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Deferred Profit Sharing Plan
A Deferred Profit Sharing Plan (DPSP) is a simple, flexible arrangement whereby a Plan Sponsor distributes a portion of the company's pre-tax profits. Specified shareholders (i.e., individuals who own, directly or indirectly, more than 10% of company stock) are excluded. Employees do not contribute to the plan.
Sponsor advantages
* plan design flexibility
* may be set up in conjunction with a Payroll Deduction RRSP or a pension plan
* contributions are not required in unprofitable years
* all contributions and administration expenses are tax deductible
* flexible contributions - the Sponsor has ample freedom to reward in relation to member performance
Member advantages
* deferred, tax-sheltered compensation
* contributions vest in members after two years of plan participation with no locking-in rules
* at termination or retirement, contributions can be cashed-out, or used to purchase an annuity or a Registered Retirement Income Fund (RRIF)
* group buying power - higher interest rates and favourable investment management fees
