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My employer in Canada has given me the option to enroll in an RRSP, DPSP, or TFSA. I've come across RRSP's and TFSA's before but I am intrigued by the DPSP (Deferred Profit Sharing Plan).

Details are as follows.

When can I join?

On the first day of any month after you've completed 3 months of employment.

How much do I contribute?

You don't contribute to this plan.

Who decides how contributions are invested?

You decide how all contributions are invested.

What happens if I leave my employer?

The full value of all contributions and investment earnings are yours once you complete 2 years of membership.

From what I can tell, I have nothing to lose. If the company declares a profit, I get "extra income" else I don't. I understand that none of this will vest if I leave before completing two years as a plan member.

Is there any reason I shouldn't be enrolling in this plan?

  • Ask your HR. e.g. Might you get a taxable cash bonus in lieu of a DPSP contribution if you aren't a member of the DPSP? – Chris W. Rea Sep 23 '14 at 21:11
  • A couple of clarification points. Do you have to choose one option exclusively or are you able to do a little bit of each? Are the monetary values identical (ie straight up matching your contributions to a maximum percent of your salary)? – Myles Sep 24 '14 at 18:24
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Is there any reason I shouldn't be enrolling in this plan?

No, it's free money!

You are automatically enrolled in a DPSP when your employer puts money in it for you, however, you might have to contribute to your RRSP with your employer before your employer will but money in your DPSP.

A DPSP (Deferred Profit Sharing Plan) is a CRA registered retirement plan that your employer sets up for you. Your employer can put as much or as little of their profit into this plan and can base their contributions on whatever they want. Usually it's based on their profits that year or a % of your annual salary. DPSP also help keep employees longer because you don't get anything unless you stay a certain amount of time (vesting).

Vesting means that you don't get any of the money unless you have been in the plan for a predetermined amount of time. The max vesting period for the DPSP is "24 consecutive months of plan membership" determined by the CRA, NOT by your employer. Your employer can choose to lower it.

Matching is when your employer only puts money into an account when you put money into an account. This can be done with an RRSP:

ie. you put in 3% of your income in your RRSP
and your employer puts 3% of your income in your **RRSP**

or it can be done with an RRSP and a DPSP:

ie. you put in 3% of your income in your RRSP
and your employer puts 3% of your income in your **DPSP**

The advantage of the DPSP over the RRSP for the employer is that if you are in the DPSP for less than 2 years, they get all their money back.

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    +1 Very clear answer on a totally new concept for me. Thanks! – Myles Sep 24 '14 at 18:21

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