Deferred Profit Sharing Plans (DPSPs)

Although this type of plan would indicate that the plan is based entirely upon a Company's profits, this is not always the case. In many situations, plan sponsors will do a combination of a Group RRSP and a DPSP as they feel this provides them and their employees a better overall package.

In Lieu of Employer Contributions to a Group RRSP or RPP

In lieu of Employer contributions to a Group RRSP or a Registered Pension Plan, a DPSP carries with it the following advantages / disadvantages:

Advantages

• Payroll taxes do not apply on employer contributions
• Registration with the pension Commission of Ontario is not required
• Other than restrictions imposed by human rights legislation, an employer has full discretion regarding who joins the plan and who he will make contributions for on a year to year basis
• Minimum contributions have been eliminated by Revenue Canada, i.e. a minimum 1% of salary is no longer required
• Any forfeitures can be withdrawn by the company or could be used to reduce or eliminate future contributions to the plan
• The plan can allow for cash withdrawals if necessary

Disadvantages

• Set up costs are typically somewhat higher than for a Group R.R.S.P. alone. As well, depending on the size of the account, and the fiduciary provider, trustee fees may also be involved. However, these expenses are more than offset by the money saved on payroll taxes
• Cannot apply to a significant shareholder or related persons, i.e. anyone with more than a 10% interest in the company
• Pension Adjustment reporting applies