Consider the Impact

What You Need To Know

Canlendar

The federal government passed legislation in June 2012. For this to take affect, each province needs to pass their own legislation with exact details of how PRPP legislation will be applied. This could happen as early as this year leaving you with some decisions to make.

PRPP legislative updates

  • Canada Flag
    Federal

    The Federal Pooled Registered Pension Plans (PRPP) Act was passed on June 29, 2012. The PRPP Act and Regulations provides a framework for establishing Federal PRPP’s that can be provided to employers and self-employed persons under federal jurisdiction. Federal PRPP’s are now available.

  • Quebec Flag
    Quebec – MANDATORY

    The Voluntary Retirement Savings Plan (VRSP) came into effect on July 1, 2014 and requires that Quebec employers who currently do not offer a workplace savings plan establish a VRSP in accordance with the regulations. Quebec VRSPs are now available.

  • Alberta Flag
    Alberta – VOLUNTARY

    The Alberta Pooled Registered Pension Plans (PRPP) Act was passed on May 27, 2013. PRPP’s will be available in Alberta once supporting regulations have been finalized.

  • Saskatchewan Flag
    Saskatchewan – VOLUNTARY

    The Saskatchewan Pooled Registered Pension Plans (PRPP) Act was passed on May 15, 2013. PRPP’s will be available in Saskatchewan once supporting regulations have been finalized.

  • British Flag
    British Columbia – VOLUNTARY

    The British Columbia Pooled Registered Pension Plans (PRPP) Act was passed on May 29, 2014. PRPP’s will be available in British Columbia once supporting regulations have been finalized.

  • Ontario Flag
    Ontario

    The Ontario Pooled Registered Pension Plans (PRPP) Act was passed on May 27, 2015. PRPP’s will be available in Ontario once supporting regulations have been finalized

    Note: In addition, on April 29, 2015 the Ontario Legislature passed Bill 56, The Ontario Retirement Pension Plan Act (ORPP).

  • Nova Scotia Flag
    Nova Scotia

    The Nova Scotia Pooled Registered Pension Plans (PRPP) Act was passed on November 20, 2014. PRPP’s will be available in Nova Scotia once supporting regulations have been finalized

Federal Pooled Registered Pension Plan and other Group Savings Plans: Know the facts

The Federal Pooled Registered Pension Plan (PRPP) provides an easy, flexible and effective way to help employees save for retirement. The table below summarizes the key differences between PRPPs and other group retirement savings plans and shows some of the advantages a PRPP offers to employers and employees.

  Federal Pooled Registered Pension Plan (PRPP)  Defined Contribution Pension Plan (DC RPP) Group Retirement Savings Plan (Group RRSP) Group Tax Free Savings Account (TFSA)
Who can offer this plan? Any federally regulated profit or not-for-profit employer, union group or association or an employer in the Northwest Territories, Yukon or Nunavut. Any profit or not-for-profit employer, union group or association. Any profit or not-for profit employer, union group or association. Any profit or not-for profit employer, union group or association.
Who is responsible for oversight on the plan? The PRPP Administrator that provides the plan. The employer, union group or association who sponsors the plan. The employer, union group or association who sponsors the plan. The employer, union group or association who sponsors the plan.
Must the plan be administered in accordance with Capital Accumulation Plan Guidelines? Yes 1 Yes 1 Yes 1 Yes 1
What investment options are available? The PRPP Administrator is responsible for selecting and monitoring the performance of the funds offered in the plan. The Administrator must offer up to five investment options in addition to the default investment. The default investment is set by the Administrator and must be either a balanced fund or a portfolio of investments that takes into account the member’s age. The plan sponsor is responsible for selecting and monitoring the performance of the funds offered on the plan. The plan sponsor is responsible for selecting and monitoring the performance of the funds offered on the plan. The plan sponsor is responsible for selecting and monitoring the performance of the funds offered on the plan.
What is the vesting period for employer contributions made on behalf of employees?  Immediate Immediate Immediate Immediate
Are employee and employer contributions locked-in? Employee and employer contributions, if any, are immediately locked in. Employee contributions that are required and all employer contributions are locked in after 2 years of plan membership.  Any voluntary employee contributions are not locked in. Employee and employer contributions, if any,  are not subject to locking in but any transfers made to a RRSP that originated from a registered pension plan will continue to remain locked in. Employee and employer contributions, if any,  are not subject to locking in.
Are employer contributions mandatory? No Yes. A minimum of 1% of the member’s pensionable earnings each year. No No
How are employer contributions taxed (to the employer)? Deductible as a salary expense. Not subject to payroll tax. Deductible as a salary expense. Not subject to payroll tax. Deductible as a salary expense. Subject to payroll tax. Deductible as a salary expense. Subject to payroll tax.
When can employees join the plan? All employees will be automatically enrolled upon satisfying the eligibility requirements.  A full time employee is eligible immediately, whereas a part time employee is eligible after 24 months of continuous service. Employees will have 60 days from the date they receive their notification of membership to notify the employer if they do not want to participate. Plan sponsor will determine the eligibility rules of the plan. Participation for employees can be set as optional or compulsory. The employer may also set minimum service requirements at their discretion but cannot exceed the following:
  • full time employees with 24 months of continuous service, and
  • part-time employees with 24 months of continuous service provided the individual has earned at least 35% of the years maximum pensionable earnings in each of 2 consecutive calendar years preceding membership
As defined by the plan sponsor. As defined by the plan sponsor.
Is there an annual maximum amount that can be contributed to the plan? Up to an employee’s RRSP contribution limit, which is generally the lesser of 18% of the previous year’s earned income and a maximum dollar amount
(up to the maximum defined by the CRA annually), plus any carry forward RRSP contribution room the employee may have.
Contribution limits are set at the lesser of 18% of an employee’s current year's earned income and a maximum dollar amount,
(up to the maximum defined by the CRA annually). These limits are updated annually.
Contribution limits are set at the lesser of 18% of the employee’s previous years year's earned income and a maximum dollar amount
(up to the maximum defined by the CRA annually), plus any carry forward RRSP contribution room the employee may have.
Contribution limits are reviewed by the CRA annually, plus any carry-forward room the employee may have from previous years.
Are employer contributions taxed to the employee? Employer contributions, if any, are not treated as taxable income to the employee, until such time they are withdrawn. Employer contributions, if any, are not treated as taxable income to the employee, until such time they are withdrawn. Employer contributions are treated as taxable income and are reported on the employee’s T4. Employer contributions are treated as taxable income and are reported on the employee’s T4.
Can the employee withdraw money from the plan?   No. Employee and employer contributions cannot be withdrawn.  

