Defined Contribution Registered Pension Plan (DCRPP)

DCRPP's are formal arrangements made by the employer (plan sponsor) to provide employees (plan members) with a monthly income at retirement. Legislation requires the employer to contribute to the plan. If employee contributions are required the plan is referred to as a contributory plan; otherwise it is a non-contributory plan.

Under a defined contribution or "Money Purchase" registered pension plan (DCRPP), the contributions of plan members and plan sponsors are invested towards funding the retirement income of employees. The contributions into the plan are known, the final benefit is not known. The employer does not have the liability to fund the employees retirement or to make up shortfalls due to poor investment selection and returns. The only liability the employer has is to fund the contributions. 

Retirement income of the plan member is based on:

1. 1. contributions made,

   2. investment selection,

   3. investment return,

   4. annuity rates and economic conditions at the time the employee retires.

Sponsor Advantages:

1. 1. Plan design flexibility.

   2. The contribution formula is clearly defined (minimum employer contribution is 1% of YMPE).

   3. Cost control – contributions are often set as a percentage of payroll.

   4. Low administrative costs.

   5. After the contributions vest, the funds are locked-in.

   6. Legislation states that voluntary contributions are allowed to be redeemed. Employers have the option of locking in all contributions.

   7. Contributions and plan expenses payable and paid by the plan sponsor are tax deductible.

   8. Contributions are exempt of payroll taxes.

   9. Plans are creditor proof.

   10. Creates a pension adjustment.

Member Advantages:

1. Plan sponsor contributions towards retirement income.

2. Early investment yields more investment income.

3. Immediate tax reductions.

4. Dollar cost averaging reduces investment risk.

5. Group buying power – higher interest rates and favourable investment management fees.

6. Insurance companies monitor performance of money managers. 

7. By naming a beneficiary, any death benefit is paid directly to the beneficiary without probate.

8. Creditor-proof – to the extent provided for under applicable legislation, pension plan contributions and benefits cannot be seized by creditors.

9. The employee knows exactly how much money is in their plan at any point in time.

10. Control over the employee's (plan member's) money and investment decisions within the plan.

Our Services For The Employer:

Stone-Hedge Financial Group Inc. acts on the employer's behalf to select an insurance company that will set up the plan, administer the plan and monitor the performance of the money managers. The employer and the employees benefit from having a designated financial advisor that will assist each individual employee with their investment selection and other financial advice. Depending on the size of the plan employees will also benefit from lower management fees. Stone-Hedge Financial Group Inc. is not owned or operated by any insurance company. As brokers we have access to a number of different insurance companies that will compete for your business. By having group purchasing power we can negotiate lower management fees for the employer's defined contribution pension plan assets.   

Our Services For The Employees:

A defined contribution registered pension plan is similar to an RRSP. The employee has to manage their own investments and make their own investment decisions. The employee can select other investments outside the company plan and transfer money to their own locked-in retirement plan (LIRA). Having an individual plan allows the employee to benefit from professional advice from their own personal financial advisor and a broader selection of investments to choose from. The employer continues to make contributions to the employees company defined contribution registered pension plan. The employee doesn't need to close their employer defined contribution registered pension plan to transfer money to their own locked-in retirement plan (LIRA), they can benefit from both plans at the same time.

In order for the employee to own the employer contributions made into their plan they need to meet the plan's vesting requirements. In Ontario employees are automatically vested in their defined contribution registered pension plan on all of the employer contribution and benefits made on or after January 1, 1965. Once the employee is vested the pension benefits belong to the employee. If the employee leaves the employer to start a new job the employee can transfer all of the funds that are vested in their company defined contribution registered pension plan to their own locked-in registered plan (LIRA).

Contact Us to Set Up or Review Your Pension Plan

The information provided on this web site is intended for general information only. It should not be construed as legal, accounting, tax or specific insurance and investment advice. Clients should consult a professional advisor concerning their situations and any specific insurance and investment matters. While reasonable steps have been taken to ensure that this information was accurate as of the date hereof, Stone-Hedge Financial Group Inc. and its affiliates make no representation or warranty as to the accuracy of this information and assume no responsibility for reliance upon it.