Advantages of simplified pension plans (SIPP)
An SIPP combines some the advantages of a group RRSP and a deferred profit sharing plan (DPSP) while offering the protection of a supplemental pension plan. Both the employer and the plan member benefits from an SIPP.
- can determine the additional voluntary contribution he or she will make to the plan every year in addition to the member contribution set by the employer, if any.
- can choose to distribute his or her savings among different investments offered by the financial institution.
- can withdraw the funds in his or her not locked-in account at any time, with a few exceptions.
- can participate in a Home Buyers Plan (HBP) or a Lifelong Learning Plan (LLP) by transferring the funds from his or her not locked-in account to an RRSP.
The employer retains important powers:
- The employer chooses the financial institution that offers a product that meets its requirements.
- The employer also decides the eligibility and membership requirements, the contribution rate, the locking-in or not locking-in of member contributions and the conditions for withdrawing from the plan.
For an employer, an SIPP:
- is as easy to set up and manage as a group RRSP but offers the advantages of a supplemental pension plan
- makes it possible for the employer to make a supplemental contribution
- offers tax advantages. Unlike a group RRSP, an SIPP will reduce the employer's contributions to several government programs
In 2020, an employer with a total payroll of $2 100 000 makes an annual contribution of $1000 per employee having a base salary of $35 000. With an SIPP, the employer can save $118.08 in payroll taxes for each employee. Those savings would not be possible with a group RRSP.
Payroll Tax Savings by Government Program
Government program||Savings in payroll taxes|
CNESST (contribution rate of 1.79%)||$18.50|
|Contribution related to labour standards||$0.70|
|Health Services Fund ||$19.12|
|Québec Pension Plan||$57.00|
|Québec Parental Insurance Plan
Note 1: In some cases, contributions to a group
RRSP are not subject to employment insurance or the Québec Parental Insurance Plan.