Group Pensions and RRSPs
Group Pensions and RRSPs
Many businesses are choosing to offer incentives like group benefits or insurance plans, which include a range of medical and other wellness services, for employees and their families. These insurance policies cover things like dental, mental health, vision problems, prescriptions, paramedical services, and hospital stays, among other things.
Benefit plans like these are popular incentives, but the possibility of a financial reward – outside of a typical salary or yearly bonus – is proving just as popular. Group pensions and group RRSPS are a way of not only ensuring long-term employee loyalty but also looking after those same employees after they give you years of good, hard work.
What are Group Pensions?
A Group Pension Plan is a group retirement savings plan, into which you —as the employer — contribute to a pension fund for the benefit of your employees. This money is invested for your employees, generating an income that can help ease the future financial weight of retirement. Your employees can also contribute to this pension fund by arranging for a certain amount to be taken from each of their paycheques.
There are two types of Group Pension Plans:
1. The Defined Benefit Plan
In a defined benefit plan, the employee knows what their pension will be worth when they retire, as it is determined by their salary, a set percentage for contributions, and how long the employee worked for your company.
2. The Defined Contribution Plan
The defined contribution plan renders the amount of the pension unknown. The “defined” aspect refers to the percentage of each paycheque an employee contributes toward their pension. The final amount depends on the contributions made by you and your employees and the rate of return these contributions earn.
What are Group RRSPs?
Group RRSPs are basically the same as individual RRSPs, except that they are set up by the employer. Like an individual RRSP, each employee can decide how their contributions —which both you and the employee make — will be invested, and all contributions are tax-deductible. Fees are generally lower than an individual account and employers can set guidelines and matching rules to best suit the company.
Choosing the Right Plan for Your Employees
Aside from providing a livable wage and a supportive work environment, securing a Group Pension Plan or a Group RRSP is a great way to look after your employees and ensure their loyalty. To choose the best option for your workplace, start by talking to your employees about their medical needs and compare those needs to the plans offered by your chosen pension and RRSP provider.
Why Choose Us for Your Group RRSP and Pension Plans?
Lifetime Benefits not only offers health coverage but also pension and RRSP plans, allowing your employees a hassle-free way to save for their retirement. By partnering with us, you can take care of your valued employees now and into the future. We take the work out of being a caring employer.
If you are interested in establishing a group pension or group RRSP for your employees then please contact us today.
Group Pensions and RRSP FAQ
A group RRSP has rules tied to withdrawals and deposits, will often have low fees and is sponsored by an employer who usually makes contributions on your behalf. A basic RRSP is held personally and can be with a bank, insurance broker or financial advisor / planner.
The employee is given the option to keep the funds with the existing institution and they will automatically be looked after by the group benefits advisor, they can transfer their money to another institution or take take the money out in cash for which taxes would apply.
In most cases not until you have left the group. However some plans do allow it for the Home Buyers Plan or education plan.
Yes, they are great retention tool for employers and from the employees perspective, the employer is also contributing to their retirement goals.
You should always, when able, contribute up to the maximum the employer will match. You never get a 100% instant return on your money anywhere else.
Once you have left the company you can transfer it to another institution.
No, but it is always recommended.
The government allows Home Buyers Plan (HBP) and Lifelong Learning Plan (LLP) withdrawals without taxation, but they must be repaid in a set timeframe to avoid taxes. To take the money out in cash for general purposes, there is always tax applied.
Contributions will be report automatically on your T4 at the end of the year and a T4RSP will be issued by the Group RRSP provider which will offset any taxes owing.
That depends on your situation and you should seek financial advice from a financial planner.
You can have unlimited number of RRSP accounts as long as you do not exceed your RRSP contribution room.
Slowly and as needed – taking large withdrawals at one time will increase your taxes owing.
No, CPP is not income tested but withdrawing from an RRSP increases your taxable income which will affect year end taxes, Old Age Security and Guaranteed Income Supplement.
Contributions made by the employer will.
Each situation is different and you should contact a financial planner. Having your money with one person has value and allows for better planning.
There are 2 types of group pension plans, defined contribution and defined benefit. These plans work differently but are governed under pension law, have additional liabilities for companies and consist of defined financial contributions from the employer and employee.
Form an employers perspective the defined contribution is superior as it requires the company to provide the contribution at the time. Form the employee perspective the defined benefit is better as it requires a guaranteed payment in retirement for which the company is responsible for regardless of returns in the pension fund, and must fund any liabilities. To note a defined contribution might benefit an employee if the returns on investments are better than the guarantee.
Defined contribution and defined benefit.
There are a number of different answers that depend on your situation. In some cases yes, depending on the amount of time you have worked for the company. Also you may receive some of your pension in the form of a transfer to a personal RRSP as well as a locked in account of which you can start receiving designated payments as early as age 55. There are also cases of hardship which you can petition the government for early release.
In past years defined benefits were the gold standard, but due to pension deficit liabilities, it is more common for the defined contribution to be used. Group RRSPs are also very popular although not technically a pension.
Yes, you can work anywhere else and some employers allow you to return as a casual employee.
You can no longer contribute and you may have to wait to collect your pension until you are 55. In some cases, plans are set up where employer contributions are taken back if an employee has not passed the vesting period. Such as 2 or 5 years.
Assuming you no longer work there, there a number of different answers that depend on your situation. In some cases yes, depending on the amount of time you have worked for the company. Also you may receive some of your pension in the form of a transfer to a personal RRSP as well as a locked in account of which you can start receiving designated payments as early as age 55. There are also cases of hardship which you can petition the government for early release.
Defined benefit pension plans will and transfer partially or fully to your spouse. Defined contribution will pay as long as there is money in the account.
No, not while you are still working with the company.