FAQ: Employer-sponsored plan
March 22, 2012
Small business owners can increase recruitment and retention success in a competitive labour market by strengthening their employee benefits package. Saskatchewan Pension Plan (SPP) is a smart, simple way to offer pension benefits to employees (full-time, part-time, casual or temporary).
Furthermore, there are tax advantages for employers who make contributions on behalf of employees. Having a pension plan shows you are committed to helping employees save money for retirement. As a true pension plan, money invested in SPP remains locked-in until retirement.
Here are some FAQ about adopting the SPP as your company’s retirement savings vehicle.
Q. How much will it cost me if I add the SPP to my employee benefits program?
A. SPP offers all the benefits of an employer-sponsored pension plan – but you bear no cost for plan administration.
Contributions can be made:
(a) By the employer as an employee benefit;
(b) By the employee through a payroll deduction;
(c) Or cost-shared by the employer and employee.
There are no sales commissions when members contribute or retire and there is no cost to set up your business plan.
Q. I’m very busy. Is SPP complicated to administer?
A. Administration is simple. SPP assists with the initial paperwork and implementation of the Plan. Employers can then receive monthly, quarterly or year-end reports that serve as the reminder for their next contribution. All employees between the ages of 18 and 71 may participate in the Plan, including full-time, part-time, casual and temporary staff.
After the intial set up SPP handles the distribution of receipts and statements to the employees. The employer has no liability for the investment decisions or future pension obligation to their employees. Investment instructions are provided by the employees and SPP directs and monitors the investment managers.
Q. Do I have to contribute every month?
A. You can tailor the plan to your company’s size and budget. Contributions to the Plan can be made monthly or any time of year. There is no minimum contribution, and no obligation to contribute every year. The maximum is $2,500 per year.
Q. Do all my employees have to participate?
A. Unlike plans that require a minimum enrolment before the benefits can be offered, SPP has no minimum. Even if only one employee is interested, you can start an SPP Business Plan – and you can just as easily add members to the Plan at any time.
Q. How is SPP treated for tax purposes?
A. SPP allows your business to put pre-tax dollars into investments for your employees. The employer contributions are deductible as a salary expense and employees may deduct the total contribution within RRSP limits.
Q. What happens if an employee leaves my company?
A. Should an employee leave your company for any reason, they simply take their SPP Plan with them, without any additional paperwork or sign-off for the employer. As Plan members, they can contribute to the Plan regardless of where they live or who employs them.
Q. Is there a waiting period until my employees can participate?
A. Many other pension plans require that an employee work at a company for a certain length of time before they are eligible to contribute. With SPP there is no waiting period; employees may begin participating at the employer’s discretion. Contributions belong to the employee as soon as they are invested.
Q. How do I tell my employees about SPP?
A. SPP will help employers with this. Please contact SPP and arrange for someone to speak to your employees. There are tools available on our website, including a wealth calculator, as well as opportunities to learn more about SPP on our blog (savewithspp.com), Facebook and LinkedIn.
Q. What do I have to do to get started?
A. Each employee will need to fill out a membership application, which is available online, and provide a copy of a proof of age document such as a passport or driver’s license.
Employees are then listed on the “Employer contribution statement” which is also available online. Mail all the paperwork into SPP and we will set up the accounts for each of your employees and an employer number for you.
Contributions for your employees can be submitted by cheque, automatic payment or credit card. Contribution amounts are flexible and voluntary and employers are free to use SPP as an incentive or bonus.
For example, the employer may decide to match an employee $500 per year or may choose to offer SPP as a place for employees to deposit any bonus money. SPP is flexible and can be customized to fit your business!financial planning, Save Early, Save for retirement