Share Your Company’s Success and Growth With Your Employees

A DPSP is a registered plan that allows companies to share their profits with employees. DPSPs provide tax incentives and allow for vesting periods on employer contributions but do not allow employees to contribute to the plan. A Deferred Profit Sharing Plan, combined with a Group Retirement Savings Plan can be a cost-effective alternative to a Defined Contribution Pension Plan.

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Is This Plan Right for You?

This plan may be an appropriate choice if:

  • You are interested in tax incentives – contributions are tax deductible and exempt from federal and provincial payroll taxes
  • You are looking for a cost-effective alternative to a Defined Contribution Pension Plan
  • You want to retain top talent - it is tied to company profits and has a vesting period

Key Features

  • Investment Options: Investment options are selected by employees based on choices available within the plan.
  • Spousal Plans: Only personal plans are allowed with a DPSP.
  • Contribution Sources: The employer contributes to the plan based on the profits of the organization. The employer may or may not contribute in years where no profits are recorded.
  • Contribution Limits: Employers can contribute the lesser of: a) 18% of the employee’s current year compensation, or b) half of the Money Purchase limit ($13,115 in 2017).
  • Sponsor Tax Implications: Contributions are tax deductible and exempt from federal payroll taxes, including CPP, EI and other applicable provincial payroll taxes.
  • Member Tax Implications: Contributions are not taxed, but rather create a pension adjustment that reduces RRSP contribution room in subsequent years, which is reflected as PA Box 52 on your employees’ T4.
  • Regulation: Governed by the Income Tax Act and regulated by the Canada Revenue Agency. The Joint Forum has issued CAP Guidelines that define sponsor, member and administrator responsibilities.
  • Member Withdrawals: Assets may be locked into the plan during the time of employment. Withdrawal of assets that are not locked in are taxable as income unless they are transferred to another registered plan. Member withdrawals are also subject to applicable withholding taxes.
  • Restrictions or Vesting: There is a maximum two-year vesting period. Members can also be restricted from making withdrawals while employed by the company.
  • Termination and Retirement: Vested assets can be transferred to another DPSP, an RPP, RRSP, RRIF, used to purchase an annuity, or taken in cash as a withdrawal. Non-vested assets are forfeited at the time of termination.
  • Member Enrollment Materials: Here is an example of the types of materials your employees would be asked to complete in order to enrol for a DPSP.

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A Capital Accumulation Plan (CAP) is a tax assisted investment or savings plan that permits the members of the CAP to make investment decisions in accordance with options offered within the plan. A Group Savings plan is considered a CAP. The Joint Forum of Financial Market Regulators issued the CAP guidelines to clearly outline the responsibilities of parties involved in a CAP and to ensure that members participating in a CAP were receiving the information and assistance they needed to make investment decisions.

RBC Royal Bank will work with you to ensure that your plan complies with the CAP guidelines.

See complete CAP Guidelines