A Simple Group Savings Plan for Businesses in Quebec. No Cost, No Administration, No Expertise Required.
As a result of Quebec legislation, businesses with 5 or more eligible employees must provide a workplace savings plan. VRSP is a simple, low cost*, easy-to-administer workplace savings plan in which employee contributions are deducted directly from payroll using pre-tax dollars.
Companies with an existing RBC group savings solution in place for all eligible employees may not require a PRPP or VRSP under Quebec's legislation.
VRSP legislation requires employers to provide employees with 30 days notice before entering into a plan. Use the letter template in the “Resource Materials” section below.
Investment Options: Upon enrolment, employee contributions will automatically be allocated to the default Lifecycle fund. However, in addition to the Lifecycle fund, employees can choose any of four other options:
- Canadian Equity fund
- Global Equity fund
- Total Return Bond fund
- RBC Investment Savings Account
- Spousal Plans: Spousal plans are not applicable to VRSPs.
- Contribution Sources: Contributions are made by the employee. Employer contributions are optional.
- Contribution Limits: Employees can contribute up to 18% of their previous year’s earned income (to a maximum of $24,270 in 2014), plus or minus other adjustments. Employees should consult their Canada Revenue Agency Notice of Assessment from the previous year to determine their individual contribution limit.
- Sponsor Tax Implications: Employer contributions are tax deductible and are exempt from payroll taxes including CPP/QPP, EI and other applicable provincial payroll taxes.
- Member Tax Implications: Payroll deduction contributions are taken from pre-tax funds and reduce member income for tax purposes. Annual tax receipts are issued for both member and company contributions.
- Regulation: Enabled by the federal Pooled Registered Pension Plans Act and the Income Tax Act. VRSP is governed by the National Assembly’s Voluntary Retirement Savings Plans Act (Bill 39) and accompanying regulations.
Administrators must obtain a licence from the Autorité des marchés financiers to offer a VRSP.
The plan must be registered with the Régie des Rentes.
- Member Withdrawals: Member contributions are not locked in and can be withdrawn during employment. Employer contributions are locked in until retirement. Withdrawals are only permitted under certain conditions (e. g. Disability). Withdrawals are taxable as income unless they are transferred to another registered plan. Withdrawals are also subject to applicable withholding taxes.
- Restrictions or Vesting: Employee-made contributions are immediately vested with permitted withdrawals.
Employer-made contributions are immediately vested and locked in until retirement, except in special circumstances (e.g. disability).
- Termination and Retirement:
- Termination: If a plan member leaves the sponsor company, assets may be maintained in a direct member RRSP account within RBC PRPP or VRSP with no impact to the member (investments and account number remain the same).
- Retirement: Upon retirement, assets can be transferred to a RRIF or taken in cash as a withdrawal from the plan. Assets transferred to a RRIF or used to purchase an annuity must be transferred no later than age 71.
Member Enrolment Materials: The deadline for implementing a VRSP varies based on the number of eligible employees in your company on a specified date:
- Employers with 20 or more eligible employees on June 30, 2016 must subscribe to a VRSP by December 31, 2016.
- Employers with 10 to 19 eligible employees on June 30, 2017 must subscribe to a VRSP by December 31, 2017.
- Employers with 5-9 employees will have to comply at a date yet to be determined, but it will not be earlier than January 1, 2018
Frequently Asked Questions
Pooled Retirement Pension Plan (PRPP) is a new alternative to traditional pension plans; it is designed for small and mid size companies that want to provide their employees with an effective, low cost, and easily administered way to save for retirement.
Features of the PRPP include:
- Automatic enrolment of all employees
- Employee opt out provision within the first 60 days
- Up to six investment options
- Employer is not required to monitor investments (no CAP requirement)
Voluntary Retirement Savings Plan (VRSP), is Quebec’s version of the Pooled Retirement Pension Plan (PRPP). Quebec is the first jurisdiction to enable this new type of workplace retirement savings plan.
Along with the introduction of the VRSP, Quebec is phasing in a requirement that all companies with more than 5 eligible employees will need to offer a workplace group savings plan to all eligible employees. A workplace group savings plan may include a VRSP, a group RRSP, or any traditional pension plan that is offered to all eligible employees. Organizations with 20+ employees will have until December 31, 2016 to comply, those with 10–19 employees will have until December 31, 2017, and those with 5–9 employees will not have to comply any earlier than January 1, 2018.
Businesses that already offer a group savings plan (pension plan or a group retirement savings plan or a TFSA) to all of their eligible employees may want to consider VRSP but they don’t need to, as they are already meeting requirements.
We currently offer VRSPs, administered by The Royal Trust Company, to businesses with offices/locations in Quebec and intend to offer PRPPs in other jurisdictions once the legislation and guidelines are in place.
Traditionally, helping employees prepare for a financially secure retirement involved a lot of time, effort and potential liability on the part of the employer; and only large companies had the resources to offer a pension plan. PRPP and VRSP legislation addresses these concerns and is expected to put small and mid-size employers on a more level footing with big companies, potentially resulting in better employee retention and productivity.
This will vary depending on the jurisdiction. Each province that passes PRPP legislation will specify whether a PRPP is mandatory or voluntary, as well as other specifics regarding their plan. Presently, employers with a location/office in Quebec, that have 5 or more eligible employees are required by law to subscribe to a VRSP (or another group savings plan) for their eligible employees within a prescribed time period. The federal PRPP legislation does not require that employers of any size subscribe to a PRPP in their business.
RBC remains committed to Group Retirement Savings Plans, Deferred Profit Sharing Plan and Group Investment Accounts in addition to VRSP/PRPP. Our Group Savings representatives can help employers determine which plan type is the best fit for your company.
There is no cost for employers to set up an RBC VRSP^/PRPP. Employer participation is voluntary (with the exception of businesses with 5 or more eligible employees in Quebec). Employers simply set up the plan, enrol employees, and manage the payroll contributions.
No. Employers can voluntarily contribute but they are not required to do so. They are permitted to deduct members’ own contributions by way of payroll deductions. While it is not mandatory, we do recommend a matching contribution to be made. This encourages employee contribution and helps to retain and attract great employees.
Yes. For the self-employed with a business number who currently do not participate in a group savings plan, PRPP/VRSP offers the opportunity to participate in a simple, efficient and straightforward pension plan to save for their retirement.
Businesses of any size and in any sector can implement a PRPP/VRSP solution in their business. Owners and employees can contribute to the plan. Employee eligibility may differ by province. For example, an eligible employee in the Quebec VRSP program includes employees who have a minimum 12 months of employment for a company that has a location in Quebec and where the employee either works or lives in Quebec. RBC can provide guidance, but encourages businesses to seek trusted counsel to determine their specific eligibility and/or compulsory status.
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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