This type of arrangement allows you to take advantage of the features of both plans. The employer contributions will be made to the DPSP while employee contributions are made into the Group RRSP. The employer contributions can be made contingent upon the employee contributing into the Group RRSP.
Some highlights to this plan include:
- The employer may impose a vesting period of up to 2 years on the DPSP only
- Employer contributions are NOT subject to payroll taxes
- Withdrawals can be restricted to termination, death and retirement on the DPSP
- Owners or relatives of owners cannot participate in the DPSP portion
- Terminated employees can withdraw the full vested amount subject to taxation
- The DPSP creates a Pension Adjustment (PA)
- The DPSP can be used to share profits with employees or as a pension plan
- Employer and employee contributions can be made in any combination but cannot exceed an individual’s personal RRSP limit