How your business can help you and your employees save for retirement

What is an IPP?

IPPs are employer-sponsored defined benefit pension plans, typically with one or two members. Pension benefits — the amount you receive when you retire — from a defined benefit pension plan are generally calculated according to a formula based on factors, such as years of service and salary. An actuarial valuation report determines contributions, which may include funding of any plan deficits. In this case, you know today what the benefits will be at retirement, but the contribution amounts may vary from year to year.

Who can set up an IPP?

A corporation can establish an IPP for owners, managers, key executives or professionals, provided the plan member is an employee of the sponsoring company. As the employer, you must be an employee of the business and you can decide which employees participate in the IPP.

This type of pension plan is generally offered to connected employees only, because the funding rules are generally less stringent for them. A connected employee is an employee who directly or indirectly owns 10% or more of the sponsoring company’s shares, or those of any other company connected to it.

Self-employed people operating an unincorporated business as sole proprietor or in a partnership are not eligible for an IPP.

Who can benefit from an IPP?

An IPP can be a valuable retirement savings vehicle if you are:

• Age 40 or older, and an employee of an incorporated business or incorporated professional.
• Receiving T4 income from the sponsoring company. You must be an employee of your corporation. Note: Dividends are not pensionable income.
• Looking for additional retirement income beyond what can be provided within RRSP limits.
• Working for an employer who is willing to set up, administer, and fund the IPP.

Benefits to the corporation:

• Allows the sponsoring corporation to make large, tax-deductible contributions for the current year’s service and lump-sum contributions for past service back to 1991, or earlier if certain circumstances are met.
• If the corporation borrows money to fund the IPP, the cost to borrow is a tax-deductible expense.
• Allows for business transition and succession planning when family members work for the corporation.
• All actuarial, accounting and administration fees, and possibly the IPP investment management fees, paid directly by the corporation — not from the IPP fund — are generally tax-deductible expenses for the corporation.

Benefits to employees:

• Provides predictable retirement income.
• May have higher contribution limits than an RRSP.
• Allows for lump sum contributions for past service since 1991, or earlier under certain circumstances.
• Offers an excellent way to increase retirement assets.
• Plan assets may be creditor protected.

What is a Group RSP?

A Group RSP is a collection of individual Retirement Savings Plans (RSPs) established by a company for its employees. It’s an easy and convenient way for employees to contribute pre-tax earnings to an RSP through payroll deductions. Plus, the employer has the option to match employees’ contributions to the plan.

Why establish a Group RSP?

A Group RSP can be a cost-effective way of building employee loyalty. In addition to providing your employees a tax-effective way to save for their retirement, you’re letting them know that you care about their financial well-being.

Plan sponsor’s responsibilities

• Establish a Group RSP for employees.
• Introduce the Group RSP to employees.
• Provide investment information, important enrollment dates, and decision-making tools to the plan members.
• Share information about the set-up and ongoing maintenance of the plan, including fund changes or mergers and if the plan switches providers.
• Maintain payroll deductions for the plan.

The plan sponsor — the company that establishes and maintains the Group RSP — may delegate some or all of these responsibilities to a dedicated service provider. CIBC has partnered with industry-leading providers to offer the highest level of service to plan sponsors.

Benefits of working with an approved service provider:

• Provides the plan sponsor with ongoing support and guidance.
• Simplifies set-up and ongoing maintenance of a Group RSP.
• Provides cost-effective plan options.
• Facilitates any relevant training to help employees plan for their retirement goals.
• Offers customized plans tailored to a company’s specific needs.
• Provides dedicated customer service to the plan sponsor and employees.

Who can benefit from a Group RSP?

Benefits to employers:

• Helps attract and retain talented employees.
• Builds employee loyalty by assisting employees with building tax-effective savings to achieve their financial goals.
• Simplifies employee contributions through payroll deductions.

Benefits to employees:

• Helps employees meet their financial goals.
• Builds tax-efficient savings.
• Offers flexibility to choose investments within their savings plan.