The Investment Funds Institute of Canada is getting a head start on the next federal budget by calling for changes to the treatment of group registered retirement savings plans.
In submissions to the House of Commons standing committee on finance, institute president Paul Bourque proposes a few rule changes to boost the pension-like properties of group RRSPs:
- Locking in employer contributions: The institute says a requirement to lock in employer contributions to group RRSPs would encourage more companies to adopt them.
- Exempting employer contributions from payroll tax: According to the institute, the Canada Revenue Agency treats employer contributions to group RRSPs as deferred income rather than pension contributions. That means they’re fully subject to payroll tax, which the institute says discourages employers from adopting them.
- Automatic enrolment: Changing the rules to enable automatic enrolment, as with pooled registered pension plans, would boost retirement savings and make group RRSPs more desirable to offer, according to the institute.
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“Group RRSPs are an accessible and efficient option within the retirement savings landscape — Canadians currently have more than $60 billion invested in group RRSPs,” wrote Bourque in the budget submission.
“They fulfil many of the same goals as PRPPs — creating long-term savings through a workplace plan with minimal administration demands on employers, making them particularly appealing to smaller businesses.”
The submission comes as the Investment Association of Canada is also calling for changes to group RRSPs in its budget submissions. The association also highlight the tax disadvantages the apply to such plans and called on the government to relieve contributions from payroll tax.