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Devanchya
Smile
Premium
join:2003-12-09
Ajax, ON
Reviews:
·TekSavvy DSL

RSP based company Contribution

I'm being recruited by a new company due to a contract change and unlike my current place which is 100% Employer Pension plan, the new company has a 50 cents on the $1 to a limit of $6000 per year. They allow the RSP to start with in 6 months of start.

Are there any traps to be considered with this type of plan? I'm looking at negotiating a "bump" in base pay to cover my side of the contribution but other than that I'm not sure what to question or if I have any major concerns with this type of plan.
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»www.codecipher.com - Marking the way to tomorrow's solutions -- Did you know that Perl is not Dead? »perlisalive.org/


nitzguy
Premium
join:2002-07-11
Sudbury, ON
said by Devanchya:

I'm being recruited by a new company due to a contract change and unlike my current place which is 100% Employer Pension plan, the new company has a 50 cents on the $1 to a limit of $6000 per year. They allow the RSP to start with in 6 months of start.

Are there any traps to be considered with this type of plan? I'm looking at negotiating a "bump" in base pay to cover my side of the contribution but other than that I'm not sure what to question or if I have any major concerns with this type of plan.

...I don't know if there are any traps vs. it not being as good as your current pension plan.

I'm confused by this "100% employer pension plan" comment though...typically its a match between you and your employer...ie, you contribute 3%, they contribute 3%....I want to say its rare that the employer would pay 100% into an employees pension plan, but maybe that you're just not seeing the deduction on your paystubs properly?

I mean even in the public service they have matching contributions...employee pays 6%, Employer pays 6%...or something to that effect....

All this means is that they'll contribute 1/2 of whatever you put in to a maximum of $6k/yr. Or, in a bi-weekly manner that's up to ~$230/per pay on the year to get the maximum from you. Meaning you'd have to contribute $460/pay to get their $230/pay just to put it in perspective...I'm not sure what $460/pay is as a percentage of your income but that's $12k/yr roughly that you'd be putting in....

Personally speaking I feel like that's a lot for a defined contribution pension plan, am I wrong? Last company I had a pension plan at it was 3% from me and 3% from employer...


dirtyjeffer
Anons on ignore, but not due to fear.
Premium
join:2002-02-21
London, ON
reply to Devanchya
do you mean defined benefit vs defined contribution??

defined benefit plans are rare now...defined contribution is the "new norm".


donoreo
Premium
join:2002-05-30
North York, ON
reply to Devanchya
said by Devanchya:

I'm being recruited by a new company due to a contract change and unlike my current place which is 100% Employer Pension plan, the new company has a 50 cents on the $1 to a limit of $6000 per year. They allow the RSP to start with in 6 months of start.

Are there any traps to be considered with this type of plan? I'm looking at negotiating a "bump" in base pay to cover my side of the contribution but other than that I'm not sure what to question or if I have any major concerns with this type of plan.

That sounds like a great plan to me. RSP contributions by the employer are not that common.
--
The irony of common sense, it is not that common.
I cannot deny anything I did not say.
A kitten dies every time someone uses "then" and "than" incorrectly.
I mock people who give their children odd spelling of names.


EUS
Kill cancer
Premium
join:2002-09-10
canada
Reviews:
·voip.ms

1 edit
reply to Devanchya
This is sometimes called DPSP (deferred profit sharing plan).
The only caveat I can think of is that the employer side contribution is not your property until you are a vested employee, standard being employed for 2 years.
Once vested, if and when you leave the company, make sure to get their account transferred to you.
Sometimes, if you leave before the vested period is up, their contributions do not become your property.
Read the contract carefully for time frames of vestment, and the particulars of which types of parting from the company will make their contributions null and void.
--
~ Project Hope ~


koira
Keep Fighting Michael
Premium
join:2004-02-16
Reviews:
·Start Communicat..

2 edits
reply to Devanchya
I believe what you are looking at is a voluntary contribution RSP with employer matching funds up to the first 6 K per year. I wouldn't consider it as a trap, its free money. These are actually good because funds in a group RRSP usually has lower management fees than individual based. You will need to understand the investment options as you will likely have to choose options of where the contributions the money will be invested. These will be various mutual funds, GIC, segregated funds etc.
Usually administered by Sunlife, Manulife etc

Here is a forum thread hashing it over:
»canadianmoneyforum.com/showthrea···ugh-work

I worked at a place that had one, saved a bundle and then when I left the funds were transferred from the group into an individual RSP. Then I transfered it over to my own self directed RRSP with a different company.


El Quintron
Resident Mouth Breather
Premium
join:2008-04-28
Etobicoke, ON
kudos:4
Reviews:
·TekSavvy Cable
·TekSavvy DSL
reply to EUS
said by EUS:

This is sometimes called DPSP (deferred profit sharing plan).
The only caveat I can think of is that the employer side contribution is not your property until you are a vested employee, standard being employed for 2 years.
Once vested, if and when you leave the company, make sure to get their account transferred to you.
Sometimes, if you leave before the vested period is up, their contributions do not become your property.
Read the contract carefully for time frames of vestment, and the particulars of which types of parting from the company will make their contributions null and void.

I used to manage these for a living... good summary.
--
Support Bacteria -- It's the Only Culture Some People Have


J E F F
Whatta Ya Think About Dat?
Premium
join:2004-04-01
Kitchener, ON
kudos:1
reply to nitzguy
For public sector, it's 9.3-10.3% each. It was underfunded for years, now the newer hires have to pay for past mistakes.
--
If you can't explain it simply, you don't understand it well enough. - Albert Einstein


Mike2009

join:2009-01-13
Ottawa, ON
kudos:3
Reviews:
·TekSavvy DSL

1 edit
I have a share plan that works that way. For every dollar I put in (up to 5% of salary) the company puts in 50 cents. Works great. I'm lucky enough to also have a defined benefit pension plan.

