Pension Adjustment Reversal - PAR

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DEFINITION

A numerical calculation in certain Canadian pension plans that reverses a previously assumed pension value. This can occur when an employee leaves a company after a short period of time and before he or she is vested. As a result, the employee may only have his or her pension contributions and not any employer contributions. The pension adjustment reversal "reverses" the overstated pension adjustments, since the employer contributions are not counted.



INVESTOPEDIA EXPLAINS

The pension adjustment reversal reduces the amount of money that has been contributed in that year's pension plan, thereby increasing the Registered Retirement Savings Plan (RRSP) deduction limit. In order to be eligible for a pension adjustment reversal, the employee must terminate his or her membership in the pension plan (for example, by transferring benefits to a Registered Retirement Savings Plan), but not necessarily his or her employment with the company. Conversely, an employee who leaves a company but continues membership in the pension plan is not eligible for the PAR.


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