Group Retirement Savings: RRSP & DPSP

In this post, we consider reasons why organizations may want to consider starting a Deferred Profit Sharing Plan and Group RRSP to attract and retain talent, align individual and organizational goals, and articulate organizational culture while reducing financial risk.


As the economy begins its path to recovery and the labour market in Alberta heats up with search for talent, organizations are looking for ways to maintain productivity, attract and retain talent, and demonstrate a culture of caring.


We know that financial wellbeing is linked to productivity. High numbers of Canadians were struggling financially at the beginning of the pandemic. Employees do not leave their worries at home when they come to work.


The pandemic and subsequent return to work is providing an opportunity to reset organizational culture and affirm to employees that your organization is there to support them. At the same time, it’s a good opportunity to put in place measures that will reinforce the importance of your whole team pulling in the same direction towards organizational success and profitability.


At the same time, some organizations feel uncertain about the future and are investing carefully in the programs and tools needed to attract and retain staff.


With these factors in mind, organizations may want to consider a Deferred Profit Sharing Plan (DPSP) and Registered Retirement Savings Plan (RRSP) for employees.


A DPSP / RRSP combination carries benefits to both employees and employers.


Benefits to Employees

  • Convenience of payroll-deducted contributions: payroll-deducted contributions reduce taxes every pay period. The result is that employees notice very little difference in their take-home pay.

  • Access to low-cost investments compared to retail solutions: the power of the group means lower investment management fees (the group savings equivalent of Management Expense fees or MERs in a retail environments). Over time, lower fees means more money in an employees’ jeans for retirement.

  • Employee contributions vest immediately: that means that employees can contribute to the plan secure in the knowledge that if they leave either voluntarily or involuntarily, they can take their money with them.

  • An opportunity for employer matching contributions: Finally, if the organization is profitable, employer contributions kick in, making it even more attractive to contribute.


Benefits to Employers

  • Vesting is possible for your contributions (maximum 2 years): Some organizations worry that an RRSP program won’t do enough to retain employees, and high turnover can mean that an employee who leaves after six months of employment gets to take the employer contributions after a relatively short tenure. A DPSP allows the employers to lock in their contributions for a maximum of two years. That means that if an employee leaves within that 2-year period, the employer contributions are returned to the organization. The employee can still withdraw their contributions to the RRSP.

  • Aligns individual goals with organizational goals:When employer matching contributions are linked to profitability, team members are encouraged to look for opportunities within their units to save on expenses or increase profitability.

  • Limits obligation to match contributions if your organization is not profitable: In uncertain times, employers can take comfort that they only have to make contributions to the plan if the organization is profitable. While RRSP-only plans allow organizations to suspend contributions, the DPSP calls out profitability and increases awareness of overall objectives.

Please contact us for more information about whether a deferred profit sharing plan could be a fit for your organization.