Group Retirement Plan Questions from Employers due to COVID-19

In the middle of the second (third?) wave of the COVID-19 pandemic, businesses are coping with increased challenges and trying to minimize the financial impact. There are a number of group retirement plan questions from employers due to COVID-19 and its on-going impact. Here are some frequently asked questions from business owners about group retirement plans:

Q: If the business sponsors and contributes to a group RRSP, can the business temporarily stop contributions?

A: Contributions made by the employer (and employee) are part of the employment contract and the employee’s overall compensation. Any changes to the terms of that contract must be communicated and agreed upon by both parties.

**Note** If the employee continues to make contributions, and the employer has a contribution match program in place, the employer contributions must continue as well. The employer can amend the plan contract to remove employer contributions if they wish to do so.

Q: The company’s group RRSP plan does not allow for withdrawals while being employed, can this rule be temporarily waived?

A: Yes, the employer establishes the rules regarding withdrawals and the employer can choose to amend this rule.

Q: If the business has temporarily laid off employees, does the business still have to make contributions to the pension plan?

A: If the business is not paying the laid off employees, no contributions to the plan are due. If the employee is on emergency leave, the company may be required to make contributions for the period of leave.

Q: Is it possible to continue contributions to the pension plan during a temporary layoff, even though employees are not being paid?

A: Provided the plan text includes a provision to allow contributions to continue during periods of temporary layoff, contributions can continue. The sponsor would apply CRA’s prescribed compensation rules for the purpose of continuing contributions. Contributions will typically be based on the member’s earnings prior to the leave and would be made in a manner as described in the plan text.

These are just a few of the group retirement plan questions from employers due to COVID-19. As many employers seek to reduce costs as much as possible, it is important to consider the long-term affects of not having a group retirement plan.

Studies have repeatedly shown the impact a group retirement plan can have on the employment decisions made by prospective employees. There are options available to minimize costs while still realizing the benefit of attracting and retaining top talent.

Group retirement plan questions from employers due to COVID-19 will continue as we enter the traditional RRSP season. If you have questions about group retirement plans, contact DENT Benefits to explore your options!

The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.

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