Group Retirement Plans

At MMGC we believe that a group retirement savings plan is an essential component of any public or private sector compensation package. We are strong believers in proactive consultancy and education for members. By engaging and educating members it is our hope that each employee takes more of a vested interest in their own retirement planning process.

Defined Contribution Registered Pension Plan

Gaining popularity over Defined Benefit Plans, the DCPP is more flexible for the employer and more portable for the employees. In an effort to attract and retain good employees, an employer may want to offer a DCPP designed with a vesting schedule that encourages long-term thinking. A plan document is created which outlines the rules and requirements of the plan. The plan document outlines such items as the contribution rates, the eligibility period, and vesting period. The plan is registered with Canada Customs and Revenue Agency as well as the particular Provincial Authority and must comply with their regulations.
Employer contributions to the DCPP are not subject to payroll taxes and the employer is able to impose a vesting period of up to two years on contributions made to the plan. With a DCPP, required contributions from both the employer and employee are 'locked-in' until retirement.

Group RRSP

The Group RRSP is the simplest and most popular plan. It is easy to set up and the employer contributions to the plan are voluntary. The tax savings associated with RRSP investing make the Group RRSP a top choice with employees. The Group RRSP is a collection of individual RRSPs where:
  • An employer assists a group of employees by handling their contributions through regular payroll deductions on a pre-tax basis; and/or
  • An employer makes regular or lump sum contributions on behalf of all or just some employees on a pre-tax basis.
As permitted by Canada Customs and Revenue Agency, both employee and employer contributions are made on a pre-tax basis. Employees will not overpay their taxes during the year and then have to wait until their income tax returns are processed to receive a refund. This is a significant benefit of a Group RRSP over an individual RRSP.

Deferred Profit Sharing Plan

Often set up by employers as a means to share profits with their employees, a DPSP is registered with Canada Customs and Revenue Agency and must comply with the terms and provisions of the Income Tax Act and regulations. Amounts allocated to a member's account must vest to the member after two years of membership in the plan, or earlier if the plan allows for it. The contributions the employer makes to the DPSP are not subject to payroll taxes. Only employer contributions are permitted into the DPSP and the contributions are limited to the lesser of: 18% of the employee's compensation for the year from the employer or A dollar limit equal to one-half of the defined contribution pension plan limit, as follows:
  • 1998 through 2002 - $6,750
  • 2003 - $7,250
  • 2004 - $7,750
  • 2005 - Indexed

Combination DPSP/Group RRSP

By combining these two group plans employers can take advantage of the features of both plans. The employer contributions will be made to the DPSP while employee contributions are made into the Group RRSP. The employer contributions can be made contingent upon the employee contributing into the Group RRSP.

Things to consider:

Choosing the right company - As independent brokers, we can help you choose an investment company that can meet your individual company needs and expectations. A company to meet your needs should offer:

  • Fund Selection and Fund Performance
  • Easily accessible asset allocation information
  • Online member services
  • Reasonable Management Fees and or Member Fees

Choosing the right plans and funds - It is important to design a plan that will provide your employees with an easy, tax-effective way to save for their futures. Plans can include but are not limited to:

  • Locked In Retirement Account (LIRA)
  • RRSP / Spousal RSP
  • Deferred Profit Sharing Plan (DPSP)
  • Tax Free Savings Accounts (TFSA)

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