There are certain conditions, such as reduced life expectancy, or where a former employee has been a non-resident of Canada for at least two years, under which the employee may withdraw the funds in their account.

Employee required and employer contributions cannot be withdrawn. However, the plan may allow the employee to withdraw any employee voluntary contributions made while employed.

Under certain conditions, like reduced life expectancy, an employee may withdraw the locked in portion of his/her account.

Withdrawals are subject to any withdrawal
restrictions imposed by the employer.
Yes
What happens if the employee terminates employment? Employees are entitled to the full value of their account. The employee may opt to continue in the plan or transfer their savings  to another retirement savings vehicle. Amounts that are locked in will remain locked in. Employees are entitled to the full value of their account. The employee may transfer their savings to another retirement savings vehicle. Amounts that are locked in will remain locked in. Employees are entitled to the full value of their account. The employee may transfer their savings to another retirement savings vehicle or receive a cash payment. Employees are entitled to the full value of their account.  The employee may transfer their savings to another TFSA or receive a cash payment.
What happens if the employee dies? Full value of the account is paid to the employee's spouse, if there is one at the time of death. If there is no spouse, the benefit is paid to the designated beneficiary or estate, if no beneficiary exists. Full value of the account is paid to the employee’s spouse, if there is one at the time of death. If there is no spouse, the benefit is paid to the designated beneficiary or estate, if no beneficiary exists. Full value of the account is paid to the employee’s designated beneficiary. Full value of the account is paid to the employee’s beneficiary.

1 Applies if the plan offers two or more investment options and members have investment discretion.

The information supplied above is provided in association with Manulife.

PRPPs also Fully Integrate with Ceridian’s Payroll Solutions:

  1. Powerpay Logo

    Powerpay

    Powerpay Web automatically tracks pay periods and dates. It even displays payroll totals and warns of potential errors.

    Powerpay ensures that government remittances are accurate, employee pay statements are delivered, and/or direct deposits are performed.

    Learn More

  2. Insync Logo

    Insync

    Insync helps to administer all HR and payroll processes from a single, secure solution plus gives a centralized view of the workforce for informed business decisions. With no more re-keying of information and much less paperwork, Insync delivers payroll accurately and on time, and administers employee information with ease.

    Learn More

Benefits of this integration include:

  • Automatically sends new and updated employee data to administrator
  • Automatically uploads contribution change information from the administrator to payroll
  • Saves 60 minutes of administration per payroll
  • Offers a number of the leading PRPP administrators for customers to choose from
  • Eliminates duplicate data entry, reduces errors
  • Contribution funds are automatically sent to the provider with every pay, accurately and on-time.