Individual Pension Plans, Supplemental Executive Retirement Plans and Retirement Compensation Arrangements

An Individual Pension Plan (IPP) is a defined benefit pension plan that is registered with the Canada Revenue Agency and the provincial authority. This means that the ultimate pension amount is defined in advance and the pension amount is based on a percentage of salary. An employer will establish an IPP for a specific executive in order to increase employer contributions to a higher level than RRSP maximums. The contributions required to finance the plan vary from person to person, based on factors such as age and income. The annual contribution amount is established by an actuary.

Supplemental Employee Retirement Plans

A Supplemental Employee Retirement Plan (SERP) is a non-registered plan for executives and / or key employees that is generally implemented when the pension of an employee under a Registered Pension Plan (RPP) is limited because of the maximum that may be legally tax-free. Instead of being limited by the ceilings set in the tax legislation, the employee will receive a pension at the time of retirement based on his total remuneration. A SERP also offers the employer great flexibility in designing the plan. The employer can choose the employees who will be offered a SERP and design specific provisions. For example, the employer may choose to include a vesting period or require the employee to remain for the duration of the agreement to receive any benefit.

“Finally, Supplemental Retirement Plans can be funded through a Retirement Compensation Arrangement (RCA), a letter of credit or simply on a pay-as-you-go basis.”

To learn more about Individual Pension Plans, Retirement Compensation Arrangements and Supplemental Employee Retirement Plans, we invite you to reach out to us.