Should you offer a group retirement plan?

Canadian businesses need a competitive edge to engage employees, source new talent, and prove their commitment to operational longevity. Is launching a group retirement plan the solution?

What do employees want? In a rapidly changing business landscape, it can be difficult to truly know. Even a decade ago, requests for fully remote work were few and far between, but it’s now a popular demand. Offerings such as retirement plans are more common, but are they still necessary? Right now, most Canadian employers offer this type of benefit. Surprisingly, workers place it high on their wish list, above dental insurance, sabbaticals—and even remote work.

It's critical to understand the current demands of today’s workers, as staff retention and recruitment were recently deemed a top concern for employers. Understandably, organizations without an established program may be hesitant to implement a new and seemingly complex system. Still, a plan could be an invaluable and priceless tool in helping you secure the best team. In fact, 60% would be unlikely to work for a company without a retirement plan.

Help wanted: finding the best team

Attracting top talent is always a challenge, especially with changing economic conditions altering what new generations of employees prefer in a workplace. Yet recent data indicates that a company-sponsored retirement program is an enduring request. Just over half of workers under 35 would pick a job with better pension benefits over one with higher pay. In fact, these retirement benefits, including Registered Retirement Savings Plan (RRSP) matching, are key to young professionals who are already facing a high cost of living. Offering a comprehensive group retirement plan up front can demonstrate a business’s understanding of the job market as well as a commitment to the long-term financial security of employees.

A group plan typically extends beyond just retirement benefits to include general financial and wellness services. These services tend to engage existing employees as well as employers. Over three-quarters of those with financial wellness programs as part of their group retirement plan report reduced stress and more than half said they were more productive.

It’s no secret that Canadians are anxious about financial matters, including rising grocery prices, mortgage rates, and more. These concerns are slipping into the workplace with four in five employees worrying about their personal finances during work hours and half saying they’d be more productive if they weren’t so stressed.

Tax advantages of group retirement plans

A major reason that businesses may hesitate to offer a group retirement plan is cost. While concern for any new expense is understandable, employee programs have the potential for several tax benefits.

  • Employer contributions: If you contribute to your employees’ RRSP or a Registered Pension Plan (RPP), this money is generally tax deductible, just like the employees’ contribution.
  • Tax benefits: Depending on the solution you choose, you can deduct the administrative fees as part of your business expenses.

Simplifying your administrative and fiduciary responsibilities

Offering employee retirement benefits does come with some administration and duties, which can seem intimidating. However, many providers offer assistance with these tasks, understanding that companies may lack the knowledge, time, or personnel to focus on managing a plan. 

  • Fiduciary training and education: Providers are immersed in the retirement industry every day so it’s easy to leverage this expertise through webinars, online resources, training, and other opportunities. 
  • Investment due diligence: Generally, companies do seek assistance in selecting funds and evaluating performance, risk, and other factors.
  • Plan governance and compliance assistance: Group retirement programs may provide tools and resources to help plan sponsors establish and maintain effective governance structures. This can include assistance with documenting decisions, maintaining records, and ensuring compliance with regulatory requirements.
  • Fiduciary support services: You might be able to access legal and compliance specialists with a greater understanding of sponsor requirements, including documentation and regulatory filings.
  • Fee and cost transparency: As mentioned, plan costs are a major consideration for businesses. Your provider can help determine up-front costs, along with potential savings and tax benefits.
  • Onboarding: The launch of a plan is a critical time. Providers can offer valuable support in creating a plan for a successful implementation.

Will offering a group retirement plan benefit your organization?

Deciding to launch a new group retirement plan is a big decision and there are many factors to consider. While a majority of Canadian organizations do offer at least some retirement benefits, there are still quite a few that don’t. Even as employee expectations change, the demand for these types of benefits remains strong. In fact, a group retirement plan can be a helpful tool for recruitment and retention. Additionally, there are also tax benefits and potential credits so businesses can more easily make this investment. Of course, busy companies may be concerned about taking on additional administrative duties and adhering to financial regulations, but providers can often assist with these duties and ease the burden. Launching a group retirement program can be a big change but could also bring big rewards.

The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.