A Canadian registered pension plan is a retirement plan that employers and unions can set up for their employees. If you own an accounting firm and are looking for extra perks to offer employees, you may want to consider setting up an RPP. Similarly, if you handle the books for a business either internally or as an independent accountant, you may also want to assist clients in putting an RPP in place.
Employers are required to contribute to these plans, and employees may also contribute. As of 2017, the maximum combined contribution is 18 percent of the employee’s income. You can set up the plan as a defined contribution or a defined benefit plan. With a defined contribution plan, the employer and the employee contribute a set percentage of the employee’s income to the plan. With a defined income plan, the employer commits to paying the employee a certain pension amount after their retirement.
You need to register RPP plans with the Canada Revenue Agency, and you may want to work with a benefits administrator, as the rules can be complicated.
For employees, the key benefit is that they get to look forward to a pension after retirement. Additionally, they can claim a tax deduction for any contributions they make. As the account grows, employees don’t have to declare those earnings as income, but once they start to take withdraws from the RPP, they do have to report those amounts as income.
Attracting quality talent can be difficult, but with perks such as RPPs in place, that job becomes easier. Whether looking for perks for your own firm or advising clients, you may want to look into RPPs.