# Wednesday, December 8, 2010

No longer only a large company benefit!

It is widely known and well proven that employees who feel like their employer cares about their future and retirement are happier and more productive members of the workforce. Probably the most direct and profound measure of this is the retirement plan. Pensions and Group RRSP’s have and continue to be the cornerstone of industry for attracting and retaining a quality workforce. Still only 38% of working Canadians are members of a group retirement savings plan because small business think it is too complicated or expensive to be involved in a Pension or Group Savings plan.

Recent developments in technology and recognition of an underserved market is making a great new employee benefit available to Canadian Small Business. Traditionally small company benefit plans were limited to the standard health and dental benefits with small amounts of life insurance and sometimes including long term disability income protection.  Often overlooked and rarely even considered available for small companies is the Group Registered Retirement Savings plan.

Until recently there were prohibitively high cash flow minimums, complicated reporting and administration requirements that needed dedicated staff just to manage reporting, as well as new issues for compliance and education. These factors all were deterrents to most small business owners even considering a GRRSP.

This has all changed.

Now the big plan technology has been driven down to a platform that allows for groups of as few as two people and cash flow minimums are greatly reduced and because the plans are administered electronically the expense ratios are low and MER’s and IMF’s are highly competitive with retail fund options.

There are many advantages for this type of small group RRSP plan. By design it is quick and easy to set up with online application and administration of the plan and there are no fees to the plan sponsors. Plan members get immediate tax savings by participating in an employer sponsored plan their contributions are deducted from gross pay before income tax is calculated and they get great rewards for having accumulated or transferring in money from their personal RRSP. Once an account has more than $25,000 in it the management fees are reduced and interest rates on guaranteed investments go up.

Members can participate or manage their investments to whatever style suits them. They can manage their own portfolios if they want to actively participate in their investments or there are options where members choose the date they wish to retire and the record keepers do all the management for them.

If your have two or more employees and expect to contribute as little as $10,000 per year to RRSP’s then a Group Registered Retirement Savings Plan can work for you.

Ian Baker. The Insurance Blogger

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