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Increasing your retirement income
Employers
Deferred Profit Sharing Plan (DPSP)
A Deferred Profit Sharing Plan (DPSP) is a simple, flexible arrangement
whereby an employer distributes a portion of the company's pre-tax
profits. Specified shareholders (i.e., individuals who own, directly
or indirectly, more than 10% of company stock) are excluded. Employees
do not contribute to the plan.
The plan can be set up in conjunction with a group RRSP or a pension
plan. Contributions can be controlled by limiting contributions
to a percentage of profits, fixed dollar amount per member or a
fixed percentage of the payroll. The amount of contribution is related
to corporate profitability and is not required in unprofitable years.
Employers must generally contribute at least 1 percent of participating
employees' annual salaries each year the company earns a profit.
Contributions are not added to members' earnings and do not increase
payroll taxes. All contributions and related expenses are tax-deductible.
The employer has ample freedom to reward specific employees in
relation to their performance. Employees may be motivated to improve
their performance since their efforts help generate company profit,
which in turn will be distributed under the DPSP. Money in the plan
is allowed to grow tax-free. When the employee retires, the money
in the DPSP can be used to buy an annuity, or transferred to an
RRSP.
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Find out more about your retirement
income goals and other financial planning opportunities with
a comprehensive analysis of your financial situation. |
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