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One of the most convenient benefits to put into the workplace is a Group RRSP. They are certainly the perfect choice for small and medium-sized businesses who do not want the administration that runs with pension plans. Group RRSP offers various options for plan design. A Registered Retirement Savings Plan (RRSP) is a way where you can help your deserving employees. A Registered Retirement Savings Plan is a retirement, savings and investing plan for employees and other self-employed people in Canada. Pre-tax money is collected and placed into an RRSP and grows until withdrawal. Many benefit companies in Canada can help you with this situation.
RRSPs are a good fit for you if you fall in the following category:
- You are under 50 and will retire in 10-15 years
- You have an investment that is less than $200K in RRSPs to date
- You are currently in the largest tax bracket
- You pay lower than 5% on mortgage
- You have a balanced portfolio of conservative stocks, bonds and cash investments in your RRSP
Undoubtedly, RRSP is a fine option but there are some key areas that need to be taken care of while you are offering a retirement plan to your employees. The following are some areas that need attention:
There are two options that you can offer:
Mandatory or Optional
As the name suggests, a Mandatory offer requires your employees to necessarily register whereas an Optional plan is a voluntary option for your employees.
Read more: The Balance Between Benefit Costs & Employee Well-Being
Another thing to consider is whether the plan is for full-time employees or part-time employees? As per the 2016 guidelines, an employee who is working continuously for at least 1 year is eligible to enroll for an RRSP plan.
This includes doing a competitive analysis and deciding how much of employer contributions would fit into the organization’s total rewards structure. The contributions can be done on various bases like seniority, years of work, top performers etc. Important! An RRSP is not very tax efficient for employers. Employers need to analyze the option and then decide their contribution.
You can help your employees with this. Ask them to put in a certain percentage of their monthly salary into the plan which will ensure a regular amount of saving over the years.
Qualifying Criteria For Employees
Can your new employees be a part of the RRSP plan as soon as they are hired? You can decide it for them. For instance, the top-level employees are eligible as soon as they are hired and entry-level employees may have some waiting period. Keep in mind, that the waiting period cannot be more than a year.
Read more: 3 Reasons Why Small Businesses Don't Have a Group Retirement Plan
Withdrawing The Money
If you want your employees to get withdrawals as soon as they retire, then RRSP is the right choice. If not, you can go for other options like DPSP (Deferred Profit Sharing Plan) where they can access the funds prior to retirement. Those funds may be withdrawn partly or in their entirety within the first two years of membership.
The fund your employee is going to invest in is decided by the employer. You must have complete knowledge about the investment plan. Your advisor and the plan provider should normally guide you through these choices that are simple, but broad enough for seasoned investors.
As an employer, your job is to collect contributions and set them aside for financial institutions. There are many payroll providers that incorporate their remittance process in their system to make it automatic. You can easily make the remittance through preauthorized payment, cheque or bank transfer.
As soon as you are prepared with these criteria, here is a brief of the procedure you need to follow:
- Form completion by the record keeper for beginning the plan setup.
- Negotiating the contract and fee agreement with the record keeper.
- Deciding on the payroll by working with a payroll service provider.
- Notifying the employees about the plan.
- Preparing member enrollment packages and other materials.
- Monitoring the plan and overall operations.
Ready to get started? Consider BP Consulting, as one of the top group benefit providers in Canada. Give us a call today to set up your plan.
Read more: Why You Must Consider an Employee Benefits Consultant
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