Forgot to mention that I hold these shares within an RRSP so it's really a similar arrangement to yours. Basically it's free money so I'm not sure why you'd be looking at it with suspicion.


dirtyjeffer
Anons on ignore, but not due to fear.
Premium
join:2002-02-21
London, ON
said by Mike2009:

I have a share plan that works that way. For every dollar I put in (up to 5% of salary) the company puts in 50 cents. Works great.

mine is the same (but i don't have the DB portion)...my wife's is the same as yours (with the DB portion).


nitzguy
Premium
join:2002-07-11
Sudbury, ON
reply to J E F F
said by J E F F:

For public sector, it's 9.3-10.3% each. It was underfunded for years, now the newer hires have to pay for past mistakes.

Yes, Nitzguy's gf is a teacher and she pays quite a large sum...I was surprised at the amount...being about 12% of her net pay I believe...

I guess I was in a different industry...I'm waiting on the new employer to jump in as jumping into the OPB at this point would be pointless as a DB plan.


J E F F
Whatta Ya Think About Dat?
Premium
join:2004-04-01
Kitchener, ON
kudos:1
Does that 12% include their sabbatical?

mr weather
Premium
join:2002-02-27
Mississauga, ON
reply to nitzguy
said by nitzguy:

Yes, Nitzguy's gf is a teacher and she pays quite a large sum...I was surprised at the amount...being about 12% of her net pay I believe...

Mrs. Weather is a teacher as well and she pays about 12%. It essentially means she has no room for personal RRSP's although she does have a TFSA.
--
"It's all coming down!!" - Mike Holmes


DKS
Damn Kidney Stones
Premium,ExMod 2002
join:2001-03-22
Owen Sound, ON
kudos:2
reply to J E F F
said by J E F F:

For public sector, it's 9.3-10.3% each. It was underfunded for years, now the newer hires have to pay for past mistakes.

Or, if you are a part of HOOP, they are sitting on about 50 billion dollars. Fully funded and will be for years. My own DB plan is 9%/7% employer/employee,, which is the new norm and new members get reduced pensions.
--
Need-based health care not greed-based health care.


DKS
Damn Kidney Stones
Premium,ExMod 2002
join:2001-03-22
Owen Sound, ON
kudos:2
reply to mr weather
said by mr weather:

said by nitzguy:

Yes, Nitzguy's gf is a teacher and she pays quite a large sum...I was surprised at the amount...being about 12% of her net pay I believe...

Mrs. Weather is a teacher as well and she pays about 12%. It essentially means she has no room for personal RRSP's although she does have a TFSA.

Same with me. Not much RRSP room but TFSA is fine.
--
Need-based health care not greed-based health care.


J E F F
Whatta Ya Think About Dat?
Premium
join:2004-04-01
Kitchener, ON
kudos:1
Reviews:
·Rogers Portable ..
reply to DKS
No reductions here for newbies...although one thing they did was get some people to retire early and offer full pension (as defined).

What does HOOP stand for? I'm OMERS. We're sitting on a lot of money, but it's not "a lot" when you factor in pension payouts over the next 40 years.
--
If you can't explain it simply, you don't understand it well enough. - Albert Einstein

graniterock
Premium
join:2003-03-14
London, ON
Healthcare of Ontario Pension. Not sure what the extra O stands for. You'll find a lot of hospitals are members. They send me a letter every year saying everything is hunky dory.

»hoopp.com/

peterboro
Avatars are for posers
Premium
join:2006-11-03
Peterborough, ON
reply to DKS
said by DKS:

Or, if you are a part of HOOP, they are sitting on about 50 billion dollars.

I'll be getting a taste of that 50 billion eventually myself and it's HOOPP (Healthcare of Ontario Pension Plan).

We got a 17-per-cent return on investments last year BTW people.

peterboro
Avatars are for posers
Premium
join:2006-11-03
Peterborough, ON
reply to graniterock
said by graniterock:

They send me a letter every year saying everything is hunky dory.

I think every plan does that regardless of their growth.


J E F F
Whatta Ya Think About Dat?
Premium
join:2004-04-01
Kitchener, ON
kudos:1
Reviews:
·Rogers Portable ..
said by peterboro:

said by graniterock:

They send me a letter every year saying everything is hunky dory.

I think every plan does that regardless of their growth.

They sure do....
--
If you can't explain it simply, you don't understand it well enough. - Albert Einstein

graniterock
Premium
join:2003-03-14
London, ON
But.... I have no reason to not believe them. It's not like I'm gonna have to wait 30 years to find out... Wait a sec!


DKS
Damn Kidney Stones
Premium,ExMod 2002
join:2001-03-22
Owen Sound, ON
kudos:2
reply to peterboro
said by peterboro:

said by DKS:

Or, if you are a part of HOOP, they are sitting on about 50 billion dollars.

I'll be getting a taste of that 50 billion eventually myself and it's HOOPP (Healthcare of Ontario Pension Plan).

We got a 17-per-cent return on investments last year BTW people.

Yup. We are already getting a taste in our house. Very nice.
--
Need-based health care not greed-based health care.


DKS
Damn Kidney Stones
Premium,ExMod 2002
join:2001-03-22
Owen Sound, ON
kudos:2
reply to peterboro
said by peterboro:

said by graniterock:

They send me a letter every year saying everything is hunky dory.

I think every plan does that regardless of their growth.

Pension law requires it.
--
Need-based health care not greed-based health care.