Voluntary retirement savings plan (VRSP)

Who does the VRSP Act apply to?

Employers
All employers who have a physical workplace in Quebec are required to offer a VRSP to their employees there. As prescribed by the law, your deadline for setting up a VRSP depends on how many Quebec employees you have.

Employees
All employees who:

• Are 18 or older
• Are an "employee" as defined in the Act respecting labour standards
• Have 1 year of "uninterrupted service" as defined in the Act respecting labour standards

Obligations

Employers who haven't set up a plan yet
Employers are legally required to offer a VRSP to employees with at least 1 year of uninterrupted service—by certain deadlines. If you don't already offer all your employees the opportunity to contribute via payroll deductions to a group RRSP, a simplified pension plan (SPP), a defined contribution plan (DC plan) or a group TFSA, you must:

• Choose a VRSP provider
• Offer the VRSP to all employees and let them know about the plan's features
• Enroll all employees with at least 1 year of uninterrupted service in the plan
• Set up payroll deductions
• Offer employees who've opted out of the VRSP the opportunity to re-enroll in the plan (every 2 years, in December)

Employers with an existing plan
If you're already offering your employees a retirement savings plan, you're required to offer a VRSP to any employees who aren't eligible for the existing plan. You also have to set up payroll deductions for all plans.

Alternatives

If you don't want to offer a VRSP, you have the option of setting up a group RRSP, a simplified pension plan (SPP), a defined contribution plan (DC plan) or a group TFSA instead.

VRSP deadlines

20 or more employees
Employers with 20 or more employees have been able to offer VRSPs to their employees since July 1, 2014.

10 to 19 employees
Employers with 10 to 19 employees have been able to offer VRSPs to their employees since July 1, 2014.

5 to 9 employees
The government still hasn't set a VRSP deadline for employers with 5 to 9 employees. Even though these employers aren't legally required to set up a VRSP, they've been able to do so since July 1, 2014.

Compliance deadline for employers
Once all the specific VRSP deadlines have passed, if you had 5 or more employees the previous year, you'll have 1 year to set up a VRSP or another approved product for your employees. Once you've set up a VRSP and employees are enrolled in the plan, you have to keep the plan in place, even if you no longer have 5 or more employees.

Contributions

Employer contributions
You don't have to contribute to your VRSP, but you can if you'd like.

Employer contributions are locked in and can be transferred to a supplemental pension plan, a life income fund (LIF) or a locked-in retirement account (LIRA) when the plan member's employment ends or they turn 55.

Employee contributions
Employees choose the contribution rate for their VRSP. If no rate is chosen, 4% of the gross salary will apply by default.

Employees who contribute to a VRSP can change their contribution rate twice a year, or more often at your discretion. Only employees who've contributed to a VRSP for more than 12 months can set their contribution rate to 0% (certain exceptions apply).

Employee contributions aren't locked in. Employees can make VRSP withdrawals before they retire, but they'll have to pay provincial and federal income taxes.

Employees can't withdraw money from their VRSP under the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP). They can get around this by transferring the required amount from their VRSP to an RRSP, and then making an RRSP withdrawal (transfer fees apply).

Enrollment

All employees are automatically enrolled in your VRSP. They can opt out within 60 days of enrollment, before payroll deductions begin.

Investment options

Everyone participating in a Desjardins VRSP has access to the same investment options.

Default option
The Desjardins VRSP offers a default investment option. It uses a lifecycle path to adjust the level of investment risk based on the employee's age. If an employee doesn't choose an investment option, their contributions will automatically be invested here.

Other options
Employees can also opt for our DGAM Money Market Fund or select from 4 multi-manager portfolios with a range of risk levels.

Tax implications

Much like RRSP contributions, VRSP contributions can be deducted from taxable income for provincial and federal tax purposes. Contributions grow tax-free until they're withdrawn. Total VRSP and RRSP contributions are subject to the annual RRSP contribution limit, a maximum of 18% of the previous year's earned income. Employer contributions are deducted from the company's taxable income and aren't subject to payroll taxes.

Fees

Investment fees
Fees may be charged directly or indirectly to plan members, including trailer fees and management and administration fees for each investment option. Investment fees can be no higher than: 1.25% of the average plan assets for the default option (lifecycle path) and 1.5% for all other options.

Administration fees
VRSP administrators can also charge administration fees for: transfers to another plan, withdrawals, financial planning and advisory services, transfers of benefits between spouses and statements of benefits.