Chapter 5

Question 1

Pension Adjustment (PA) definition

Answer 1

reduces RRSP contribution room for people who have employer sponsored plan. It is the total pension credit from all pension plan in which the member’s employer participated

Question 2

RRSP maximum $ limit

Answer 2

the maximum amount an employee can contribute to RRSP + RPP + DPSP = lessre of

• 18% of prior year’s total compensation
• money purchase limite of prior year

Question 3

Pension credit

Answer 3

measures the value of pension benefit earned or accrued during the year

Question 4

PA for a DCPP

Answer 4

It is the total of employee and employer contribution during the previous year + Forfeited amount

Question 5

PA and divorce settlement

Answer 5

transfer of RPP resulting from divorce settlement is not included in annual contribution limit

Question 6

PA and DPSP

Answer 6

PA is the sum of employer contribution + forfeited amount
Employer contribution is the lesser of
-1/2 money purchase limit or
-18% of salary minus forfeited amount

Question 7

PA for a DBPP

Answer 7

step 1: lesser of:
1)Plan formula 
2)2% of earnings 
3) greater of 
-Overriding provision 
- 1/9 money purchase limit 
Step 2: Pension credit formula = (9*benefit earned)-600
or money purchase limit

Question 8

DBPP : integrated formula

Answer 8

the plan are integrated with benefits provided with CPP or OAS. The benefit earned is reduced ba a factor that takes into account an estimate amount the employee will collect from CPP

Question 9

Contribution holiday and PA

Answer 9

Because employee continue to accumulate pension benefit during a contribution holiday, it has no effect on PA

Question 10

Double dipping

Answer 10

refers to the extra RRSP contribution that can be made the year a company sets up a contribution plan

Question 11

Past Service Pension Adjustment (PSPA)

Answer 11

• Benefits improved retroactively
• Additional period of past service credited
• Retroactive change to the determination of benefits
  PSPA is not available for DPSP nor for money purchase plan

Question 12

Pension Adjustment Reversal (PAR)

Answer 12

restores an individual’s RRSP contribution room in the the situation where the individual terminates membership in an RPP by terminating employment or participation in the plan. PAR does not include individual’s own contribution nor benefit earned

Question 13

What are the 3 types of profit sharing plan

Answer 13

1) Cash profit sharing plan
2) employee profit sharing plan
3) Deferred profit sharing plan

Question 14

Cash profit sharing plan

Answer 14

Fully taxable bonuses paid out once or twice a year

Question 15

Employee Profit sharing plan

Answer 15

% of profit with no maximum which is added to the employee taxable income for the year

Question 16

Deferred Profit Sharing Plan (DPSP)

Answer 16

registered money purchase plan with contribution made out of profit. No contribution by employees

Question 17

Plan for significant shareholders (owns at least 10% of voting shares)

Answer 17

DBPP: pension benefit for the significant shareholder must not be more than 50% of total pension benefit
BCPP: contribution can be the lesser of $3500 or 20% of remuneration for the year in question

Question 18

Individual Pension Plan

Answer 18

A type of DBPP which has to reach a certain value at retirement so tax deductible are not limited to 18% of income

Question 19

Max contribution to a DPSP

Answer 19

1/2 of money purchase limit

Question 20

Capital Accumulation Plan (CAP)

Answer 20

It is a tax assisted investment plan that allows a member to make investment decision from not less than 2 options . Can be DCPP, DPSP, group RRSP, group RESP

Question 21

Taxation on RPP

Answer 21

RPP contribution made by the employee is tax deductible