What is a Deferred Profit-Sharing Plan

A Deferred Profit-Sharing Plan is a registered, employer sponsored plan, that is set up to share company profits with employees and is typically set up in combination with a Group RRSP. This type of plan can be set up for all employees or certain groups of employees but specified shareholders and individuals related to the employer cannot participate in the Deferred Profit-Sharing Plan. \

These plans are easy to set up, have a large fund line up, are low cost to you and employees, and when managed by Advantage Pacific, they benefit from our active management program. This program includes one on one meetings anytime the employee wants to talk about their investments, no fee fund switches (rebalancing), semi annual updates in which we will attach a digital copy of their statement and review how their account has performed, outline and explain any changes we are recommending, and provide a general market update.

Why a DPSP

  1. Similar to a Group RRSP – Many of the benefits of a DPSP are the same as a Group RRSP such as Better Fees, Tax Savings, proven savings method, and easy administration, but there are key differences.
  2. Offering in Conjunction with a Group RRSP – A DPSP is typically set up in combination with a Group RRSP so employees can add their own contributions to the plan, but it isn’t a requirement.
  3. Vesting Period – If vesting is a concern and you want to restrict access to the employer contributions going into a Group RRSP for a period of time what we normally recommend is you set up a Group RRSP for an employee’s portion of the contributions, and you set up a DPSP for the employer portion. This means if an employee leaves the company before the vesting period is met, they will not have access to the employer contributions and they will be returned to the company. Typically, an employer could request a vesting period of up to two years.
  4. Contributions are Tied to Company Performance – This is an added incentive for every employee to ensure the company is performing well but can also be a demoralizer if the company doesn’t perform and there are no contributions.
  5. Only the Plan Sponsor can Contribute – Unlike a Group RRSP where both employers and employees can contribute, only the employer contributes to a DPSP.
  6. Contributions are not Considered Additional Salary – The contributions to a DPSP aren’t typically considered taxable income so they do not attract payroll taxes which means net savings for the plan sponsor. These contributions must still be added to an employees T4 as a pension adjustment.
  7. Tax Deferred Growth – Like a regular RRSP the money deposited to a DPSP grows on a tax deferred basis. These contributions are not considered income but must be listed on the employees T4 as a pension adjustment.
  8. Easy Administration – – Like a Group RRSP these plans are easy to set up and require little effort on the end of the company sponsoring the plan. These responsibilities are limited to calculating the payment for each member and authorizing members to participate in the DPSP.

Services Offered

Many financial services companies look at group investment plans as “set it and forget it”, but we think people lose out on incredible value when any investment is looked at this way. When your plan is managed by Advantage Pacific, we regularly look at the fund options the employees of your plan have picked and will make recommendations to them of how they can rebalance their portfolio to better fit their risk tolerance, other investing preferences and how they could change their fund line up to earn a better rate of return.

All the plans we set up are customizable by your employees, meaning they get to pick their own fund options. We prefer this as each employee is going to have a different risk tolerance and different investment preferences. As often as your employees would like we will meet with them in person, on the phone, or though Zoom to review and reassess their risk tolerance to ensure they are invested correctly. All of this is no cost to the employee and is covered by the commission the fund company pays to us when you set up your plan.

Fees

Transparency is important to us and we are always happy to disclose our fees publicly. Our fees for managing a group investment plan typically range from .10% to 1.5% per year, depending on total assets within the plan, annual contributions, and the number of employees regularly contributing.

Call Today

If you are interested in finding out more about setting up a DPSP please do not hesitate to call and make an appointment with one of our advisors or follow this link CRA DPSP Guidelines to read more about the rules surrounding DPSP’s.

Authorized distributor for The Canada Life Assurance Company, Equitable Life Insurance Company, The Manufacturers Life Insurance Company, Pacific Blue Cross, and Desjardins Financial Security Life Assurance Company. Manulife & Stylized M Design, and Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.

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