As we approach the RRSP contribution deadline, the first day of March, we get to hear a lot of talk about RRSP contributions, tax free savings accounts and other retirement investment vehicles. A comfortable retirement requires preparation well in advance of your retirement age, and it is important to build a plan that is most suitable for you. While there are several sources for retirement income, including government pension plans, dividend yielding investments and your own savings, today we will discuss two employer sponsored retirement plans – Group RRSP’s and RPP’s.Why should you participate in a Group RRSP or RPP in the first place?The answer is rather simple – tax sheltering. Money earned from both RRSPs and RPP’s is not subject to income or capital gains taxes. They are only taxed as income when money is withdrawn from each program. Both group RRSP’s and RPP’s are employer-sponsored retirement savings plan. Contributions are made by pay roll-deduction on a pre-tax basis by each plan’s administrator. Usually the employer will match the employee contributions and administration costs are spread between the plan members and the employer. Some employers will actually double their contributions on your behalf – so turning down an RPP would be to reject a pay raise and higher retirement income.What are the differences between the two?Group RRSP’s are very similar to individual RRSP’s except that employees will pay a slightly higher payroll tax, since the income is included on their T4. In Group RRSP’s, the employer contribution is a taxable benefit and employees receive a tax deductible. The plan administrator can place restrictions on withdrawals while the member is employed and set no “locking-in” post-employment and employer contributions are immediately vested.RPP’s however work a little differently. For example, employer contributions are not included on T4 as income, but reflect as Pension Adjustments. Contributions cannot be removed from the plan until a member terminates their employment, retires, is deceased or the plan is terminated. Also contributions to an RPP will reduce your RRSP contribution threshold.How to choose between the two?Much depends on your business size and payroll tax situation. For example, if you were to go with a Registered Pension Plan, any contributions made by the employer are not subject to payroll taxes, such as EI, Workers Safety and Insurance Board and the CPP contributions. This is not the case with Group RRSP’s who will be subject to payroll taxes.Fees also tend to be lower on group plans and over time, even a 1% saving in fees becomes a substantial amount. RPP contributions are always deducted on payroll, so, you are not tempted to spend your money in advance of receiving it.Most importantly, as the Ontario Liberal Government has recently announced, the mandatory Ontario Retirement Pension Plan (ORPP) will begin phasing in to the market as of January 1st 2017. However, employers with a comparable workplace pension plan can opt out of this payroll tax. According to the Government’s definition of comparable workplace pension plans, a Registered Retirement Plan might work for you as it more closely fits the criteria set by the Provincial Government as a comparable workplace plan.Pensions come in two types – Defined benefits and Defined Contributions. A defined benefits plan guarantees a specific payout of income when the pension matures. Whereas defined contribution plans guarantee how funds enter the pension, but there is no provision for retirement income until the pension finally pays out, at which point you can manage the funds to meet your needs.Need Advice?There is much to consider before choosing a retirement package for your benefits package and the decisions that you will need to make can become complicated. For small business owners, retirement planning involves special attention taken into account which range from sources of income and tax considerations. When you are ready to learn more about your options, contact one of our advisors who can help you make the best choice for your business needs and personal considerations.Contact Beneplan to learn more at 1-800-387-1670.