Group RRSP matching program: 5 things employers should consider

Canadians have a lot on their minds. Political uncertainty, continued economic instability, climate change, financial planning for the future—there’s a lot to keep the average person up at night. When will I be able to retire? Will I have enough money to live comfortably? Am I saving enough for retirement right now? Can I afford to save more?

This collective unease is showing up in national surveys. The Healthcare Ontario Pension Plan (HOOPP) reports that nearly half of all unretired Canadians did not set aside anything for retirement in the past year, and 43% say they are now planning to retire later than they originally expected. 

Similarly, a recent survey by CPP Investments found that 61% of Canadians fear running out of money in retirement.

As an employer, you can help untangle the real retirement concerns of your employees and boost their financial future by setting up a group retirement savings plan (GRRSP). These programs make it easier and more cost-effective for individuals to sock away funds for later while realizing present-day tax benefits.

You can even take that benefit one step further by offering matching on employee contributions. These types of initiatives, typically administered by an insurance company, bank or modern online provider like Wealthsimple, are increasingly becoming a valuable part of competitive compensation packages that attract and retain high-quality talent. 

Curious about the impact of offering matching (or not)? This article is for you. We’ll break down how GRRSP matching works, what makes it worthwhile for employers, and what to consider when creating a program tailored to your company’s needs.

What is Group RRSP matching?

First, it’s important to understand how a basic GRRSP works: it enables employees to direct a portion of every pay cheque into a registered account, usually with pre-selected investments. These GRRSP accounts offer the same features and parameters as individual RRSP accounts, which means employees can:

Once the money is in the GRRSP, it’s tax-sheltered in the same way RRSP contributions are.

How does RRSP matching work? 

Some employers also choose to layer on a matching program that parallels contributions made by employees.These employer RRSP matching contributions are usually between 3% and 5% of an employee’s pre-tax salary. This percentage will vary depending on the employer size, industry, and other compensation factors, but over time, even small matching programs can really add up for employees.

If an employer offers a matching program, an employee can contribute beyond the matching rate with non-matched contributions, as long as they stay within their annual RRSP contribution limit. Both employers and employees should keep in mind that all contributions count toward this contribution limit. 

RRSP matching: What’s in it for the employer?

There are lots of advantages for employers to match their employees’ RRSP contributions. Beyond bolstering the financial health of the people they value, an RRSP matching program can build a strong workforce for the future by:

5 considerations when forming your RRSP matching program

There are plenty of ways to customize your matching program to align with things like your company values and overall compensation budget. When it comes to making employer contributions to an employee’s GRRSP, it’s up to you to define the terms. The top five considerations include:

1. Restricted or unrestricted?

There are two types of GRRSP options: restricted and unrestricted plans. Either way, the contributions you make to an employee’s GRRSP are considered a taxable benefit to the employee. 

However, in a restricted plan, the employee cannot transfer or withdraw their funds (except to use under the Home Buyers’ Plan or Lifelong Learning Plan) before they retire or are no longer employed with the company. In an unrestricted plan, employees can transfer or withdraw their funds, usually under certain limitations such as once a year or after filling out a request form.

At Wealthsimple, we typically recommend offering an unrestricted GRRSP because it offers greater flexibility for employees by making their funds available to them in case of emergency or if they want to transfer contributions to a trading or other RRSP account.

2. Vesting schedule or no vesting schedule?

Some companies set up a vesting schedule for their employees. We mostly see this when the GRRSP is combined with a deferred profit sharing plan (DPSP) under which employee contributions go to the GRRSP, while matching employer contributions go to the DPSP. Vesting is not permitted with GRRSPs.

If an employee leaves before the predetermined date in the vesting schedule, unvested funds go back to the employer. So, if an employee leaves before they meet the end of their vesting period, their DPSP money is returned to the company. 

Wealthsimple recommends offering a GRRSP plan without a vesting schedule to allow for the most benefit to employees. ​ 

3. Plan tiers or no plan tiers?

When you set up your GRRSP, you can offer different levels to employees based on things like:

Wealthsimple advises against GRRSP tiers for a couple of reasons. For one, they add a layer of administrative complexity. On the other hand, they may feel unfair to employees. Most employers want their staff to feel equally valued no matter where they live or how their role contributes.

4. Enrollment right away or after a probationary period?

Employers have the option to provide new employees access to the GRRSP program upon being hired, after a brief probationary period (e.g. three months), or after a year or more of being with the company.

Similarly, an employer may allow new employees access to the GRRSP program but choose to delay the RRSP matching program until the employee has reached a predetermined employment milestone. 

Although any of these options are perfectly acceptable, it’s best practice to offer your full GRRSP program, including RRSP matching, at the outset of employment. That way, the employee gets their full compensation right away.

5. Base contributions + matching 

Some employers choose to implement matching RRSP contributions only if the employee is also contributing the same amount to the GRRSP via deductions from every pay cheque. Others will make percentage-based contributions regardless of whether the employee contributes to the GRRSP. 

 Much like all the other decisions related to an RRSP matching program, employers are in the driver’s seat. It’s important to set up a plan that makes sense for your company’s size, industry, workforce, compensation budget, and overall values. 

There’s a lot to consider, so before partnering with a GRRSP provider, it’s helpful to be prepared with questions and a basic framework for how you’d like your company’s GRRSP to look. 

In today’s employee market, an RRSP matching program can be a powerful employee attraction and retention tool and a positive and cost-effective way for employers of all sizes to help prepare their workforce for retirement. Helping your employees prepare for a successful financial future can go a long way to easing their minds in the present.