An overview of the Pooled Registered Pension Plan (PRPP)
Use this summary to learn more about the Pooled Registered Pension Plan (PRPP), responsibilities you may have as an employer and other important facts.
This information is based on Bill C-25, the Pooled Registered Pension Plans (PRPPs) Act, which was passed by the Federal Government in June 2012. While each province will have discretion in determining how its PRPP will be structured should each province choose to adopt one, the Act provides a useful overview of the features of PRPPs, which are summarized in the table below. The descriptions below may differ for the provinces depending upon what each chooses to do.
 What is a PRPP?
A Pooled Registered Pension Plan (PRPP) is a new type of group retirement savings plan. It is a defined contribution pension plan with some differences that make it simpler than a typical defined contribution pension plan. The PRPP offers tax advantages for both employers and employees, similar to those offered by a traditional pension plan.
How do I know if I must set up a PRPP for my employees?
Federally regulated employers are not required to set up a PRPP for their employees; however, individual provinces will determine if employers will be required to offer a PRPP and what conditions, if any, will apply.
Which employees can participate?
Full-time employees are immediately eligible to participate in the PRPP. Part-time employees can join the PRPP after completing 24 months of continuous employment.
When they are eligible, employees will be automatically enrolled in the plan chosen by a participating employer, but they will be able to opt out of participation in the plan within 60 days of receiving notification they have been enrolled.
Do employers have to contribute?
No, employers are not required to contribute to their company's PRPP. However, they may choose to do so. Aside from the benefits of employee retention and attraction, if any employer chooses to contribute, these tax benefits are available:
- Employer contributions are not subject to payroll taxes.
- Employer contributions may be deducted from income for tax purposes.
What are the tax advantages of a PRPP to an employee?
Employee contributions to a PRPP are deductible from income before income tax is applied in the same manner as Registered Pension Plan contributions. As well, money contributed by the employer to the PRPP is not included in an employee's taxable income and the employee does not pay income tax on this money until it is withdrawn (ideally at retirement).
How are employees enrolled in the PRPP?
An employer will automatically enroll his or her employees by providing the administrator with the required employee information to establish a PRPP account. The administrator in turn sets up an account for each employee. Employees will have 60 days to notify the employer of their desire to opt out of the PRPP.
Do employees have to stay in the PRPP?
No, an employee may terminate their membership or participation in the PRPP within the first 60 days of receiving notification they have been enrolled. After the 60-day opt-out period ends, employees can set their contribution rate to zero.
How much can employees contribute each year?
An employee can contribute up to his or her Registered Retirement Savings Plan contribution limit, which is typically 18 per cent of the previous year's earned income, minus contributions to other registered plans. The administrator will be responsible for setting an employee's default contribution rate and any increases to that rate with the option for the employee to change his or her contribution rate at any time.
Can the employee withdraw money from the plan?
In general, funds are not allowed to be withdrawn until retirement, in accordance with the legislation. However, regulations state that locked-in funds can be withdrawn in certain situations (i.e., a disability).
I already offer a group RRSP to my employees. Do I have to establish a PRPP?
No. As long as you have a workplace retirement savings plan in place, you are fulfilling the government mandate.
I already offer a retirement savings plan in my company, but I just don't make it available to everyone. Do I have to establish a PRPP?
No, you could choose to offer the existing company retirement savings plan to those employees not currently included, or you could set up a PRPP for those employees, but you are not obligated to do so.
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