Simplified Pension Plan (SPP)

An SPP is a pension plan in which the employer, and most often the employee, contribute to an account in the participant’s name. An SPP is administered by a financial institution, such as National Bank Trust, which reduces the employer’s administrative burden.

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What’s an SPP?

An SPP is a simplified pension plan.

The benefits of an SPP for the employer

  • Administrative costs are reduced because the SPP is a multi-employer plan.
  • Contributions and administrative fees are tax deductible for the employer.
  • Since the SPP is a defined benefit plan, the employer does not have to assume the associated financial risks. The pension amount will depend on the amount that has accumulated in the participant’s account at retirement.
  • Investments are made as per the employee’s instructions, which releases the employer from this responsibility.
  • All amounts deposited by the employer in an SPP are locked in. 
  • The plan set-up and registration with the Canada Customs and Revenue Agency and the Régie des rentes du Québec is the responsibility of the financial institution.

The benefits of an SPP for the employee

  • The participant receives an immediate tax refund for their contributions, if applicable.
  • The employer’s share is immediately vested. Employer contributions therefore belong to the participant as soon as they are made.
  • Voluntary contributions made after June 3, 2004 can be withdrawn before retirement. Contributions may also be withdrawn before retirement in the event of employment termination, if previously agreed-to by the employer. Contributions made before June 3, 2004 may not be withdrawn prior to retirement, except if the employee ceases to be active and the value of his/her rights is lower than 20% of the maximum pensionable earnings.