Give Your Employees a Simple Way to Save for the Future
A GRSP is a collection of individual RRSP accounts administered by a company or organization (the plan “Sponsor”) on behalf of its employees (members). It allows employees to contribute directly from their payroll using pre-tax dollars.
- Investment Options: Investment options are selected by employees based on choices available within the plan.
- Spousal Plans: A spousal account can be established, which allows members to direct all or a portion of their contributions to a spousal plan.
- Contribution Sources: Contributions can be made by employees and/or employers.
- Contribution Limits: Employees can contribute up to 18% of their previous year’s earned income (up to $26,010 in 2017) plus or minus other adjustments. Employees should consult their Canada Revenue Agency Notice of Assessment from the previous year.
- Sponsor Tax Implications: Employer contributions are considered part of an employee’s salary and are tax deductible as an expense and subject to payroll taxes such as CPP and EI.
- Member Tax Implications: Payroll deduction contributions are taken from pre-tax funds and result in immediate tax savings through reduced taxes at source. Tax receipts are issued for both member and company contributions.
- Regulation: The individual member accounts adhere to the Income Tax Act. The plan itself is registered with the Canada Revenue Agency. CAP Guidelines define sponsor, member and administrator responsibilities.
- Member Withdrawals: Withdrawals are taxable as income unless they are transferred to another registered plan. Withdrawals are also subject to applicable withholding taxes.
- Restrictions or Vesting: Vesting is not allowed for a GRSP. However, the plan can be established with a notification of withdrawal, which is intended to inform the sponsor if an employee withdraws funds. Notification of withdrawal requires employees to complete a withdrawal form and have it signed by the sponsor prior to a withdrawal being made. Sponsors may choose to suspend matching contributions for a period of time if funds are withdrawn from the plan.
- Termination and Retirement: Assets may be maintained in an individual RRSP account with RBC Royal Bank with no impact to the member (investments and account number remain the same). Assets can also be transferred to an RRSP, RRIF or be taken in cash as a withdrawal from the plan. Assets being transferred to a RRIF or used to purchase an annuity must be transferred no later than age 71.
- 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 GRSP.
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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