A pension plan: talk it over with your employer
If the employer doesn't offer a pension plan, you can take the first steps. The Régie des rentes du Québec has prepared for you a short list of advantages that could get the employer interested in giving pension plans a closer look.
Useful comment to break the ice
- Did you know that there is a proven way to more easily recruit manpower? That way is to set up a pension plan. An employer that offers a pension plan is an employer that everyone talks about.
A key question to ask the employer:
Did you know that there is more than one type of pension plan?
The SIPP is tailor-made for small businesses. And now it is even more flexible and easier to set up and administer.
Tell him that with an SIPP...
- He will have a minimum of administrative duties. The financial institution administers the plan and provides the required information to the members and the supervisory authorities (the Régie des rentes du Québec and the Canada Revenue Agency).
- The employer contribution is not subject to payroll taxes, which is a considerable advantage for small businesses. On the other hand, an employer who contributes to an employee's RRSP must increase the employee's reported salary by the amount of the contribution. That "pay increase" can result in an increase in the employer's payroll taxes for various government programs.
Talk to him about savings in payroll taxes
These savings vary according to the government program involved. Their calculation can be made by a representative or consultant authorized to offer group pensions.
Show him this table
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.
Talk to him about taxation
The taxation rules for an SIPP are more advantageous than those for a deferred profit sharing plan (DPSP). If the bulk of the employers small business is composed of family members, they can all participate in an SIPP but not in a DPSP.
Furthermore, the 25 370 $ annual contribution ceiling for an SIPP, in 2015, is clearly more advantageous than the 12 685 $ ceiling for a DPSP.
Be sure to talk to him about a power sharing agreement
By means of a power sharing agreement with the union, the employer can share with you or another of the company's unions the powers related to a pension plan.
Regardless of what the plan text provides, some powers can be exercised by you or jointly by you and the employer, particularly with respect membership conditions and the withdrawal of members, the withdrawal of the employer, the member contribution and the employer contribution.
Defined contribution plans and defined benefit plans
Make sure the employer knows about the following advantages and details
- The employer can sit on the pension committee (the plan's administrator) or can be designated by the committee to carry out certain functions.
- Defined contribution and defined benefit plans are contracts registered with the Régie des rentes du Québec, under which the employer agrees to make periodic payments to a pension fund in order to provide employees with a retirement income. Such plans may also require employees to make regular member contributions (as provided in the plan text).
- The employer decides (in some cases jointly with the union) the main characteristics of the plan. Once that has been done, the plan text must be registered with the Régie des rentes du Québec and the Canada Revenue Agency.
- The employer has the power (in some cases jointly with the union) to make amendments to the plan or to terminate it.
- The employer's contributions to the pension fund are tax deductible.
Some more arguments
For a defined contribution plan
- The amount of the contributions paid into the pension fund is set in advance.
- The amount of a member's retirement income depends, among other factors, on:
- contributions made to the plan
- income generated from the investment of contributions
- interest rates in effect
- The risks related to fluctuations in the pension funds rate of return are borne by the members and beneficiaries.
- The employer's participation is limited to the employer contributions required under the plan provisions.
For a defined benefit plan
- The cost of benefits and the contributions to be made to the pension fund are determined by an actuary
- The amount of a member's retirement pension generally corresponds to a percentage of his or her salary, multiplied by the number of years of credited service under the plan.
- The employer is responsible for funding the plan.
Tell him how easy it is to set up a pension plan
The employer can get help from his financial or legal counselor, an actuary or any other person with the competence to set up a pension plan. That could include you!
For more information, contact the Régie des rentes du Québec
||(Be sure to select "Supplemental pension plans" as the subject of your message)
|By regular mail:
Direction des régimes de retraite
Régie des rentes du Québec
Case postale 5200
Québec (Québec) G1K 7S9
And finally...ask the employer to find out for himself
Invite the employer to visit the section Employer on the Régie des rentes du Québec's Web site. He will be able to appreciate for himself all the advantages that he could have by setting up a pension plan in his company.
Other useful links