Deferred Profit Sharing Plan (DPSP)
Candlefocus EditorEmployers must make all contributions to the DPSP and employees cannot add to it. Generally, employers have complete discretion over the amount they wish to contribute to the plan each year and can even deduct the amount from their taxes. This makes the DPSP an attractive method for employers to provide employees with retirement savings options and help employees reduce their own taxable income.
Employees don't have to worry about making contributions to the DPSP, but there are a few key rules and restrictions regarding withdrawals. Generally speaking, before an employee can take out money from the plan, they need to have worked at their job for two years, and must be at least age 55 when they withdraw.
Unlike other employer retirement plans, such as registered pension plans or group RRSPs, the money in a DPSP does not have to be invested in specific investments. This allows employers to be able to use more sophisticated retirement planning strategies, should they choose to do so.
Overall, the key benefits of a DPSP are tax-deferred growth on contributions and the employer's ability to tailor the plan to the employees they wish to provide retirement saving opportunities. This type of plan can help both employers and employees alike to successfully prepare for retirement.