Deferred Profit Sharing Plan

A Deferred Profit Sharing Plan (DPSP) is a simple, flexible arrangement whereby a plan sponsor distributes a portion of the company's pre-tax profits. Specified shareholders (i.e., individuals who own, directly or indirectly, more than 10% of company stock) are excluded. Employees do not contribute to the plan.

Sponsor advantages

• Plan design flexibility.
• May be set up in conjunction with a Payroll Deduction RRSP or a pension plan.
• Contributions are not required in unprofitable years.
• All contributions and administration expenses payable and paid by the sponsor are tax deductible.
• Flexible contributions - the sponsor has ample freedom to reward according to member performance.

Member advantages

• Deferred, tax-sheltered compensation.
• Contributions vest in members after at least two years of plan participation with no locking-in rules, unless withdrawals are prohibited for active members.
• At termination or retirement, contributions can be cashed-out, or used to purchase an annuity or a Registered Retirement Income Fund (RRIF) or RRSP.
• By naming a beneficiary, any death benefit is paid directly to the beneficiary with no need for probate.
• Group buying power – higher interest rates and favourable investment management fees.