Everything you need to know about group savings solutions: The RRSP, VRSP, DPSP, and more

To help you make informed business decisions, here's a look at how the group RRSP, RRSP+ by payroll deduction, VRSP, DPSP, PRPP, SPP and DCPP work and the advantages of each savings solution.

Fonds de solidarité FTQ

Setting up a retirement savings plan allows you to comply with the Voluntary Retirement Savings Plans (VRSP) Act, which applies to companies with 10 or more employees.

Offering a group savings option through your business is a good way to attract and retain talent. According to the ÉducÉpargne annual survey (French only), 95 percent of respondents think it's important to have enough savings to lead an active and comfortable life in retirement.

What's more, personal finance specialists generally agree that group savings tend to earn better returns than personal savings, in part because the management fees are generally lower or nonexistent due to the higher value of the managed portfolio. Group savings are usually easy for an employer to set up and manage.

Did you know? Employer contributions to many group savings solutions are not subject to payroll taxes or social security charges, reducing your tax burden when you make contributions.

At a glance

To help you make an informed decision, here are the most common group savings options and their main features.

	Tax treatment of employee contributions	Tax treatment of employer contributions	Employer contributions	Employee contributions	Savings only for retirement
Group RRSP	Tax-deductible	Under special circumstances, exempt from certain social security charges	Optional	Optional	No
RRSP+ at the Fonds de solidarité FTQ	Tax-deductible (RRSP) Additional 30 percent in tax savings¹	Exempt from social security charges	Optional	Optional	No
VRSP	Tax-deductible	Exempt from payroll taxes	Optional	Optional	Yes
DPSP	N/A	Exempt from social security charges	Mandatory	None	No
PRPP	Tax-deductible Included in RRSP contribution room	Tax-deductible	Optional	Optional	No
SPP	Tax-deductible	Tax-deductible Exempt from payroll taxes	Mandatory	Depends on the plan	Yes
DCPP	Tax-deductible	Exempt from payroll taxes	Mandatory	Depends on the plan	Yes

Main features of each group savings plan

Group registered retirement savings plan (RRSP)

The group RRSP allows each employee to have their own account and choose their own investments. The contributions, however, are managed collectively. If an employee leaves the company, they keep their money and the amounts contributed by the employer, if applicable.

For employers:

Most financial institutions do not charge the employer any management fees.
The employer is free to contribute (or not) to their employees' RRSP. If you do contribute, you get to determine the contribution terms and amount.

For employees:

Employees benefit from tax deductions taken directly from their payroll.
The amounts placed in a group RRSP are eligible for the Home Buyers' Plan (HBP) and the Lifelong Learning Plan (LLP).
In general, employees choose investments based on their savings strategy and financial goals.
The contribution amount can be adjusted at an employee's request. They can also transfer additional sums to supplement their usual contributions.

Offer your employees the RRSP+ via payroll deduction with the Fonds de solidarité FTQ

The RRSP+ with the Fonds is more than just a traditional RRSP. It lets you give your employees more with its additional 30 percent in tax savings.¹ In other words, without employer contributions, an RRSP+ of $1,000 only costs an employee $425 a year, or $8.17 a week.² It's a turnkey solution that's quick and easy to set up and free for employers and their employees.

Your employees can contribute by payroll deduction and benefit from the tax savings on each pay, allowing them to save for the future while enjoying the present.

By opting for the RRSP+, you're also supporting thousands of local businesses. The Fonds invests in more than 3,300 businesses that create, maintain, and safeguard jobs in all regions of Québec.³

Choosing the RRSP+ with the Fonds is a win-win solution!

Voluntary retirement savings plan (VRSP)

A business with 10 or more employees is required to set up a VRSP, unless it gives its employees the option of contributing to an RRSP or TFSA by payroll deduction or offers them a registered pension plan. The provincial government made this a legal requirement to help Québecers save for retirement.

