CHOOSING A GROUP RRSP
What to Consider in Choosing a Group RRSP
Small and medium businesses and other organizations often find it expensive to run a pension for their employees. A Group RRSP offers more flexibility, lower costs and more benefits for the employees. Group RRSPs are rising in popularity for these reasons. Unlike defined pension plans that are regulated by various legislations, the flexibility in Group RRSPs means that what one offers could be entirely different from what the other offers. What can be considered in choosing a Group RRSP?
The whole point of shifting the pension plan to another party is to ease administration. A potential provider should show how his business processes merge into those of the business taking the Group RRSP. There should be few additional administration tasks added to the HR department as possible.
Different organizations and their employees have different needs depending on their corporate culture and values. A Group RRSP should be as flexible as possible to the needs of the business and its employees. This involves merging with the different health and life insurance policies already in place. The Group RRSP should fit into the easy management of the overall compensation package.
Pension funds are very sensitive, and as such, the investments that are offered should be sound and viable. The provider should show a good record of healthy investments already in place, as well as provide a clear and well-defined investment plan. Do the fund managers have re-balancing plans? This is one of the pointers of a good Group RRSP because it ensures that money is always coming in.
Group RRSP investment returns will be defeated by high management costs and fees. A good provider should show that the fees involved in investment management are lower than those that would have been incurred on a regular basis. The provider should not place additional front or back-end loads to the organization.
A Group RRSP is more attractive to employees if there are matching contributions from the employer. Although this is not mandatory in Group RRSPs, it does make sense for the employer to match a certain percentage (Ex: 2% for every 5% contributed by the employee). This is in light of the fact that the employer is not mandated to give a fixed amount of money to a retiring employee, unlike defined pension plans.
Type Of Provider
There are 4 types of Group RRSP providers in today’s market; insurance companies, banks, mutual fund managers, and self-appointed trustees. Each has its own strengths and weaknesses. A bank, for example, would have the liquidity and investment experience, but may not understand compensation benefits very well. An analysis of each provider should be done before choosing.
If you or your employees are looking for a hands-on approach to creating a custom Group RRSP that works for everyone, be sure to contact our Group RRSP experts here at Puhl Employee Benefits for a no-obligation consultation.