Deferred Profit Sharing Plan (DPSP)

A deferred profit sharing plan (DPSP) is a simple, flexible arrangement whereby a plan sponsor distributes a portion of the company’s pre-tax profits. Any employee contributions go into a separate account (such as an RRSP).

  • Contributions are flexible. The plan sponsor has ample freedom to reward plan members according to personal performance; however, contributions are not required in unprofitable years.
  • Contributions vest in members after at least two years of plan participation. There are no locking-in rules unless the plan prohibits withdrawals for active members. At termination or retirement, contributions may be cashed out, used to buy an annuity or a registered retirement income fund (RRIF) or transferred to an RRSP.

The employer may contribute to a DPSP one-half, you may contribute one-half of the registered pension plan’s money purchase limit for the year.