With the 2024 deadline for contributions to registered retirement savings plan (RRSPs) around the corner (March 3), it’s the season to remind employees to take full advantage of the unique benefits of your organization’s group RRSP.
And it may be a good time to consider whether you as a plan sponsor can be doing more to get full value from your plan, both for the organization and for employees.
Or, is the time right for you to offer a group RRSP in the first place? One in five (22 per cent) employers does not offer any form of retirement benefits, reported the 2024 Canadian Employer Pension Survey by the Angus Reid Group and the Healthcare of Ontario Pension Plan (HOOPP). And the 2024 Benefits Canada Survey found that 29 per cent of plan sponsors offer a group RRSP.
Employers cite cost as the biggest reason (56 per cent) for not offering retirement benefits, according to the HOOPP survey. Yet among those that do offer retirement benefits, the majority (69 per cent) agreed with the statement, “Regardless of economic conditions, companies could afford to offer workers good pensions if they wanted to.”
Noah Bucholtz, Group Retirement Specialist at Peak Benefit Solutions in Peterborough, Ontario, a member firm of Benefits Alliance, would add that group RRSPs in particular are more affordable than many employers think.
“Group RRSPs are a cost-effective and feasible way for small and mid-sized businesses to offer a competitive benefits package without the high administrative costs of traditional pension plans,” says Bucholtz, noting that “over the past five years, we’ve seen increased accessibility, reduced setup costs and more flexible plan designs, making them even more attractive today.”
The HOOPP survey appears to validate group RRSPs’ growing popularity. Among businesses that have invested in retirement benefits, they were most likely (57 per cent) to have introduced or improved a group RRSP in 2024, well ahead of introducing or improving a defined contribution pension plan (DCPP, 29 per cent) or defined benefit pension plan (DBPP, 24 per cent).
And when asked what they plan to invest in over the next year, a group RRSP again tops the list, with 53 per cent planning to introduce or improve it, compared to 44 per cent for a DCPP and 33 per cent for a DBPP.
In today’s tough labour market—a recent poll from Robert Walters found that 74 per cent of Canadian professionals are currently looking for a new job—group RRSPs can be an increasingly powerful attraction and retention tool. Particularly when the plan sponsor matches employees’ contributions.
“Employees understand that the money you’re giving them is going towards their financial future and their wellness. They get the message that their employer cares for them and wants to invest in them and keep them within the company,” says Bucholtz.
To maximize enrollment and participation, marketing needs to hinge upon the advantages of a group RRSP versus individual or retail RRSPs:
- The biggest advantage is the employer’s matching contributions. In Canada, most employers match between three per cent and five per cent of an employee’s pre-tax salary.
- Because retirement savings are pooled in a group plan, investment fees are lower for employees—and they don’t pay administrative fees, which some financial institutions charge.
- Employees can set up automatic deductions from their pay cheque to more easily reach their maximum contribution amount, rather than making a lump-sum contribution near the deadline.
For plan sponsors who don’t yet offer matching, Bucholtz points to the flexibility of options to suit employers’ needs and budgets. “You can do a tiered system where you’re rewarding the employees who have been there the longest with the higher matching contribution.” Or a plan sponsor can offer a fixed contribution amount or a percentage of the employee’s contributions, he adds.
It’s also important to communicate that automatic deductions are necessary to enable the employer’s match. “Unless stated otherwise by the employer, in the majority of circumstances, group RRSPs are not set up to match a lump-sum contribution,” says Bucholtz. That said, employees can still be encouraged to contribute lump sums as well—for example, a bonus—to build up their savings even more.