Do more for your GRSP

A Deferred Profit Sharing Plan (DPSP) is an employer-sponsored profit sharing plan that allows employers to share business profits all or a select group of employees on a periodic basis. As employer contributions are not insurable earnings, employees cannot access it. This means that the employer does not pay CPP and EI on these contributions, making it an ideal benefit

Characteristics of a DPSP:

  • Contributions to the plan are made based on the profits of the company
  • A DPSP may be set up for some, or all, employees
  • Employees cannot contribute to the plan other than a direct transfer from another DPSP, after 1990.
  • Contributions are not taxable to the employee
  • Income in the plan is also not taxable
  • Pension Adjustment (PA) from DPSP reduces the amount that the employee can contribute to an RRSP
  • The employee is taxed when withdrawals are made from the plan
  • A DPSP may provide that, on election by the beneficiary, all or any part of the amounts payable to the beneficiary may be paid:
    • 147(2)(k)(v) in equal installments payable not less frequently than annually over a period not exceeding 10 years from the day on which the amount became payable; or,
    • 147(2)(k)(vi) to a licensed annuities provider to purchase an annuity for the beneficiary, where
      • (a) annuity payments begin no later than the end of the year in which the beneficiary attains 71 years of age, and
      • (b) the guaranteed term, if any, of the annuity does not exceed 15 years.
    • DPSP lump sum payments can be transferred tax-free to an RPP, RRSP, or RRIF.