Deferred Profit Sharing Plan (DPSP) for employees in Canada

Deferred Profit Sharing Plan (DPSP)

The DPSP is a registered plan allowing businesses to share their profits with employees. It includes tax incentives and allows companies of setting vesting periods for the employer contributions. A deferred profit sharing plan, combined with a group registered retirement savings plan (RRSP), can cost-effectively replace a defined contribution pension plan.

Advantages

• Increases the sense of belonging to the company and increases loyalty by using the vesting period
• Provides flexibility to the employer who may not contribute during years when no profit is generated by the company
• Allows personalization of each plan depending on employee preferences
• Contributions to a DPSP are non-taxable for employees
• Employer contributions are deductible and exempt from payroll taxes