GROUP RETIREMENT PLANNING:

Employees who are fortunate enough to participate in an employer group retirement plan are even further ahead than those who provide for their future retirement needs by contributions to an individual retirement plan. There are a few different options available to employers. Each provides unique benefits to both the employer and the employees.

GROUP RRSP’s: The Group RRSP is the simplest and most popular plan for many reasons. It is easy to set up and employer contributions are voluntary. The tax savings associated with RRSP make the Group RRSP a top choice with employees. This plan 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 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 (DPSP):

A Deferred Profit Sharing Plan is often set up by employers as a means to share profits with their employees. A DPSP is registered with Canada Revenue Agency and must comply with the terms and provisions of the Income Tax Act. Amounts allocated to a member’s account must belong 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 an employer can contribute to a DPSP. These contributions are formulated by the company and allow for maximum contributions to individual employees by the Canadian Revenue Agency. The contributions are limited to the lesser of:

• 18 percent of current annual income, or
• 50 percent of the allowable money purchase limit

Year*	DPSP	Money purchase Limit
2006	$9,500	$19,000
2007	$10,000	$20,000
2008	$10,500	$21,000
2009	$11,000	$22,000

^* For subsequent years, the money purchase limit will be increased by increases in the Average Industrial Wage.

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.