Simplified pension plan
The simplified pension plan (SIPP) is an advantageous choice for small businesses and an excellent strategy to more easily find and keep workers.
You won't be the only employer participating in the plan...
An SIPP is a pension plan offered and administered by a financial institution, in which several employers participate.
A financial institution administers your SIPP
The authorized financial institution with which you conclude your pension plan contract will take care of the setup and daily administration of your SIPP. There's no pension committee, no red tape.
Is it better than a group RRSP? You be the judge!
Your contribution to an SIPP does not result in any payroll tax; that's a big advantage for a small businesses. An employer who contributes to a worker's RRSP must increase the worker's pay to cover the amount of the employer's contribution. That "pay increase" is subject to payroll taxes for several government programs.
Is it better than a DPSP? You be the judge!
The annual contribution that you can pay into a deferred profit sharing plan (DPSP) is subject to a ceiling equal that is only half of that which applies for an SIPP.
The 25 370 $ ceiling for an SIPP, in 2015, is clearly more advantageous than the 12 685 $ ceiling for a DPSP. 3Are you the owner of a family-run business?
If the bulk of your company's personnel is composed of family members and other relatives, they can all participate in an SIPP but not in a DPSP.
Savings for you!
There is no simple rule for determining the possible savings in payroll taxes as a result of having an SIPP; the ceilings and contribution rates vary from one government program to another. A representative or consultant authorized to offer group annuities will be able to use data you provide to help you see the impact in your particular situation.
In 2015, an employer with a total payroll of 2 100 000 $ makes an annual contribution of 1 000 $ per employee having a base salary of 35 000 $. With an SIPP, the employer can save 133,37 $ in payroll taxes for each employee. Those savings would not be possible with a group RRSP.
Payroll Tax Savings by Government Program
Savings in payroll taxes
|Employment insurance note 1
|CSST (contribution rate of 1,94%)
|Commission des normes du travail
|Health Services Fund
|Québec Pension Plan
|Québec Parental Insurance Plan note 1
|note 1: In some cases, contributions to a group RRSP are not subject to employment insurance or the Québec Parental Insurance Plan.
What's in it for your employees?
- Employees who participate in an SIPP have an active role in the management of their retirement savings because they decide how to distribute the retirement capital in their locked-in and not locked-in accounts among the investment offerings of the financial institution.
- They can put aside additional, not locked-in sums (additional voluntary contributions), if they so choose.
- They can, at any time, withdraw their additional voluntary contributions and, in some cases, their member contributions.
- They can take advantage of a Home Buyers Plan (HBP) or a Lifelong Learning Plan (LLP), by transferring withdrawals to an RRSP.
Additional advantages that your employees will appreciate!
- The employer contributions that you make are vested benefits for members as soon as they are made. They are set aside for retirement, guaranteeing a true life income.
- If a member dies, the balance of his or her accounts is paid to his or her spouse (if any) or else to a designated beneficiary or the heirs.
- The contributions made to an SIPP and the income that they produce are generally not seizable. The exceptions include partition of family patrimony and support payments.
- The contributions made by a member are deductible from his or her taxable income.
- Under certain conditions, a member can add to his or her SIPP sums accumulated in other retirement savings vehicles.
An informed employer will act without hesitation
To get started right away on setting up an SIPP that corresponds to your financial means and to your employees' needs, contact one of the financial institutions that offer them or a representative or adviser authorized to offer group annuities.
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