Registered Pension Plan IV - Conditions of Establish and Funding the Registered Pension Plans

Registered Pension plan is a form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the government. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires. Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan. In this article, we will discuss funding of registered pension plans.
I. Conditions for plan established
1. Plan arranged by employers
The employer arranges for a plan for the employees and source deducts the contributions. The employer may commit to contribute to each employee’s plan and may also pay all plan costs.
2. Employees owned the plan
The employee owns all the funds after contributions are made. The employer’s contribution is considered as taxable income to the employee, but offset by their deduction.

II. Funding conditions
1. Defined contribution plan
a) Employers and pension providers must keep detailed records of contributions, years of service, salary and beneficiary declarations. Regular reports are filed to the government, employer and to each employee.
b) Contributions must be invested as prescribed by regulations. This allows some negotiation of the employer as to how funds are invested.
c) Pension plans require the services of knowledgeable advisors in the form of consultants and/or agents.

2) Defined benefit plan
Beside all the conditions of defined contribution plan, defined plan requires additional condition actuarial services, in order to provides an initial assessment of the plan and also regularly spaced assessments thereafter. This is to guarantee the pensions that have been contracted for the employers. Every three years, the employer is advised as to any surpluses or deficiencies and what additional contributions may be required to keep the plan current as provided by law.

I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

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