Characteristics of the simplified pension plan (SIPP)
Employers who want to be well informed will appreciate the following information.
Administration
As the employer, you have only a small number of administrative duties. The financial institution that administers the plan will provide all the required information to members and to the supervisory agencies (Retraite Québec and the Canada Revenue Agency 
).
Employer and member contributions
An SIPP combines several of the advantages of a group RRSP and a deferred profit sharing plan (DPSP). Thus, you can decide whether the contributions made by members are locked-in or not locked-in and you can change the amount of your contribution by making and additional employer contribution.
Unlike contributions to a group RRSP, contributions to an SIPP do not result in additional payroll taxes, which is a big advantage for a small business. An employer who contributes to a worker's RRSP must do so by increasing the worker's pay to cover the amount of the employer's contribution. That "pay increase" is subject to payroll taxes for several government programs.
Payroll Taxes
Your savings in payroll taxes can vary from one government program to another. A representative or consultant authorized to offer group annuities can make the calculation for you.
Example If in 2024 your total payroll is $2 000 000 and you make an annual contribution of $1000 per employee having a base salary of $35 000, you could save $121.76 in payroll taxes for each employee.
Payroll Tax Savings by Government Program
|
Government program | Savings in payroll taxes |
|---|
| Employment insurance See Note 1 | $17.78 |
|
CNESST (contribution rate of 1.5%) | $15.00 |
| Contribution related to labour standards | $0.60 |
| Health Services Fund | $17.46 |
| Québec Pension Plan | $64.00 |
| Québec Parental Insurance Plan See Note 1 | $6.92 |
|
Total |
$121.76 |
|---|
-
Note 1In some cases, contributions to a group
RRSP are not subject to employment insurance or the Québec Parental Insurance Plan.
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Taxation
The tax rules for an SIPP are more advantageous than those for a DPSP. Therefore, if you are the owner of a family-run small business, you and your family members can participate in an SIPP (which would not be possible in a DPSP).
The annual contribution that you can pay into a DPSP is subject to a ceiling that is equal to only half that which applies for an SIPP. The $32 490 for an SIPP, in 2024, is clearly more advantageous than the $16 245 ceiling for a DPSP.
Your powers
You have important powers over your company's SIPP. You can determine the plan's provisions, including:
- conditions for member enrolment and withdrawal
- whether or not members must make contributions
- the rates for member and employer contributions
- whether member contributions are locked-in or not locked-in
Under certain conditions, you also have the power to:
- amend the plan's provisions, for example, to reduce your employer contribution if your company finds itself in a difficult period
- replace your SIPP with an SIPP from another financial institution
- terminate your participation in an SIPP.
Other characteristics of an SIPP
Power sharing with a union
If your company has a union, you can make an agreement with it to share certain decision-making powers that are usually exercised by the employer. For example, you could agree to jointly determine the conditions for plan membership and withdrawal or where member contributions are locked-in or not locked-in.
A power sharing agreement between you and the employer is considered to be an integral part of the SIPP text. However, it does not have to be included in collective agreement negotiations.
Retirement information committee
If the SIPP has 50 members or more who work for you, a retirement information committee can be set up if a majority of those members request one. The committee acts as liaison between those members and the financial institution to give members easy access to information about the plan.
The costs of an SIPP
The administration of an SIPP by a financial institution involves 3 types of expenses:
- investment expenses related to funds management. These costs include brokerage fees, remuneration of the investment advisor and of the securities custodian. They are charged as specific costs and not distributed to the members' accounts.
plan operating costs - These costs include:
- fees related to plan registration and other fees that must be made to Retraite Québec
- production costs for the annual statement of benefits sent to each member
- costs related to transferring sums from member accounts to other retirement savings instruments
You can decide how to share the costs incurred by the financial institution to meet the statutory and regulatory requirements for SIPPs. They can be distributed among the employer, the members and the pension fund.
- costs related to the operations of the retirement information committee (if a committee exists). These costs are additional costs that can be paid by the employer or by the plan members.
How to set up your SIPP
You will need to contact a financial institution that offers an SIPP or a representative or consultant authorized to offer group pensions. The latter can help you determine the parameters of your SIPP, based on your financial means and your objectives.
An informed employer will act without hesitation
To get started right away on setting up an SIPP that corresponds to your financial means and to your employees' needs, you can consul our list of financial institutions that are authorized to offer SIPPs.