Marie-Christine Daignault | Desjardins Group
The Voluntary Retirement Savings Plan Act is still a bit of an unknown to entrepreneurs, mostly when it comes to the employer advantages they can get.
Our expert Maura Pisetta, Desjardins Group Pension Plan advisor, has some answers.
Q1 How can I benefit from contributing to my employees’ VRSP?
- Amounts paid by the employer are deductible from the employer’s income.
- Employer contributions do not represent a taxable benefit for the employee. So there are no payroll taxes, or contributions to the Régie de rentes du Québec (RRQ), the Régime québécois d’assurance parentale (RQAP), employment insurnance, the Health Services Fund (HSF) and the Commission des normes du travail (CNT).
- Compared to the group retirement pension plan (RRSP) and the tax-free savings account (TFSA) for which the employer’s contribution is considered a taxable benefit for the employee, this is a “plus” for certain employers.
- As an employer, contributing to the VRSP would increase employee participation in the VRSP. Your efforts to put in place the plan will pay off.
- Your participation as an employer fosters employee buy-in and loyalty.
Q2 Do I have to contribute to my employees’ VRSP?
Even if your business is subject to the Act, you, or your employees for that matter, are not required to contribute because as the name itself suggests, all contributions are voluntary. You only contribute if you want to.
Your contributions are:
- Are immediately transferred over to the employee
- Locked in, which means that can only be withdrawn at retirement
- Deductible from the employer’s income
Q3 Are all employees eligible to contribute to the VRSP?
Under the VRSP, we must distinguish between:
- Employees who are subject to the VRSP: who have been automatically registered for the VRSP by their employer
- Employees whose participation in the VRSP is voluntary
Employees who are subject to the Act meet the following three conditions:
- Be at least 18 years of age
- Be an employee as stipulated in the Act respecting labour standards
- Have at least one year of uninterrupted service with their employer as stipulated in the Act respecting labour standards
Seasonal employees are also subject to the Act:
- If they have accumulated at least one year of uninterrupted service before registering (even if there have been lay-off periods)
- If both the employer and the employee want to renew their contract every year.
Employees who aren’t subject to the Act may request to participate. As an employer, you’re required to register them.
Self-employed workers can enrol in the plan voluntarily by contacting an authorized VRSP administrator.
Employees aged 65 or over can contribute to a VRSP, as is the case for the RRSP, up to the end of the year during which they turn 71.
Q4 How much will it cost?
Putting in place a VRSP is cost-free for the employee.