What is RRSP matching?
RRSP matching is a company-sponsored means for your employees to save for their retirement. Typically, the program is offered to employees who’ve been with your company beyond a certain amount of time. They can then apply for the program and have a fixed portion of their income contributed to an RRSP, via payroll deduction. The beauty of RRSP matching is that the company matches this deduction, thus doubling the total amount that gets deposited. Employees are free to make contributions above and beyond what’s matched in the employer-sponsored program, and these are still “matched” by the employer as long as they don’t exceed the determined matching cap. For example, say your company offers 2% RRSP matching. This means your employees can contribute up to 2% of their income per pay cheque towards an RRSP, which your company will also match and contribute on their behalf. Even if they decide to contribute more per cheque, the company is only obligated to match according to the program’s cap.
RRSPs explained
Canada’s Registered Retirement Savings Plan (RRSP) lets employees contribute part of their income to a purpose-made retirement savings account. RRSP contributions reduce the tax an employee pays on their total income, and employees who regularly contribute to an RRSP with a matching program will end up paying less income tax than an employee who makes no contributions at all. RRSPs can also be used to fund a first-time home purchase, which is especially attractive to millennials and younger employees. This is all thanks to a program called the Home Buyers’ Plan, which allows first-time home buyers to withdraw up to $35,000 tax-free from their RRSP to buy or build a home. While it may be a stretch to claim you’re offering younger employees an easier means of home ownership, it is nevertheless an attractive knock-on benefit to offering this type of program. RRSPs exist independently of the employer offering them. That means employees can make whatever career moves they want, and bring the RRSP with them (minus the matching). They don’t need to stay with one particular company for life in order to properly prepare for retirement. It also gets the ball rolling on retirement savings for employees young and old, who may feel that the task is entirely on them. It’s a great way to show that you care about your employees and their future.
Group RRSPs simplify things
In contrast to individual RRSPs, which are managed by whoever owns them, group RRSPs make administration much easier. That’s because all employees involved must follow the same rules and processes, and invest in the same funds. They also offer convenient features, like payroll deduction and early withdrawal policies that ensure employees are well positioned for retirement when the time comes. Group RRSPs also make things easier, management-wise, for employees. Many employees (especially young ones) don’t know much about government savings programs or retirement, and will appreciate having all the comparison shopping and technicalities taken care of on their behalf. Lastly, as an employer, you’re able to collect statistics on how widely the program is being used by your employees. This allows you to optimize it for your workplace’s unique circumstances and tailor it to your employees’ needs.
Educate your employees
The most likely reason your employees don’t already have RRSPs of their own is because of how complicated the process can seem. It’s easy to get caught up in regulatory pitfalls and find retirement saving via an RRSP to be a complicated headache of a process that’s more trouble than it’s worth. Luckily, if you’re thinking of offering employer RRSP contributions, you can make employee education a central pillar of your onboarding. There are very clear dos and don’ts when it comes to administrating and contributing to employer-sponsored RRSPs and you can eliminate much of the confusion and uncertainty by both comprehensively training new hires and periodically refreshing existing employees on how the program works. If done correctly, your employees will have a heightened appreciation of the program and of you as an employer. Nothing shows your employees that you care about them quite like a dedication to their future, whether through developing their skills or helping them save for retirement. Employees will see why the program is a crucial part of your overall retention structure, and hopefully will view it with a greater sense of importance when considering potential employers down the road.
Things to consider
Company-matched RRSP contributions can be one of the key parts of your employee benefit structure, but only if your employees fully understand the benefits of making regular contributions and why you offer the program in the first place. Regular seminars or lunch-and-learns about retirement planning are a great way to gauge interest in implementing such a program, and if you decide to start, will put your employees in a good headspace about staying with your company. After all, having an employer that cares so much about its employees that it’s willing to help them save for their first home or retirement is a perk worth bragging about. Between positive word-of-mouth and proper articulation of the program and its benefits to potential hires and current employees, you’ll set the groundwork for a fruitful employment relationship that could even last until they need to access the savings you’ve helped them make!
