A group Registered Retirement Savings Plan (RRSP) is an employer-sponsored retirement savings plan, similar to an individual RRSP, but administered on a group basis by the employer. Contributions are made by pay-roll deduction , on a pre-tax basis, through a Group RRSP administrator. Employee contributions are often matched by the employer (typically to a maximum of 3-5% of earnings). However, contributions by the employer are not mandatory. Contributions by the employer are taxable as income to the employee.
Under current legislation, contributions up to 18% of the employee's previous year's earned income to the maximum contribution limit can be made, if the employee is not a member of a Deferred Profit Sharing Plan (DPSP) or a registered pension plan. If the employee is a member of a DPSP or a pension plan, the total maximum RRSP will be reduced by a pension adjustment.
Investment decisions are made by the employee and the options are similar to those available for an individual RRSP and can include:
Unlike an individual RRSP, members of a Group RRSP are not generally permitted to purchase individual securities.
Group RRSPs are very flexible in terms of how money is received at retirement. The plan member has the option of taking the money as cash, purchasing a life annuity, purchasing a fixed term annuity (also known as a term certain annuity) or purchasing a Registered Retirement Income Fund (RRIF).
Advantages of a group RRSP compared to an individual RRSP:
Disadvantages of a group RRSP compared to an individual RRSP: