Setting Up A Group Retirement Plan In Canada. The Employer’s Options

Offering a retirement savings benefit is one of the most effective ways to attract and retain Canadian talent.

Canada has several types of group retirement vehicle, each with different rules, tax treatment, and administrative requirements. Choosing the right structure, and setting it up correctly matters.

Here is how the main options compare.

Group RRSP (Registered Retirement Savings Plan)

The most common and flexible group retirement vehicle in Canada.
Employees contribute through payroll, often with source-deduction treatment where properly set up. Employers typically match a percentage (commonly 3–5%).
Contributions count against the employee’s RRSP contribution room (18% of prior-year earned income, to an annual maximum which for 2026, is $33,810).
Easy to administer, portable for employees, and well understood.
Employer contributions are immediately vested. They are a taxable benefit to the employee and may be offset by an RRSP deduction only if the employee has available RRSP contribution room.
Best for most small-to-mid-size companies wanting a simple, attractive retirement benefit.

How This Coordinates With Employer Disability Coverage

Many employers provide short term disability (STD) coverage as part of their benefits package. EI Sickness Benefits and employer STD are designed to coordinate, not duplicate.

If an employer provides STD that meets or exceeds EI sickness benefit levels, the employee typically claims STD rather than EI.
Employers who offer a qualifying STD plan may be eligible for an EI premium reduction through Service Canada’s Premium Reduction Program, lowering the employer’s EI multiplier below the standard 1.4x.
Where STD ends (often after 15–26 weeks), long-term disability (LTD) or EI may continue, depending on the situation.
Coordinating these correctly avoids gaps in the employee’s income and avoids the employer overpaying premiums.

DPSP (Deferred Profit Sharing Plan)

An employer only contribution plan, often paired with a group RRSP.
A key advantage is that DPSP contributions do NOT count against the employee’s personal RRSP allowance. However, they do create a pension adjustment that reduces the employee’s RRSP room for the following year.
Employer contributions can be tied to company profitability and can include a vesting schedule (up to 2 years).
Employees cannot contribute to a DPSP. It is funded entirely by the employer.
It is best for companies wanting to reward performance or preserve employees’ RRSP room. Often combined with a group RRSP (the employee contributes to the RRSP, the employer matches via the DPSP).

RPP (Registered Pension Plan)

A more formal, regulated pension structure, either defined contribution (DC) or defined benefit (DB).
Subject to provincial pension legislation, locking-in rules, and more rigorous administration and reporting.
DC plans are more common today. DB plans are increasingly rare in the private sector due to cost and risk.
More administratively complex and costly than a group RRSP.
They are best for larger, established companies that want a formal pension offering and can manage the regulatory burden.

Group TFSA (Tax Free Savings Account)

A newer addition to group savings offerings. Contributions are after tax, but growth and withdrawals are tax free.
Useful as a complement to an RRSP, particularly for employees who have maxed their RRSP room, or want more access to savings.
Annual contribution limits apply ($7,000), separate from RRSP room.
They are best for companies wanting to offer flexibility alongside a primary RRSP or DPSP plan.

Which Structure Should You Choose?

For most companies hiring in Canada through EOR, a group RRSP, often combined with a DPSP for the employer match offers the best balance of attractiveness, simplicity, and tax efficiency.

It is what Canadian employees recognise and expect, it is straightforward to administer through payroll. The RRSP plus DPSP employer contributions do not use the employee’s current RRSP room, but they create a pension adjustment that can reduce the employee’s future RRSP contribution room.

How We Set It Up And Administer It

We establish and administer group retirement plans as part of our benefits service.

We advise on the right structure for your company size and goals, handle provider selection and plan setup, process employee and employer contributions through payroll each pay period with correct tax treatment based on plan type and payroll requirements, and manage ongoing administration including enrolment, contribution changes, and year end reporting.

You offer a retirement benefit that competes in the Canadian market without taking on the administrative burden.

Ready To Offer A Group Retirement Plan?

Book a call.

Book a call. We’ll recommend the right structure and handle the setup and administration.