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  • Category: Corporate Benefits

    Group RRSPs: Do you know your liability?

    I just finished reviewing the annual reports for a Group RRSP and Deferred Profit Sharing Plan (DPSP) on behalf of a client who has one in place for his employees. On paper everything seems just fine. The investment climate is improving and on average every employee seems to be doing much better this year than last. But once I got beyond the glossy graphs certain issues started to become apparent.

    Many employees hadn’t yet chosen an investment plan and were defaulting to the option chosen by their employer. A significant number of employees were withdrawing funds from their plans, presumably to supplement their current income. Most employees weren’t on track to meet their retirement savings goals. An education program for his employees wasn’t in place.

    That’s not good for employees – and it’s not good for employers, who have a liability they may not be aware of. In 2004, the Canadian Association of Pension Supervisory Authorities issued guidelines for Capital Accumulation Plans (CAP) which refers to “a tax assisted investment or savings plan that permits the members of the CAP to make investment decisions among two or more options”.

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    First aid for employee benefits plans

    This week, as reported in Investment Executive magazine, the Conference Board of Canada released results of a nationwide survey confirming what entrepreneurs have known for some time: the cost of providing employee benefit programs is rising unsustainably — 10% in the past year, roughly three to five times the rate of inflation.

    What’s more, most businesses are wondering if they’re getting what they’re paying for. While 78% of survey participants said they have well developed benefits strategies, only 14% said they believe their programs are effective at meeting the objectives of the strategies.

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