When choosing which benefits to offer your employees, options like extended health and dental coverage typically get the most attention. While these certainly are important, a group savings plan can be critical to long-term employee retention for your business.
Does Your Company Need a Group Savings Plan?
While not as essential as other options like mental health coverage, offering a group savings plan can be important to your staff. Many workers in Canada don’t have a dedicated retirement savings plan beyond the standard Canada Pension. In fact, a poll by Bloomberg showed that 32% of workers in Canada are approaching retirement age without any dedicated savings.
The current economic climate has only exacerbated the issue, with Benefits Canada reporting that more than 70% of Canadians find it challenging to save for retirement due to rising costs. While offering an employee pension can certainly fill this void, pensions are prohibitively expensive, especially if you have a smaller company. Offering a group savings plan such as a group RRSP gives you a way to contribute to your employees’ long-term financial security without putting your business on the hook indefinitely.
Types of Group Savings Plans
Before deciding on whether or not to offer a group savings plan (or pension), it’s important to understand your options. Let’s take a look at the two main types of group savings: defined contribution (DC) plans and defined benefit (DB) plans.
Defined Contribution Plans
Defined contribution plans are the most common type of program in Canada. In a DC plan, employers contribute to the plan by matching employee contributions to a Group RRSP for a specified percentage or dollar amount. The amount paid out when the employee retires is based on the total amount contributed to the program and the fund’s investment performance. An additional benefit of DC plans is that they are flexible and can be adjusted based on your specific needs.
Defined Benefit Plans
On the other hand, defined benefits plans offer employees a guaranteed amount of money rather than calculating payouts based on contributions. In DB plans, employers are responsible for specific pension payments to the retiree. The specified amount is usually determined based on a formula that considers both earnings and years of service. However, it does not change based on the fund’s investment performance. Some employers offer these plans as an additional employee guarantee, but DB plans are inherently less flexible than DC plans.
Regardless of which type of group savings plan you choose to offer, sustainability is essential (and often overlooked) when creating benefits. Working with the right broker can ensure the long-term efficiency and success of your program.
Create the Perfect Employee Benefits Package with Zarmac
Zarmac Benefits has been providing benefit programs to both new and established businesses for over 20 years. We take the time to analyze what you need and customize a benefits package specifically for your business style, now and for the future.
Zarmac provides critical analysis specific to your business to deliver real choices, advise on trends, streamline renewals, and optimize your plan design. We make it easy for you and your team by supporting the management of your program. We also proactively educate and eliminate questions to ensure there are no surprises.
Ready to protect your business and your team? Find out more about the Zarmac difference!