Group RRSPs
Profit Sharing Plans
Retirement Compensation Arrangements
The Sharing Plans can be sponsored by profit making organizations for their employees. Shareholder employees or partners, or employees who are relatives of these persons, may not be members of the plan.
Basic Registration Requirements
The onus is on the plan sponsor (the employer) to show that their plan meets the requirements for registration.
The purpose of a plan is for the employer to share a portion of the profits with employees. The registration requirements are intended to ensure that this happens. The basic requirements include:
- the plan must be formalized and approved by Revenue Canada
- the plan must be funded through a trust
- the profit allocation must be made within a prescribed time period
- any benefit payments due must also be paid within certain defined time periods.
DPSP contributions are tax deductible to the sponsoring employer, not taxable to the employees while the funds remain in the plan, and taxation of the investment income earned by the trust is deferred until paid out of the trust.
EPSP allocations are tax deductible to the sponsoring employer, but also are taxable to the employee in the year of allocation. Investment income earned by the trust is also taxable in the year earned.
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