Plan Design
Selection of Suppliers
The design of a retirement plan will take into consideration the following:
- the objectives of the employer sponsoring the plan (e.g. how paternalistic is the firm in the handling of employee benefits?)
- the budget available for funding the retirement program
- the nature of the employee group and their perceived retirement savings objectives.
Once the basic plan structure is determined and the specific vehicle has been elected, the details of the plan design can be finalized and suppliers for the various services selected. The plan design must comply with Revenue Canada, and, if it is an RPP, provincial or federal regulators. Minimum provincial and PBSA standards that apply to Registered Pension Plans have been summarized at the end of this section.
In the event that a Group RRSP or DPSP, or perhaps a combination of these two vehicles is used for the retirement plan, there are minimal requirements imposed by the regulators in the area of plan design. Group RRSPs can be established that provide for contributions on any basis determined by the employer (although most employers will want to ensure that their contribution formula does not contrive any Human Rights legislation.) Since the contributions made by the employer become treated as if they were made by the employee, they become immediately owned by the employee (i.e., immediately vested in the employee.) A waiting period or contribution rated graded by service can mimic the vesting provisions in other plans. Also, a Group RRSP can be established on a basis that allows in-service withdrawal only upon the employer's approval. If in-service withdrawals are allowed, they may be discouraged by placing limits on their frequencies or by triggering a suspension of contributions.
To qualify for registration a DPSP must provide for vesting of the sponsor's contributions once the member has completed 24 continuous months of membership. In-service withdrawals may or may not be allowed.
Subject to the above requirements, employers will often be able to use a Group RRSP alone or a combination of a Group RRSP and DPSP to meet the same objectives available through a Defined Contribution Pension Plan. The informal arrangements can offer the employer much greater flexibility and lower indirect costs.
