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Many companies offer their employees Deferred Profit
Sharing Plans. Contributions to the plan can be set by a wide variety of
formulas. The DPSP is very similar to an RRSP, with the only major
difference being that the DPSP contributions reduce RRSP room a year
later, allowing you higher RRSP contribution amounts this year.
| |
RRSP |
DPSP |
| Tax on growth |
no |
no |
| Investments |
any |
any |
| Withdrawals |
taxed |
taxed |
| Retirement |
RIF, annuity |
Xfer to RRSP RIF, annuity |
| Employer contributions as income on T4 |
yes |
no |
| EI & CPP Deductions |
yes |
no |
| Receipt |
yes |
no , included in PA |
| Lowers RRSP room |
same year |
next year |
Then Why The DPSP?
- DPSP only reduces your RRSP room following year
(allows full RRSP contribution for current year), the reduction shows
up as a Pension Adjustment (PA) on your employer's T4
- Employer money kept separate (many plans may have a
withdrawal restriction while employed - see your plan's details)
- Employer saves payroll taxes & you don’t pay EI
& CPP on contribution
For the forms required to open a ScotiaMcLeod DPSP account
(if you are part of an employer plan offering DPSPs), click
here.
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