Are pension contributions tax-deductable?

The regular contributions made to the USPP are tax sheltered. When plan members complete their Income Tax returns they may claim their USPP contributions as a deduction from their income. Within certain limits, contributions to purchase prior service may also be tax deductible

How do pension contributions affect contributions to RRSP’s?

Under the current tax system contributions to the USPP do not directly affect contributions to RRSP’s. It is the value of the USPP entitlement earned in the tax year that will be used by Canada Revenue Agency to determine how much plan members can contribute to their RRSP in respect of the next tax year. The value of pension earned in the year is reported on their T-4’s, in Box 52, and is called the Pension Adjustment or PA. Canada Revenue Agency will notify plan members of the RRSP contribution room that they have for the tax year. The amount that can be contributed to an RRSP in a given year is 18% of the previous year’s earned income (to an annual dollar maximum) minus the PA for the previous year.

If upon termination, a plan member’s benefit is less than their total Pension Adjustments for years since 1989 the Pension and Group Insurance Administration Division will calculate a Pension Adjustment Reversal (PAR). This will reinstate RRSP contribution room for the years after 1989.