Which of the following statements about pension adjustments (PA) is TRUE?
A.
They represent how much your pension is reduced due to market conditions.
B.
They increase your registered retirement savings plan (RRSP) room by the amount of the pension adjustment.
C.
They represent how much your pension will increase due to years of service.
D.
You will receive a PA whether you are in a defined contribution or a defined benefit pension plan.
The Answer Is:
D
This question includes an explanation.
Explanation:
A pension adjustment (PA) is the amount that the Canada Revenue Agency (CRA) assigns to your pension plan each year to reflect the value of the pension benefits that you earned. The PA reduces your registered retirement savings plan (RRSP) contribution room for the following year by the same amount. The PA ensures that all taxpayers have access to comparable tax assistance, regardless of the type of pension plan they participate in. You will receive a PA whether you are in a defined contribution or a defined benefit pension plan, but the calculation of the PA will differ depending on the type of plan. (Canadian Investment Funds Course, Chapter 8, Section 8.2)
[:, Canadian Investment Funds Course, Chapter 8, Section 8.2: Retirement Savings Plans and Pension Plans, Investopedia: Pension Adjustment: Definition and Types of Plans1, PlanEasy: What Is A Pension Adjustment?2, , ]
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