VRSP - Small business owner FAQ

Voluntary Retirement Savings Plans (VRSP)


Learn more about how VRSPs can work for your business and your employees, by using the helpful resources on this page and reading the frequently asked questions (FAQs). For detailed information, visit the Régie des rentes du Quebec website.

FAQ

Why should I offer my employees a VRSP?
Do I have to offer my employees a VRSP?
Who is eligible to participate in the VRSP?
If I offer a VRSP, do my employees have to participate?
How can my employees make their contributions?
How much do employees have to contribute to the VRSP?
Do employers have to contribute as well?
Are VRSP contributions locked in?
What's the tax treatment for contributions?
When can employees start to receive retirement income?
Am I responsible for administering the VRSP?
Who chooses the investment options?

Why should I offer my employees a VRSP?
Companies of all sizes and in all industries compete for the best and the brightest employees – and a workplace retirement savings plan is key to their success in attracting those employees. Now, with the VRSP small- to mid-size businesses have an easy, effective way to gain a significant competitive edge in attracting and keeping the skilled workers they need to grow and succeed.

For employees the VRSP is a welcome and affordable opportunity to save for retirement. Research has shown that employees are more engaged – and therefore more valuable – when they have a sense of security about the future.

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Do I have to offer my employees a VRSP?
Yes, employers who do not already offer a registered retirement savings plan (RRSP) or tax-free savings account (TFSA) with payroll deductions or a registered pension plan to all of their eligible employees (see question below for a definition of eligible employees) and who have five or more eligible employees must offer a Voluntary Retirement Savings Plan (VRSP) as follows:

  • employers with 20 or more eligible employees on June 30, 2016 must have a plan in place by December 31, 2016
  • employers with 10 - 19 eligible employees on June 30, 2017 must have a plan in place by December 31, 2017
  • employers with 5 - 9 eligible employees don't have a date set yet, but  it cannot be prior to January 1, 2018.

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Who is eligible to participate in the VRSP?
Eligible employees are those who:

  • are 18 years of age or older
  • work solely in Quebec or work both in Quebec and outside Quebec for a Quebec employer or are residents of Quebec and work outside Quebec for a Quebec employer; and
  • have 1 year of uninterrupted service.

Eligible employees who have access to an existing group registered retirement savings plan (RRSP) or tax-free savings account (TFSA) where you offer payroll deductions or to a registered pension plan don't need to be enrolled in the VRSP.

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If I offer a VRSP, do my employees have to participate?

  • Eligible employees must be enrolled in the plan, but they can opt out. The employee must notify you in writing, within 60 days of the notice of membership being sent to them by Sun Life, that he/she wishes to opt out of the VRSP. You must advise Sun Life in writing within 30 days if you receive such notification from an enrolled employee. After 60 days from the date that the notice of membership is sent, employees are not allowed to terminate their membership in the plan; however, they may be able to set their contribution rate to 0%.
  • A form is available from the Learn more page which can be used by employees to inform you of their decision to opt out of the plan and for you to in turn to notify Sun Life.

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How can my employees make their contributions?
Contributions will be made by regular automatic payroll deductions. Employees can also make lump-sum contributions by signing into mysunlife.ca and using the form provided.

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How much do employees have to contribute to the VRSP?
Employees can set their own contribution rate up to the maximum allowed under the Income Tax Act. Under the Income Tax Act, combined employee and employer contributions are subject to the same annual limit as RRSPs (i.e., max total 18% of previous year's earned annual income). If employees do not choose a contribution rate, the default rate will be 2% of their gross salary from July 1, 2014 to Dec. 31, 2017, 3% of gross salary from Jan. 1, 2018 to Dec. 31, 2018, and 4% of gross salary from Jan.1, 2019, forward. Employees can change their contribution rate at any time.

Employees can reduce their contribution rate to 0% after contributing to the VRSP for at least 12 months, or earlier if:

  • Under tax rules they are no longer permitted to make contributions to the plan
  • They make an additional contribution to the plan equal to or greater than the contribution determined for that period;
  • You contribute to the plan on their behalf.

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Do employers have to contribute as well?
No, employer contributions are completely optional. Any contributions made by you are tax deductible and will not be subject to payroll taxes (same treatment as contributions made to a pension plan). Under the Income Tax Act, combined member and employer contributions are subject to the same annual limit as RRSPs (i.e., max total 18% of previous year's earned annual income).

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Are VRSP contributions locked in?
Employer contributions will be locked in – i.e., they cannot be taken out of the plan in cash and must be used to provide retirement income. Employees are not allowed to withdraw employer contributions from the plan while they are still employed although there are exceptions in certain situations (e.g. death, disability, reduced life expectancy, relocation outside of Canada).

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What's the tax treatment for contributions?
Employer contributions, if any, are deductible as a salary expense and are not subject to payroll tax.

Employee contributions are deductible by employees up to the same limit as an RRSP. Under the Income Tax Act, combined member and employer contributions are subject to the same annual limit as RRSPs (i.e., max total 18% of previous year's earned annual income) and reduce a member's RRSP contribution room.

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When can employees start to receive retirement income?
A VRSP plan member can begin taking retirement income if he or she has stopped working, or postpone retirement income until no later than the end of the year in which he or she turns 71. If the member does not choose a retirement income option by that date, Sun Life will begin making annuity payments for life to the member for a guaranteed minimum of 10 years. The amount of retirement income that a member receives will depend on the contributions to the member's account, the investment income, and the interest rates in effect at retirement.

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Am I responsible for administering the VRSP?
No. Sun Life will administer the VRSP.
You are responsible for the following:

  • Notify your employees of your intention to join a VRSP at least 30 days before the effective date of joining the plan
  • Enrol employees as they become eligible
  • Collect opt-out notices from your employees and send the information to Sun Life
  • Deduct contributions from plan members’ pay and remit them to Sun Life for deposit in the members' accounts
  • Inform Sun Life when employees are hired or leave the company
  • Upon request from plan members, provide copies of documents such as your contract with Sun Life, the plan’s annual information return or the plan’s annual financial report

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Who chooses the investment options?
Sun Life determines the line-up of funds that your employees can choose from and invests their contributions according to their instructions. Your employees have 60 days from the date their notice of membership was sent to them by Sun Life to make their fund selections. After 60 days, contributions will be invested in the default fund.

The default fund is a series of target date funds which are segregated funds that automatically reduce risk as the investor approaches the target date – typically retirement. If a member does not select a fund(s) for their contributions, contributions will be invested in the target date fund with a maturity date just prior to their 65th birthday.

Employees can change their fund selections at any time by signing in to mysunlife.ca or by calling our customer care centre at 1-866-733-8612, Monday to Friday 8 a.m. to 8 p.m. ET.

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Learn More

Quebec VRSP
Apply Now

Call us at 1-855-362-3086

Our Small Business Centre offers advisors and employers with personalized inbound and outbound support.

Call us at any business day between 8 a.m. and 6 p.m. ET, or send us an email at RVER@sunlife.com.