Employers can use Deferred Profit Sharing Plans (DPSPs) to share some of the company's profits with employees.
This type of plan is often an add-on to a group Registered Retirement Savings Plan (RRSP).
Advantages to a DPSP
- Gives employees a real stake in the company
- Complements a group RRSP or an individual RRSP by offering an employee incentive plan
- DPSP contributions and operating costs are tax-deductible for the employer
- Investment income grows tax-free, like in an RRSP
About contributions to a DPSP
- Based on company profits from the past year or previous years
- Not locked in, though employees may have to wait up to two years before their rights are vested and most employers don't allow employees to make withdrawals while they're still with the company
- Made at the employer's discretion; for example, the employer can choose not to contribute to the DPSP if the company is having financial issues
- Made by the employer, while employees are generally able to contribute to another plan offered by the employer
Which retirement plan is right for you? Check out our Retirement savings plan table.
This text is for information purposes only. Refer to your policy for all conditions, exclusions and restrictions.