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For over 25 years, we have helped small to medium-sized businesses achieve their financial goals through group retirement plans. In this blog, we outline exactly what a group retirement plan is and the customized plans that we provide for our members.
What is a group retirement plan?
A group retirement plan is an excellent way to put money towards your retirement years while in the peak earning stage. It has lower and more competitive fees than a regular Registered Retirement Savings Plan (RRSP) due to the number of plan participants, so it’s worth investing in if this is an option your company currently has. In addition, many employers today are matching the contribution that you make, based on an agreed percentage of your salary. This allows you to increase your savings without any additional investment from you.
Defined Contribution Pension Plan (DCPP)
The DCPP is the most popular plan offered by Canadian employers today. It allows you to make contributions while working for your employer. This type of plan allows employers to match their employees’ contributions. There is a limit to how much you can contribute to your DCPP per year. This type of pension plan has no pre-determined payout at retirement, but the final amount paid is based on total assets accumulated by the employee.
Group Retirement Savings Plan (GRSP)
The GRSP is very similar to an individual Registered Retirement Savings Plan (RRSP). All the standard rules for a RRSP apply to a GRSP. This type of plan allows employees to invest a portion of their earnings. With a GRSP, you benefit immediately from tax savings on any contributions made and your employer can match the contribution that you make also. An employee can contribute up to 18% of their previous year’s income, up to a maximum of $29,210 for 2022. The money cannot be touched until retirement unless you wish to borrow money for the Home Buyer’s Plan or Lifelong Learning Plan.
Deferred Profit Sharing Plan (DPSP)
A DPSP enables employers to share a portion of their profits with employees. Employers typically offer a DPSP alongside a group RRSP or other savings plans. Only the employer contributes to a DPSP and the contributions reduce the overall RRSP contribution room. Employees do not pay taxes on contributions until they withdraw funds from their DPSP. DPSPs are a retention tool commonly used by employers – vesting periods are implemented up to a maximum of 2 years. It also reduces the company’s tax burden, since all their contributions are tax-deductible.
Defined Benefit Pension Plan (DBPP)
This type of plan allows employees to receive a lifetime of retirement income based on the average salary earned and the years of service to an employer. An employee on a DBPP knows the exact pension amount they will receive when they reach retirement.
Group Tax Free Savings Account (GTFSA)
A GTFSA offers employees a tax-free investment option for growing their savings. Like the standard Tax Free Savings Account (TFSA), there is no tax on withdrawals made. It’s a great savings vehicle for short-term purchases such as a new car, home improvements, a vacation or to create an all important emergency fund. Many employees contribute to a GTFSA as a means of saving for a rainy day or to supplement their overall retirement savings goals.
Are you looking for a Canadian group retirement plan provider? Open Access works with companies across Canada to implement group retirement plans. We understand that every organization has different needs and requirements, which is exactly why our plans are fully customizable. Contact us here to learn more about the group retirement plans we offer, and how we work with organizations to set them up quickly and seamlessly.
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