Prpp

The government has a bill to be passed anytime now regarding pensions. In June 28, 2012, the government announced that the PRPPs will receive Royal Assent in Bill C-25.

What is PRPP?

PRPP (Pooled Registered Pension Plan) is a new pension option that the Canadians who do not have a workplace pension plan currently can choose. PRPPs will be implemented across Canada, and specific for small business owners or the self-employed. Government mentions that PPRPs will involve pooling large funds and third-party administration to help small businesses and self-employed save for retirement. Also PRPPs will provide more benefits such as simple management and no payroll taxes. PRPPs are an appropriate and effective method to close gaps in the retirement system.

PRPPs investment rules：

The Finance Department published an analysis statement about regulatory impact that covers important rules of Federal PRPP, the most material to small businesses are the clauses including permitted investments, permitted inducements, low cost, zero contribution rate, and rights to know information.

PRPPs advantages:

1. It will be easier and faster than traditional pension plan during setup process and application.

2. Employer will not need responsible for executive tasks of a general defined contribution pension plan, such as finishing an annual information return.

3. If any employer decides to contribute to PRPP, they choose how much they want to contribute in PRPP, and some tax benefit are:

1) Employer contributions will not be subject to payroll taxes.

2) For tax purposes employer contributions can be deducted from an employee’s income as a salary expense.

Additional information for PRPP:

On March 14, 2013, PRPP got a death sentence from B.C. legislature, the government waiting for the next elections on May. “If the NDP wins the election, which almost seems a foregone conclusion, it would seem unlikely that they would revive the legislation, based on the position of the NDP...