We will probably need the advice of a tax lawyer/accountant, if and ever, the pension comes into effect. Has anyone had the experience of getting transfered from Supp Res to the P Res? The process is absolutely full of pitfalls, and takes forever- Med, Security, qualifications etc. My understanding is that the CDS is attempting to get the former CLS, Lt Gen Jeffries off Supp List and into the P Res to assist with transformation and has "discovered" the problems. He will be fast tracked of course. I personally am getting my ducks in order to launch a complant through the chain of command. A complant, not a Redress. It will be based on my Redress, signed by the CDS years ago that stated that the Reserve Pension was a "PRIOITY" Trouble is priorities in the CF are routine matters, its just a phrase. The following is from the CFPMP web site, and is an update of a previous document.
November 2005
This fact sheet is for Reserve Force members who are considering buying back past service or earnings under the CFSA pension plan.
Tax issues arise when you buy back past service or earnings
Current contributors to the Canadian Forces Superannuation Act (CFSA) pension plan can buy back eligible service that they don't now count as "pensionable service". When the new CF pension provisions come into force in 2007, Reserve Force members who become CFSA contributors or participants will also have an opportunity to buy back.
When you buy back, your pensionable service and/or earnings increase, which in turn, increases your pension benefit. As a result, you may be able to retire with an unreduced pension at an earlier age. Therefore, it's usually to your advantage to have as much pensionable service and earnings under the CFSA pension plan as possible.
The details of buyback for Reserve Force members are still being worked out in the development and approval of the regulations and administration systems. In the meantime, however, it's a good idea to consider some of the tax issues that arise when you decide to buy back past service or earnings.
If you're buying back past service or earnings since 1990
You will be able to buy back past service or earnings related to any years since 1990, as long as you have enough corresponding amount of unused RRSP deduction room. If you don't, you can create this deduction room by cashing in existing RRSPs, or using that money to buy back service.
Under Income Tax Act rules, a Past Service Pension Adjustment (PSPA) results whenever you buy back pension benefits for service since 1990. For example, if, between 1990 and now, you had been contributing or participating in the CFSA, you would have already had Pension Adjustments (PA) for pension earned at the time. That PA would have limited how much you would have been able to contribute to your RRSP.
What's a PA?
In 1990, the federal government revamped the tax system as it applies to retirement savings. To promote tax fairness between members of an employer-sponsored pension plan and non-members, the government brought in the PA.
The Canada Revenue Agency (CRA) requires that, each year, employers calculate a PA for each employee based on his or her participation in the pension plan. The government uses the PA to determine an individual's RRSP deduction limit for the following year, and communicates the RRSP deduction limit on the Notice of Assessment sent after individuals file their annual income tax returns.
Under plans like the CFSA, the PA represents the value of the pension built up during the year, not the amount of employee or employer contributions.
See CFPMP Fact Sheet-called Pension Adjustment-for more information on the PA.
How's the PSPA applied?
If you had been a CFSA contributor or participant earlier, you would have received a PA for each year of participation since 1990. After the new provisions come into force, any buyback will trigger a PSPA, to make sure that the retirement savings system stays in balance, under tax law.
The PSPA reduces your RRSP deduction limit retroactively, just as if you had received a PA for every year since 1990 that you are now buying back.
The CRA must approve-or, in the language of the CRA, "certify"-a PSPA for service since 1990, which you wish to buy back. If you do not have enough unused RRSP deduction room, or cannot create it by withdrawing funds, the PSPA will not be approved. If the CRA doesn't approve the PSPA, you can't buy back the past service or earnings.
Examples of how the PSPA works
Here are two examples of how the PSPA could affect RRSP deduction room and an individual's ability to buy back past service.
Example 1
Sgt Linda Bloggins joined the CF as a Reserve Force member on May 1, 1996. She's been serving on a full-time basis, and becomes a contributor under CFSA Part I on the coming-into-force date-for the sake of this example, March 1, 2007.
In January 2008, she wants to buy back her 10.84 years of service before the new CF pension arrangements came into force. Linda has made contributions to her RRSP since joining the CF but did not make the maximum permitted contributions.
Linda's unused RRSP deduction room as of December 31, 2007 $60,000
PSPA related to the buyback of 10.84 years of service $53,000
The CRA will approve Linda's PSPA.
Example 2
Sgt Max Muggle also joined the CF as a Reserve Force member on May 1, 1996. He's been serving on a full-time basis, and becomes a contributor under CFSA Part I on the coming-into-force date-for the sake of this example, March 1, 2007.
In January 2008, he also wants to buy back his 10.84 years of service before the new CF pension arrangements came into force. However, Max contributed the maximum permitted to his RRSP each year.
Max's unused RRSP deduction room as of December 31, 2007 $0
PSPA related to the buyback of 10.84 years of service $53,000
In this case, the CRA won't approve Max's PSPA. The CRA allows to carry forward a negative balance of up to $8,000. Therefore, under tax law, Max will be allowed to buy back the past service as long as he withdraws at least $45,000 from his RRSP, or transfers all or part of it to the CFSA pension plan to pay for the buyback.
For the sake of these examples, we have used Reserve Force members who are joining CFSA Part I. The PA and PSPA will also be generated for those who buy back under CFSA Part I.1.
Which RRSP contributions will the PSPA affect?
The PSPA won't have any impact on your RRSP contributions for 2005 and 2006.
The PSPA affects your RRSP deduction limit in the year the PSPA is approved by the CRA. For example, if your buyback application is approved by the CRA in 2007, your 2007 RRSP deduction limit will be immediately reduced. The 2007 RRSP contributions you will have made based on your 2006 Notice of Assessment may need to be withdrawn or may not be tax-deductible.
Individuals who have unused RRSP contributions (that is, contributions made to the RRSP but not yet deducted) may have to make withdrawals from their RRSPs to avoid paying penalty taxes.
If you're buying back pre-1990 service or earnings
PAs were introduced in 1990. Therefore, a buyback of your pre-1990 years of past service or earnings isn't affected by and won't change the amount you have contributed to your RRSP. There are, however, limits on the tax-deductibility of the amount you will be asked to pay for that bought back service or earnings.
If you're buying back service or earnings that combine years before and since 1990
Whether your buyback application includes pre-1990 or post-1990 service or earnings, the CRA must still certify the PSPA for your service since 1990 for you to be able to buy back your pensionable service or earnings.
For more information on PSPAs, tax-deductibility of RRSP contribu-tions, and other tax-related issues Call Canada Revenue Agency's Automated Information System for Individual Tax Filers at:1 800 959-8281
(press * on your telephone keypad to speak with an agent)
For more information concerning the new provisions Visit the Web site of the Canadian Forces Pension Modernization Project,
on the Internet, at: http://www.forces.gc.ca/hr/dgcb/cfpmp/
For more information concerning your current pension benefits and entitlements Visit the Web site of the Director Accounts Processing, Pay and Pensions / Pension Services,
on the Internet, at http://www.admfincs.forces.gc.ca/pension/
The information in this fact sheet covers proposals that have been developed by the Canadian Forces Pension Modernization Project. However, further work must be completed before the new pension provisions are finalized and given legal effect through the regulations. Members should be aware that the proposals are subject to change during this finalization process. In the event of any discrepancy or misunderstanding, pension obligations and entitlements will accrue in accordance with the applicable legislation.
