Retirement Savings Program - focus on the bottom line

Deferred Profit Sharing Plan

Features

A Deferred Profit-Sharing Plan (DPSP) can be an effective tool to assist with retirement savings as well as focus employee attention on your bottom line.

Employees may be enticed to improve both individual and group performance, since their efforts help generate company profit, a portion of which will be distributed under the DPSP.

Successful motivation of your staff depends on tailoring the contribution formula to the unique needs of your organization. The allocation of funds to employee accounts can be arbitrary or follow a contribution formula, using the following variables:

percentage of profits,

fixed dollar amount per employee,

percentage of payroll,

occupational class,

seniority,

matching employee contributions to a RRSP or a pension plan.

Contributions and expenses are tax-deductible to the employer.

Contributions are not added to employees' earnings and do not increase payroll taxes.

Plan Rules (Updated January 2005)

Employers may contribute an amount no greater than 9% of the employees' earnings for the current calendar year to a maximum of half of the RPP maximum ($9,000 in 2005).

A vesting schedule of up to 24 months of plan participation is permitted.

Vested contributions are not locked-in, and can be cashed out or used to purchase an annuity.

Employees are not permitted to contribute to the plan.

Significant shareholders (those who own, directly or indirectly, more than 10% of company stock) are not permitted to participate.

Administration

Employee communication and education are key to satisfying the employer's fiduciary responsibilities.

The plan requires trustees with at least one being independent.

An information return must be filed annually.