What is a VRSP?
VRSPs were introduced to make it easier for employees of small businesses to save for retirement. The VRSP solution offered by Desjardins is 100% online, making it an easy and convenient choice for you and your employees.
Legal deadline to offer a VRSP
Employers who have at least 5 employees on December 31 of a year AND at least 10 employees by June 30 of the following year are required to subscribe to a VRSP by December 31 of the same year.
(For example: if you have 5 employees on December 31, 2019, and you have 10 on June 30, 2020, you must subscribe to a VRSP* by December 31, 2020.)
From the date of your online request, a maximum of 3 months is required to set up your VRSP.
*It's also possible to offer a different group retirement savings plan. Call our Customer Contact Centre to determine which one is best for you.
Advantages
For employers
- No fees
- Lots of plan set-up support
- Educational materials for plan members
For employees
- Low management fees
- Contributions accumulate tax-free
- The employer can also make contributions
- Immediate tax savings, since contributions are deducted at source
Contributions
Employer
- No minimum rate
- Locked in
- Non-taxable as not subject to payroll taxes
- Vested immediately
Employee
- Subject to annual RRSP contribution limit
- Employees can keep contributing, even after they leave the company
- Spousal contributions not permitted
- Not locked in
Details
Administration
- Plan must be registered with Retraite Québec and with the Canada Revenue Agency
- Regulatory fees paid via Desjardins Insurance
- No annual meeting required
Investment
- Employees responsible for their investment choices
- Investment policy not required
More information about VRSPs
Who does the VRSP Act apply to?
Employers
All employers who have a physical workplace in Quebec are required to offer a VRSP to their employees there. As prescribed by the law, your deadline for setting up a VRSP depends on how many Quebec employees you have.
Employees
All employees who:
- Are 18 or older
- Are an "employee" as defined in the Act respecting labour standards
- Have 1 year of "uninterrupted service" as defined in the Act respecting labour standards
Obligations
Employers who haven't set up a plan yet
Employers are legally required to offer a VRSP to employees with at least 1 year of uninterrupted service—by certain deadlines. If you don't already offer all your employees the opportunity to contribute via payroll deductions to a group RRSP, a simplified pension plan (SPP), a defined contribution plan (DC plan) or a group TFSA, you must:
- Choose a VRSP provider
- Offer the VRSP to all employees and let them know about the plan's features
- Enroll all employees with at least 1 year of uninterrupted service in the plan
- Set up payroll deductions
- Offer employees who've opted out of the VRSP the opportunity to re-enroll in the plan (every 2 years, in December)
Employers with an existing plan
If you're already offering your employees a retirement savings plan, you're required to offer a VRSP to any employees who aren't eligible for the existing plan. You also have to set up payroll deductions for all plans.
Alternatives
If you don't want to offer a VRSP, you have the option of setting up a group RRSP, a simplified pension plan (SPP), a defined contribution plan (DC plan) or a group TFSA instead.
VRSP deadlines
20 or more employees
Employers with 20 or more employees have been able to offer VRSPs to their employees since July 1, 2014.
10 to 19 employees
Employers with 10 to 19 employees have been able to offer VRSPs to their employees since July 1, 2014.
5 to 9 employees
The government still hasn't set a VRSP deadline for employers with 5 to 9 employees. Even though these employers aren't legally required to set up a VRSP, they've been able to do so since July 1, 2014.
Compliance deadline for employers
Once all the specific VRSP deadlines have passed, if you had 5 or more employees the previous year, you'll have 1 year to set up a VRSP or another approved product for your employees. Once you've set up a VRSP and employees are enrolled in the plan, you have to keep the plan in place, even if you no longer have 5 or more employees.
Contributions
Employer contributions
You don't have to contribute to your VRSP, but you can if you'd like.
Employer contributions are locked in and can be transferred to a supplemental pension plan, a life income fund (LIF) or a locked-in retirement account (LIRA) when the plan member's employment ends or they turn 55.
Employee contributions
Employees choose the contribution rate for their VRSP. If no rate is chosen, 4% of the gross salary will apply by default.
Employees who contribute to a VRSP can change their contribution rate twice a year, or more often at your discretion. Only employees who've contributed to a VRSP for more than 12 months can set their contribution rate to 0% (certain exceptions apply).
Employee contributions aren't locked in. Employees can make VRSP withdrawals before they retire, but they'll have to pay provincial and federal income taxes.
Employees can't withdraw money from their VRSP under the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP). They can get around this by transferring the required amount from their VRSP to an RRSP, and then making an RRSP withdrawal (transfer fees apply).
Enrollment
All employees are automatically enrolled in your VRSP. They can opt out within 60 days of enrollment, before payroll deductions begin.
Investment options
The same investment options are available to everyone participating in a Desjardins VRSP. Plan members can choose the off-the-shelf approach or the do-it-yourself approach.
Off-the-shelf approach
Plan members have access to the DFS BlackRock® LifePath® Index target date funds — ready-made portfolios based on a lifecycle approach. The risk level is determined according to their age and adjusted as they get closer to retirement.
The target date fund with the year closest to the plan member’s expected retirement year (or if not provided, the year they turn 65) is the default option when they don’t provide investment instructions.
Do-it-yourself approach
Plan members can opt to create their own investment portfolio by choosing from “à la carte” funds. The options include 2 fixed income funds and 2 equity funds.
Tax implications
Much like RRSP contributions, VRSP contributions can be deducted from taxable income for provincial and federal tax purposes. Contributions grow tax-free until they're withdrawn. Total VRSP and RRSP contributions are subject to the annual RRSP contribution limit, a maximum of 18% of the previous year's earned income. Employer contributions are deducted from the company's taxable income and aren't subject to payroll taxes.
Fees
Investment-related fees
The total fees applicable to the investment options available in the VRSP include management fees, as well as investment and operating fees and the applicable sales taxes. These fees must be less than or equal to 1.25% of the average plan assets for the default option and 1.5% for all other options.
Management fees are the fees charged to manage and administer the plan. Desjardins Insurance deducts them from the market value of the funds held by the plan member.
Investment fees are the fees charged by the fund managers. They vary according to the option selected and the fund manager. Operating fees cover the cost of brokerage commissions, auditing and other fees associated with the purchase and sale of the securities in the funds. Operating fees change each year. The unit values of the funds are calculated after investment and operating fees as well as the applicable sales taxes have been deducted.
Administrative fees
In addition to the fees mentioned above, a VRSP administrator may also charge plan members fees for transactions and services. These include, but are not limited to, a cash reimbursement, a transfer to another plan, the production of a statement of accumulated benefits and the transfer of benefits between spouses. These fees are deducted from the market value of the funds held by the plan member.