On July 4, 2023, the Canada Revenue Agency published information about Permitted Corrective Contributions (PCC) and Pension Adjustment Corrections (PAC) for money purchase (MP) registered pension plan administrators (RPPs).
A PCC is a contribution to an MP RPP in a calendar year to correct contribution errors in one or more of the 10 immediately preceding years. A contribution error must have arisen due to a failure to enroll an individual as a member of a plan or to make a required contribution to a provision.
PCCs will be limited to the lesser of two amounts:
- The first amount is determined by the formula A + B – C.
A is the total of the missed contributions over the 10 immediately preceding years.
B is the amount of interest, if any, applicable to the missed contributions. The rate of interest used may be the rate required by the Pension Benefits Standards Act, 1985 or a similar law of a province. Where the Pension Benefits Standards Act, 1985 or a similar law of a province does not require an interest rate, the rate used must be reasonable (such as the rate of return of the plan fund over the period of missed contributions).
C is the total amount previously contributed as a PCC for the individual to the provision.
- The second amount is determined by the formula E - F.
E is 150 percent of the money purchase limit for the calendar year.
F is the total amount of PCCs previously contributed in respect of the individual to the provision, or to any other money purchase provision, if a participating employer participated on behal of the individual under the other provision.
PACs provide more flexibility to plan administrators of MP RPPs to correct for pension adjustments (Pas) reported for over-contributions to a MP RPP that were returned to the payer. A PAC will restore a member’s RRSP deduction limit where over-contributions are returned to the contributor.
A PAC is only calculated and reported for amounts returned to the payer that were made in the 10 immediately preceding years, and it is calculated based on the formula:
A – B – C
Where:
A is the total of all amounts, each of which was included in the individual’s pension credit with respect to an employer for the retroactive year under the provision.
B is the total amount that ought to have been contributed to the provision under the terms of the plan as registered with respect to the individual for the retroactive year.
C is the amount, by which the total of all amounts, each of which is the individual’s PA for the retroactive year in respect of a participating employer, exceeds the lesser of the money purchase limit for the retroactive year and 18 percent of the individual’s compensation (as defined in subsection 147.1(1) of the Act) from participating employers for the retroactive year.