Thinking of adding a Retirement Plan?
If your plan includes a Retirement Plan, congratulations! You’ve given your company a critical competitive hiring advantage; a Retirement Plan is key tool for recruiting and attracting new employees to your organization. And of course, adding a Retirement Plan is a great way to reward your current employees, and helps improve retention and staff tenure levels.
While only approximately 20% of employers offer a Retirement Program, many employers are now discovering how incredibly important a Retirement Plan can be — especially for those struggling to lure and retain staff.
Retirement Plans come in many formats, including Defined Contribution Pension Plans, Defined Benefit Pension Plans, GRRSP’s and GRRSP/DPSP Plans. Today most employers lean toward the GRRSP/DPSP plan option, where possible. This style of plan is more flexible and enables the employer to control more of the plan rules and protect the company contribution to the plan. This is done through “vesting” rules. Vesting is a participation timeline requirement the employee must meet in order to receive the company contributions at termination. Rules in a GRRSP/DPSP can stipulate this requirement and protect the company contributions from being accessed by short term employees.
Most plans offer an Employee/Employer match program where the amount the employee contributes is matched by the employer. Most plans offer between 3 – 5% contribution matches. This means whatever the employee contributes the employer matches, up to a set maximum amount. Typically, there are no direct costs incurred for the Employer to set up a GRRSP/DPSP as the fees for running the program are included in the Investment Management Fees (IMFs) the employee pays through each fund. An employer’s main administrative role is to deduct the employee’s contribution and remit both the employer and employees’ portion on a monthly basis to the carrier.
All retirement providers offer a host of funding options, but the key to a well-run plan is simplicity. Employees are not typically investor-savvy, as a result most providers offer simplified solutions to as an option. A common simplified choice is a Target Date Fund, which is often referred to as an autopilot fund. This style of fund requires little effort from an employee, as the employee makes one choice by selecting their target retirement year, which in turn determines the Target Date fund best suited to them. Once selected this fund automatically addresses the changing risk needs as the employee ages and will automatically make fund changes to reflect their evolving needs.
For employers thinking about introducing a retirement plan, be sure to use a qualified broker to assist you through the right design decisions and help manage the program on an ongoing basis. A good broker will assist you in your CAP Compliance requirements and provide you with an annual summary to help you meet and protect your organizations interests, and build a sound CAP file to be referred to in future years should past efforts and diligence need to be confirmed.
Business Insurance Services offers a wide range of services to guide and assists clients through the steps of implementing and maintaining a Retirement Plan. For assistance please contact Rosemary Marsh at 905-777-9990, or via email at firstname.lastname@example.org if you’d like to discuss any of the above. Our expertise is your advantage.