Tax Letters: Current Developments – December 2013 – Voluntary Retirement Savings Plan (VRSP)Date: December 2013
VOLUNTARY RETIREMENT SAVINGS PLAN (VRSP) – AN OVERVIEW
On December 3, 2013, the Quebec National Assembly passed Bill 39 to implement the Voluntary Retirement Savings Plan (VRSP) for Quebec salaried and self-employed workers. The plan officially takes effect on July 1, 2014, but may be implemented at a later date as discussed below.
VRSPs are mainly for employees who do not have access to a group retirement savings plan offered by their employers.
An employer is obliged to offer a VRSP if:
- The employer has at least five or more full-time employees who have a minimum of one year of uninterrupted service and are at least 18 years old; and
- The employer does not offer an RRSP or TFSA for which source deductions could be made, or a registered pension plan.
Criteria and Deadlines for Implementing a VRSP:
Number of Employees
|5-9||To be determined||Exact date to be determined by the government (on or after
January 1, 2018)
An employer is not required to contribute to a VRSP. However, if contributions are made, they will not be subject to payroll taxes. The employer contribution may be deducted from corporate income for tax purposes.
An employee may not withdraw contributions made by the employer until age 55 or upon termination of employment, at which time employer contributions become available to be transferred. However, there are certain conditions, such as reduced life expectancy, small balance in the employee VRSP account or the employee’s place of residence being outside Canada for two years, under which the employee may withdraw employer contributions before age 55. If the employee stops working, the contributions made by the employer may be transferred to an authorized retirement savings vehicle such as a locked-in retirement account or a life income fund for the benefit of the individual
Employee contributions to VRSPs are tax deductible, similar to any other registered plan, such as an RRSP. The employee contributions can be deducted directly from the employee’s pay. The annual combined VRSP (employer and employee) and RRSP contributions cannot exceed the employee’s RRSP contribution limit. As is the case for RRSPs, the amounts accumulated in a VRSP are not taxed until they are withdrawn.
Employers must automatically enroll any eligible employees. The VRSPs are required to be managed by an authorized financial institution that is subject to stringent rules and supervised by the Régie des rentes du Québec. Self-employed workers and any other interested parties will also be able to sign up for VRSPs by contacting an authorized administrator.
In order for your corporation to remain compliant with the Quebec legislation, you may be required to implement a VRSP as early as 2016. Should you require any additional information, please do not hesitate to contact any member of our Tax Group.
CURRENT DEVELOPMENTS is issued periodically by Bessner Gallay Kreisman LLP Chartered Professional Accountants to clients, staff and other interested parties to provide information of interest to the reader. The comments are of a general nature and are not intended to cover all aspects of the subject matter. Prior to implementing any planning based upon information in the attached commentary, the specific facts pertaining to any particular situation should be carefully considered. Our firm will be pleased to assist in this regard and to provide further details pertaining to the matters discussed herein.
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