What a pension adjustment is
A pension adjustment (PA) is the value of the retirement benefits an employee earned in a registered pension plan or deferred profit sharing plan during the year. Its purpose is fairness: it reduces the employee's RRSP room so that someone in a workplace pension can't shelter more in total than someone saving only in an RRSP. Group RRSP contributions don't create a PA, because they already use RRSP room directly.
How PAs are calculated for DC plans and DPSPs
For a defined contribution pension plan, the PA is simply the total of all employer and employee contributions made to the member's account for the year, plus any forfeitures reallocated to them. For a DPSP, the PA is the employer contributions made for the year (employees can't contribute to a DPSP). Defined benefit plans use a different formula based on the benefit earned.
Where the PA is reported
Employers report each employee's PA in box 52 of the T4 slip, which is due by the end of February. The CRA then uses it to calculate the employee's RRSP deduction limit for the following year, which appears on their Notice of Assessment.
The formula for RRSP room
An employee's new RRSP room for a given year is 18% of the previous year's earned income, up to the annual dollar limit ($33,810 for 2026), minus the previous year's PA, plus any pension adjustment reversal (PAR) and any unused room carried forward. Put simply: the PA reported on this year's T4 reduces next year's RRSP room.
A worked example
Priya earns $90,000 and belongs to a DC pension plan. She contributes 5% of her salary ($4,500) and her employer matches 5% ($4,500). Her PA for the year is $9,000. Next year, her new RRSP room is 18% of $90,000 ($16,200) minus her $9,000 PA, or $7,200, plus any unused room from earlier years. If Priya were in a Group RRSP with the same contributions instead, her $9,000 would come directly out of her $16,200 of room in the same year, leaving the same $7,200 for personal RRSP savings.
Annual limits for 2026
For 2026, the money purchase limit for DC pension contributions is $35,390, the DPSP limit is $17,695, and the RRSP dollar limit is $33,810. DC contributions are also capped at 18% of the member's compensation for the year. These limits are indexed and published by the CRA each year.
Pension adjustment reversals (PAR)
If an employee leaves before employer contributions have vested, for example unvested DPSP contributions that are forfeited, the PA previously reported for those contributions overstated what they actually received. A pension adjustment reversal restores that RRSP room. Because DC pension contributions now vest immediately in most jurisdictions, PARs mostly arise from DPSPs with a vesting period.
What to tell employees
The most common question employers hear is why an employee's RRSP room dropped after joining a pension. The answer is that the PA is doing its job: their employer's contributions are already sheltering part of their savings. Encourage employees to check their Notice of Assessment or CRA My Account for their exact room before making personal RRSP contributions, so they don't over-contribute.