A Group RRSP is a collection of individual RRSP's offered to employees and administered on a group basis by the sponsoring employer, often complimenting an Employee Group Benefits Plan
Group RRSP's are a popular investment alternative to defined benefit and defined contribution retirement savings plans due to the lower administrative burden.
Group retirement & savings are beneficial for a business in the following ways:
Attract and retain employees: Group RRSP's are another layer of compensation intended to help employees save for retirement and is well received by new and existing hires.
Tax Deductible: Contributions made by your business on behalf of your employees are a tax-deductible expense.
Flexible: You determine the contribution formula that best suits both the business and the employees.
Affordable: There are no annual administration fees for Group RRSP's, and employers are not required to make contributions to the plan (though they often will).
Easy Administration: Lower administrative burden compared to defined benefit and defined contribution pension plans.
Aside from the administration of the plan by the employer on the behalf of the employee, Group RRSP's work essentially the same way as an individual RRSP.
Contributions are to the plan are made by pay-roll deduction on a pre-tax basis, and while not required, employee contributions are often matched by the employer (typically to a maximum of 3-5% of earnings). Any contributions made by the employer are taxable to the employee.
Investment options are usually a little more limited than other retirement savings vehicles, depending on the provider of the RRSP's. Rules around how much and when an employee can withdraw funds from the plan are determined by the employer.
Upon reaching maturity (when the owner turns 71), the owner will have three options:
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