As benefits advisors, we are often asked “what are our competitors doing?” or “what do employees from other companies you work with value?” and although there are some straightforward responses, it’s never been more apparent that Canadians are thinking about their financial security more and more. As a result, Group RRSPs are being added at a record pace for us here at Humi.
Some think, “well, that sounds great but we can’t afford to spend more money” or assumptions are made that “we’re all young and young people don’t care about retirement and savings”. For the latter, this myth was debunked during our October webinar, but did you know that there are Group RRSP options out there that literally cost your business $0? Often thought of as a daunting new expense, Group RRSPs are available for organizations of all sizes, budgets and for all stages of your business lifecycle.
What can a Group RRSP do for my employees?
Enhance compensation
As mentioned earlier, a Group RRSP can be a surefire way to enhance the total compensation package for your existing employees, as plan members’ tax-deductible contributions are sheltered until withdrawn. A couple of (great!) exceptions to this rule are that contribution withdrawals will remain tax-sheltered when being used for the First Time Home Buyers’ Plan or Lifelong Learning Plan. It could also be that key piece to attract a new candidate to your organization from their other employment considerations.
Improve employee financial wellness
Existing financial stressors or simply a lack of member education can prevent people from taking charge of their financial wellness. As their employer, employees want you to help them, so you can be the catalyst to get them over this hump by acting as a facilitative resource while saving them money in the process. Similar to group health and dental benefits, your organization’s group buying power allows you to support your employees by providing them with a retirement program with lower fees than if they chose to set up their own RRSP with their bank or a Robo advisor. Lower fees mean members’ investments go that much further over time.
Unlike group health and dental plans, group RRSPs are also portable, so the plan member is able to take their savings with them should they leave your organization – giving your employees the financial security and ease they’re looking for.
What things should employers be aware of?
When considering a business case around offering a group RRSP to your staff, we often highlight two typical directions that your organization can take and begin the discussion here:
Legacy Insurance company providers:
- No setup fees
- No monthly employee subscription fees
- The only cost to your business would be the amount/percentage you choose to match
- Typically, have higher investment management fees (IMF) than fintech providers (see below)
FinTech providers:
- Lower IMF than the legacy providers
- Subscription fee model used to offset the lower IMF’s (a cost to the business for employees that choose to participate in the plan)
- Employee matching would be the only additional cost to your business
As mentioned above, with many providers in the Canadian market, there are no setup fees associated with implementing a Group RRSP. These same providers typically don’t charge any monthly fees for the plan’s administration, so you can set up a Group RRSP for your employees without incurring any additional expenses for your business.
It’s important to note that in order to introduce a plan at no additional cost to your business, you would be doing so without providing any form of member contribution matching. This is a great way to dip your toes into the pool so to speak, then, when your business is ready, introduce employer matching at a later date.
If you’re keen on learning more about Group RRSPs and how Humi can help you implement them at your company, contact our benefits team at benefits@humi.ca!
