Deferred Profit Sharing Plan

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. Specified shareholders (i.e., individuals who own, directly or indirectly, more than 10% of company stock) are excluded. Employees do not contribute to the plan.

Sponsor advantages

  • plan design flexibility
  • may be set up in conjunction with a Payroll Deduction RRSP or a pension plan
  • contributions are not required in unprofitable years
  • all contributions and administration expenses are tax deductible
  • flexible contributions - the Sponsor has ample freedom to reward in relation to member performance

Member advantages

  • deferred, tax-sheltered compensation
  • contributions vest in members after two years of plan participation with no locking-in rules
  • at termination or retirement, contributions can be cashed-out, or used to purchase an annuity or a Registered Retirement Income Fund (RRIF)
  • group buying power - higher interest rates and favourable investment management fees