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Wendy Matton

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To attract and keep the best and brightest, a form of retirement saving is often the solution within a company’s compensation framework. Group registered retirement savings plans (GRSP) and deferred profit-sharing plans (DPSP) provide two different options popular in the SME market. The key differences are outlined ahead:

GRSP & DPSP Comparison

Traditionally, a DPSP would be administered alongside a GRSP to give the employer a more secure option of contributing to an employee’s retirement savings. What do we mean by secure? There are limitations on how and when employees can access the funds from a DPSP. A common example is that the funds are not accessible to the employee until after the first two years of employment have been completed (also known as a vesting period).

An important commonality for both the GRSP and DPSP is that the employee has the ability to determine how their funds are invested (stocks, equities, etc.) and the risk level tied to their investments.

                                   

Taxation

From a taxation perspective, GRSP contributions offset an employee’s taxable income by deferring the income tax paid until the time that the funds are withdrawn. Simply put, money contributed to an GRSP is tax-sheltered. On the other hand, DPSP contributions are not considered taxable income for employees. As such, they are not subject to payroll taxes and provide more control by the employer in vesting.

Honourable Mentions

In terms of allowable contributions, group GRSPs are higher than a DPSP. Moreover, GRSPs facilitate spousal plans if the employee so chooses, while DPSP is for employees only. Lastly, group GRSPs can be implemented by not-for-profits, while a DPSP, as the name implies, are only available to for-profit companies.

Most financial institutions facilitate these programs and talking to your trusted benefits advisor can point you in the right direction.

Wendy Matton

Wendy has nearly 40 years of experience in the financial services sector. She began in banking and moved on to Bay St. trading in fixed income, currency and commodities, to management. The next phase was spent in sales and advisory roles as an independent financial and insurance advisor. She has spent the last 15 years as a consultant in the employee benefits industry. Wendy enjoys going on gal-pal road trips with her daughter visiting theatres and B&Bs across Ontario. When not hosting a “Scuff ‘n’ Scoff” with her hubby and musical friends, her most treasured moments are outdoors, back in the hills of Newfoundland on a ski-doo or on a pristine lake with her dad, in a canoe.
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