Defined retirement investment fund contribution
Defined Contribution Pension Plan (Traditional or RHA)
The operation of the defined contribution pension plan is similar to that of an RRSP. It initially sets the contribution that the employer and the worker will contribute respectively, but the income will depend on the amount accumulated. A registered pension plan provides employees with a means of saving for their retirement and is a key component of a benefit program for the employer.
- Limits the employer’s commitment to the contributions and not to the performance
- Contributions and administrative expenses are tax deductible
- Represents a significant saving for the employer since contributions are not subject to payroll taxes.
- Tax deductions are immediate for employees
- Funds are safe from creditors in the event of bankruptcy
Simplified & Traditionnal Pension Plan
Defined Contribution Pension Plan (Traditionnal)
In the situation of a defined contribution or traditional pension plan, the employer and the employee contribute a fixed or defined amount. The amount of the pension income that the member receives at retirement is determined in particular by the amount of Accumulated contributions and earned investment income.
Simplified Pension Plan (SIPP)
The Simplified Pension Plan (SIPP) is available only to businesses in Quebec and Manitoba. The RHA is a traditional pension plan, but as its name suggests, its administration is simplified.
This plan provides more flexibility than a traditional pension plan because it allows for more flexible contribution levels and greater flexibility in plan design in particular with respect to withdrawal rules and transferring. Unlike a traditional pension plan, the establishment of a pension committee is not mandatory.
The employer must pay a minimum employer contribution of 1% of its payroll. In addition, it can pay an additional fee at its discretion, for example to reward performance.