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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, July 5 2017
Group Retirement Savings Plan
6 signs  it's time to contribute to your employees' retirement plan


Have you been hesitating for years to make contributions to your employees’ retirement plan? The one thing you should know is that this would be highly profitable for you, much more than increasing wages. It is a win-win situation for your organization and your employees!

Here are 6 signs that the time has come for your company to contribute to your employees’ retirement plan.

1. Recruiting is difficult

If you have problems recruiting new employees, it may be that your overall compensation package is not competitive enough. For the same salary offer, an applicant will usually choose the organization providing the best total compensation.

If your competitors contribute to a pension plan and you don’t, your company is at a disadvantage. Adding an employer contribution to the pension plan will help you come out ahead and attract top talent.

2. Your employees are not saving enough

In Quebec, nearly 1.9 million workers (47% of all workers) have no group retirement savings plan. As the cost of living keeps going up, employees often find it difficult to save on their own. Everyone knows a retiree who is struggling to make ends meet. Making employer contributions is the best way to help your employees reach their goals.

In plans where employers match employee contributions, an overwhelming proportion of employees will save for their retirement. The reason is simple: there’s money on the table. Employees will want to avail themselves of it. Otherwise, they will voluntarily forfeit “free” money from their employer.

3. You want to offer your employees an affordable savings tool

Of course, your employees can contribute to their RRSP with their bank or credit union. However, when they do so, they generally pay management fees 30% higher than with an employer-sponsored plan. Why? Simply due to economies of scale. Management fees are much lower in group plans than in individual plans.

Moreover, employees will make direct payroll RRSP contributions. This is much easier to budget and plan than a lump-sum year-end contribution.

Finally, employees will receive the applicable income tax refund directly on each pay (immediate tax benefit) instead of waiting a year before getting their refund under an individual RRSP. It is better to have your money available right away instead of letting the government keep it for months.

To learn about all the benefits of offering a group plan to your employees, visit our website (Advantages of a pension plan).

4. Increased profitability by contributing to your employees' retirement plan

If your company’s financial health has improved and you want to reward your employees, there’s nothing like contributing to employees' retirement plan. This will clearly demonstrate your gratitude and appreciation for their efforts and your concern for their financial security in retirement. This way, they will be motivated to continue performing well within the organization.

Under such circumstances, you may be tempted to give a bonus or a pay raise to your employees. However, both approaches would be expensive for the firm. It is far more cost effective to contribute to a pension plan instead of paying a bonus or increasing wages. Why? Simply because making contributions to certain types of pension plans allows you to save on your payroll taxes (QPP, Employment Insurance, QPIP, etc.). This usually generates a 10-15% saving on the amount paid. This is something to think about!

5. You want to reduce your costs

If you raise the pay of your employees every year and want to control cost increases, there is nothing better than contributing to employees' retirement plan. Instead of giving a 3% pay raise, why not settle for a 2% raise and contribute 1% to the pension plan? As stated above, a pension plan contribution will cost 10-15% less than a pay raise.

This strategy is increasingly popular with companies: it generates savings for the organization and is highly appreciated by employees.

6. Employee turnover

Nothing is more frustrating than losing an employee to a competitor. So much time and energy are invested in training an employee. Employees are always on the lookout for offers from the competition. It is important for your company to remain competitive in order to keep and even attract top talent.

Under the VRSP legislation, all Quebec firms with 5 or more employees will be required to offer a savings plan to their employees. Making employer contributions will undoubtedly set you apart from the competition.

As you can see, there are many indications that employer pension plan contributions will benefit both the organization and its employees. Delaying this will put you at risk. With a growing labour shortage, employers must remain vigilant in order to attract and keep their employees.

Several companies are making the move in order to promote retirement savings among their employees and thus demonstrate their concern for their employees’ financial security in retirement.

Have you made your decision? Act now!


Jimmy brings overs 20 years of experience in pension plans. After starting his pension career at the Ontario Teachers’ Pension Plan, he worked as DC Consultant for a large actuarial firm and two insurance companies before joining AGA. With his extensive pension experience, he has developed an acute expertise in the selection, the design and the implementation of pension plans. Jimmy provides his clients with both expertise and insight on their employee benefits.
Jimmy Carbonneau, Group insurance and group annuity plans advisor