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Is 2024 the year to update your Group Retirement Plan?

Understanding the nuances between retirement options like Deferred Profit Sharing Plans (DPSPs) and Group RRSPs is essential for maximizing benefits while minimizing costs. Below we explore the differences, highlighting the advantages of modernized group retirement benefits that prioritize accessibility and low fees, ensuring employees can confidently plan for their futures.


Group Retirement Fees


Group retirement plans have minimal employer fees. The cost to the employer is the amount they choose to contribute towards the plan. Fees still exist and are built into an Investment Management Fee (IMF) that is based on a percentage of your employees’ investment. Are your employees paying too much with your current provider?

 

If you’re a small to medium sized business, your employees could be paying 1.8% or higher on their investment fees in your group retirement plan, and even more if they leave your plan. Doing a fee review of your plan, while not changing the employer costs, can significantly impact the amount employees can grow their retirement fund during their working years.



Using a DPSP?


One group retirement option for employer contributions, the Deferred Profit Sharing Plan (DPSP), provides significant advantages for plan setup, such as a vesting period and the ability to avoid additional payroll expenses. If your company is only using RRSP accounts, you may be missing out.

 

Many carriers use the term GRSP for Group Retirement Savings Plans, but a GRSP is not an actual account. The main accounts available to small businesses for group retirement are the RRSP, DPSP, and DCPP (Defined Contribution Pension Plan). The DCPP was historically a good option, but with all the background regulations required by the carrier to manage a pension plan, they generally have higher fees for employees than a DPSP/RRSP plan.

 

Our most common setup for a for-profit business is a matching structure where the employer contributes a percentage of employee income into a DPSP account to match an employee contribution from payroll into an RRSP account. For example, an employee chooses to deposit 3% of their income into their group RRSP, so the employer matches that 3% with a deposit into a DPSP account. The employee may choose to contribute above the 3%, but the employer’s plan design will determine the maximum they are willing to match on each payroll deposit.

 

Here’s a breakdown of some of the differences between the accounts:


DPSP Group RRSP
Who can contribute? Employer only Employer and employee
Vesting period? Up to 2 years None
Ownership? Returned to employer if employee leaves within vesting period Employee owns funds immediately
Eligibility? Employees only, no owners with more than 10% stake in company Owners and employees can participate
Availability? For-profit companies All organizations
Payroll expenses? Avoids additional CPP, EI, EHT costs Must pay CPP, EI, EHT costs on contributions

Modernized Group Retirement Benefits


Does your current provider allow every employee to easily book a personal online session to set up their investments, ask investing questions, and get advice on making changes to their plan? Are you reaching to a general inbox with a hope of a response after days of waiting?

 

Whether you’re setting up a plan for the first time, or already have something in place, most carriers fall behind the needs of your employees. Choosing a modern group retirement provider with low fee options available will allow your employees to feel the value you are providing them.




If you're interested in learning more, want to start a plan or have or our team review your current fee structure, get in touch with one of HMA's advisors today and take the first step towards a stronger financial future for your team.


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