For employers:

You are required to register all your employees and cancel the registration of those who request it.
You can contribute to your employees' VRSP, but are not obliged to. If you decide to do so, you won't pay social security charges on your contributions.
The process for setting up a VRSP is relatively long.

For employees:

Your employees are automatically registered in a VRSP and can make contributions of up to 4 percent of their gross salary. Those who wish can request to adjust the amount of their contributions.
The contribution is deducted directly from the employee's pay, so they can enjoy immediate tax savings.
Management fees are low and regulated under the Act, varying between 1.25 and 1.50 percent, which can have a positive impact over the long term.
Although their options are limited by management fee caps, employees can choose their own investments.

Deferred profit sharing plan (DPSP)

The DPSP lets you share a portion of your company's profits with your employees. Contributions may vary from year to year and are discretionary.

For employers:

Only you can contribute.
You pay no social security charges on your contributions.
You can impose a minimum period of employment before the amounts paid into the account become available, and defer the vesting period for your employees by a maximum of two years.
You cannot contribute more than the equivalent of 18 percent of an employee's annual salary or more than 50 percent of the applicable eligible contribution limit from registered pension plans. The contribution room is not cumulative.

For employees:

The deferred income is taxable only upon withdrawal. Unlike an RRSP, it is not an investment that can grow over the years. Depending on the plan, however, employees can use the amounts in a DPSP for the LLP or HBP.

Did you know? Since employees cannot contribute to the plan themselves, you can only offer them a DPSP under the VRSP Act. That's why many companies offer it in conjunction with a group RRSP.

Pooled registered pension plan (PRPP)

The PRPP is a group plan available to employees and self-employed individuals. Participants who change jobs can continue to contribute.

For employers:

Unlike a pension plan, you do not manage the PRPP for your employees—the plan's administrator does.
If you decide to participate in your employees' plan, you can enroll your employees yourself. Otherwise, each employee can register for the PRPP of their choice.
Unlike the group RRSP, contributions to a PRPP are pooled with the other funds in the plan and you receive a corresponding tax deduction. The contributions you make are not considered taxable income for your employees.

For employees:

PRPP contributions are included in the same way as contribution room in an RRSP.

Simplified pension plan (SPP)

Offered only in Québec, the SPP is a defined contribution plan established by the company and administered by a financial institution.

SPP for employers:

Unlike the group RRSP, the minimum employer contribution to the SPP is 1 percent of payroll.
You can also decide if this money should be locked away for the employee's retirement.
Contributions and plan administration fees are tax deductible for the employer.

For employees:

Contributions are deducted directly from the employee's pay, helping them enjoy tax savings.

Defined contribution pension plan (DCPP)

With the DCPP, a set contribution amount is determined in advance for the employer and for the employee.

In general, it is the plan administrator who decides which investments to make with the available assets.

For employers:

A DCPP functions like an RRSP.
The employer's contribution, however, is mandatory.

DCPP for employees:

The employee's contribution is also mandatory.

Ultimately, the goal is to find a win-win solution for you and your employees!

Legal Notes

¹The Fonds de solidarité FTQ's shareholders will receive 15% in tax credits from the Québec government and 15% from the federal government. They are capped at $1,500 per fiscal year, which represents a $5,000 purchase of shares of the Fonds de solidarité FTQ.

Please read the prospectus before buying Fonds de solidarité FTQ shares. Copies of the prospectus may be obtained on the Website fondsftq.com, from a local representative or at the offices of the Fonds de solidarité FTQ. The shares of the Fonds de solidarité FTQ are not guaranteed, their value changes and past performance may not be repeated.

Prospectus_EN

²Example for the 2021 taxation year, based on a person with a $40.000 taxable annual income with a marginal tax rate of 27.50%, receiving 52 paychecks per year and benefits from a tax refund on each paycheck. These amounts are estimates that could vary depending on your taxation status.

³As at Novembre 30, 2020.