Deferred Profit Sharing Plans (DPSPs) are an attractive addition to an employer's compensation plan to attract, retain and compensate high value employees.
Unlike employer contributions to an employee's RRSP, DPSP contributions do not add to an employee's taxable income. The contributions however do reduce the employee's RRSP contribution room. In addition, the plans can be set up with a 24 month vesting period, limiting the employee's access to the funds in the short term.
DPSPs are tax efficient.
For employers and employees DPSPs are tax efficient. The DPSP contributions are paid out of pre-tax business income, and since they are not considered part of the employees taxable income, no Canada Pension Plan (CPP), Employment Insurance premiums or income taxes are payable on these disbursements. In addition, since contributions are based on profits, no contributions are due in years where the business records a loss.
A B2B Bank Dealer Services DPSP enables employers to offer a wide range of investment options and comprehensive reporting to their employees with convenient plan administration, and online access to add employee accounts and manage one-time and recurring contributions.