Our Services > Group Savings (cont.)
Additional Group Benefits
In addition to the instant tax savings, a Group RRSP also offers the following benefits of contributing by installment:
  • Payroll deduction offers the ultimate convenience; It is the easiest way to save.
  • Avoid the last-minute RRSP rush at the end of February.
  • It's easier to reach your RRSP limit that with a single lump-sum contribution at the end of February.
  • Contributing earlier maximizes the value of your savings by keeping them tax-sheltered longer than year-end lump-sum contributions.
  • It eliminates the need to borrow money from a bank to make an RRSP contribution, thus saving interest costs.

Deferred Profit Sharing Plan (DPSP)
DPSP's can be used as a pension plan or as a supplement to a company's Group RRSP. Like a registered pension plan, a deferred profit sharing plan must be registered with Revenue Canada and must comply with the terms and provisions of the Income Tax Act and regulations.

The employer may contribute an amount "out of profits," or related to profits, into a trust fund that will accumulate sheltered from income tax. The employer's contributions are tax deductible and are not taxable to the employee until paid out. Employee contributions are not permitted.

Employer contributions into a DPSP are limited to the lesser of 18% of the employees compensations of 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

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. Any non-vested amount forfeited by a terminating employee must either be allocated to other plan members or refunded to the employer no later than the end of the year following the year in which the amount was forfeited.

A DPSP may give members the right to withdraw vested benefits from the plan at any time. However a member's vested benefit must be paid no later than 90 days after the earliest of:

  • If the member is vested, Mackenzie allows for a $500 withdrawal per calendar year
  • Death of the member
  • Termination of the employment of the member
  • Attainment of age 69
  • Termination of the plan

Highlights
  • No minimum employer contributions
  • Employer contributions are not subject to payroll taxes
  • Only employer contributions are permitted into the plan
  • The employer may impose a vesting period of up to 2 years
  • Withdrawals can be restricted to termination, death and retirement
  • Owners or relatives of owners cannot participate in the plan
  • Terminated employees can withdraw the full vested amount subject to taxation
  • Creates a pension adjustment
  • Can be used to share profits with employees or as a pension plan

 
 
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