One of the most popular options for employers to offer employees as a benefit is a group RRSP. They are easy to establish and are a great way to encourage your employees to save for retirement. You can offer a contribution matching program and contributions are made directly via payroll deduction. By offering this type of plan you can see improved employee morale and it can help attract and retain talent for your team. Let’s look at Group RRSP’s and go over some items you should think about before you offer one
One thing to consider is that there are costs associated with running a group RRSP. Although there isn’t usually a management fee that the employer bears, there are fees that will be applicable within the individual accounts. Investment management fees and admin costs are still charged to group retirement plan investors, they just tend to be lower than what they would be in the individual market. This results in improved savings for plan members, but they aren’t fee-free. The other thing that you need to remember as an employer is that any employer contributions that go into the plan for employees are taxable benefits and as such they will trigger the payroll taxes that your normal payroll incurs. Increased CPP, EI and WCB premiums are all things that will apply to employer group RRSP contributions.
Aside from the costs though, the benefits of offering a retirement plan to your employees are numerous. As I mentioned previously, it is a great tool to help you attract and retain employees. We’ve touched on the idea of showing your employees what their ‘Total Compensation’ is during another discussion. Making sure that your employees see the amount that you are adding to their retirement savings on an annual basis makes someone who is receiving other employment offers think twice about any moves.
Payroll deduction plans are also an awesome way for people to save. The human mind is a tricky thing, it sometimes gets in the way of what’s best for us. If you have an RRSP contribution that comes out of your chequing account on a monthly basis this is often viewed as an expense and is something that gets stopped when a cash crunch hits. When the deduction is taken at source though it is viewed differently. It seems like simply because people don’t see that monthly withdrawal from their personal accounts they don’t think about it. Human nature is that we often spend what we have. The simple act of deducting something from payroll doesn’t allow the money to land in a bank account and as such we never ‘had’ it in the first place. This simple psychological difference can make a huge impact when applied over years to someone’s retirement savings.
As a final note to think of, remember that there are options available with an RRSP and it doesn’t matter if it is a group plan or individual. If you have young employees the money in an RRSP is eligible for both the Home Buyers Plan and the Lifelong Learning Plan. Both are important, tax advantaged ways to pay for important items. Offering a plan that helps someone save to where they can achieve these big life events is a great morale builder as well.