As the labour shortage puts more negotiating power in potential hires’ hands, employers are increasingly bulking up their employee perks, including adding more savings opportunities, such as group tax-free savings accounts. But some are also offering a lesser-known option: non-registered savings plans.
Similar to their registered counterparts, a non-registered plan is a group account offered by an employer to employees who choose to participate. Among the differences are that there’s no contribution limit on non-registered plans, and money made in them is taxable.
Curtis Johnson, a Calgary funeral director, says retaining employees can be a challenge in that industry, so his employer offers a non-registered savings plan (NRSP) as a retention incentive. After staying with his company for five years, the 32-year-old became eligible for a biweekly, $75 matching contribution to an NRSP.
The money has to stay in the account for at least six months, but then he can withdraw it and do with it whatever he wants. He typically moves it into his Questrade account and invests in index funds in his tax-free savings account.
Mr. Johnson says he likes the flexibility because it allows him to choose when he will pay the tax on the money. If it were to go into a registered retirement savings plan instead, he’d pay the tax upon retiring, when he expects to be in a higher tax bracket. Paying the tax on it now, while he’s in a lower bracket, seems to make more sense, he says.
Mr. Johnson’s arrangement – where his workplace offers a more flexible savings option than the heavily structured registered plans geared toward retirement savings – is not the norm.
The 2021 Benefits Strategy and Benchmarking Survey Report from Gallagher Benefits and HR Consulting Canada found 10 per cent of the 401 businesses they surveyed offer employees a non-registered savings plan. This number has remained fairly steady – around 10 per cent or 11 per cent – since Gallagher began conducting this survey in 2017. Such plans are more common among larger businesses – 22 per cent of businesses with more than 500 full-time employees, compared with 3 per cent of those with fewer than 50 staff. The survey also found for-profit businesses were more likely to offer them than non-profits.
Melanie Jeannotte, chief executive officer of Gallagher Canada, says non-registered workplace savings plans have traditionally been used as a “spillover account” – a way for an employer to continue to match employee contributions beyond the annual limit imposed by an RRSP.
Now, she says, they’re increasingly being used in more creative ways – to help employees save for shorter-term goals such as a home down payment, or as a way to match contributions for immigrants who don’t yet have RRSP room because it’s their first year employed in Canada.
Ms. Jeannotte says the small bump these plans are seeing is part of a greater trend among employers to give more flexibility in what has become a job-seeker’s market. “Employers are having to rethink how they deploy rewards tools.”
Royal Bank of Canada’s non-registered offering for business clients is called the Group Investment Account. Doug Crowe, vice-president of RBC Group Advantage, said that an additional reason some clients choose non-registered plans is to provide matching incentives for employees over the age of 71, who can no longer contribute to an RRSP.
Hilda Gan, president of People Bright Consulting in Markham, Ont., offered a deferred profit sharing plan at her previous company, iTrans Consulting, a transportation engineering firm she ran with her husband.
The plan was set up as a retention benefit for employees who stayed for two years, giving them up to $5,000. Ms. Gan says the deferred payout, which is similar to many non-registered plans, was “not ideal as a retention strategy.” The company moved to providing bonuses instead after about two years.
She says offering a non-registered plan may not be worth the administrative effort required for many companies. She says even if most of the work is done by the financial institution, it still requires some degree of decision-making and oversight from a company’s human resources team or other employees.
“As an employer, I am going to have to work with a banker to set it up and I have administrative costs to manage it,” Ms. Gan said.
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