefit plans, the exact accrual must be used.

For Defined Contribution Plans
The PAR is equal to the total of post 1989 unvested employer contributions without interest.

PARs apply only to terminating or retiring members who choose to take all of the value of their benefit out of the plan as well as non-vested terminated members. In other words, they apply to anyone who leaves a pension plan without further pension entitlement under the plan. They do not apply on death or for those choosing a deferred or immediate pension. This includes members who have made a partial withdrawal from the plan but who still have remaining pension entitlement.

PARs apply retroactively to terminations paid out on or after January 1, 1997.

Reporting
For 1997 and 1998 terminations, PARs must be reported by March 31, 1999 or within 60 days from the publication of the final regulations, if later. Because of the 1999 reporting date, employees terminated in 1998 will have their RRSP cutoff extended from the usual end-of-February deadline to April 30, 1999.

In future years, PARs must be reported within 60 days after each quarter.

Reporting forms have not yet been published. They should be available when the regulations are finalized.

Implementation
Our first priority is to deal with the backlog in respect of 1997 and 1998 terminations. The key piece of information required to calculate the PARs for these ex-members (of defined benefit plans) is the total of all their Pension Adjustments reported since 1990. We are currently in the process of determining the availability of this information from our records and we will contact our clients shortly to obtain any additional information that may be required. Should you have any questions in the meantime, please do not hesitate to contact the writer.