Pooled Registered Pension Plan (PRPP)

The Federal Government recently passed Bill C-25 also referred to as the Pooled Registered Pension Plan Act. while still in its infancy, and with many details still to be drawn up, this plan provides yet another method for Canadians to save for their retirement. Standard Life has put out a good summary of what we know thus far. I have linked it below. I have also summarized what I feel are the most important parts.

Rob's Summary

• All employers will be required to offer the plan to all employees working for at least 24 months.
• Employees will be "auto-enrolled" and can opt out.
• Employees can voluntarily contribute a percentage of their earnings to the PRPP by payroll deductions.
• The employer is NOT required to match or contribute (at this time, this could change)
• The suppliers of these plans will largely be existing financial institutions such as banks and insurance companies
• Investment fees are to be kept to a minimum <1%
• Since fees are to be kept so low there will be a very low level of service, there is no overhead to pay for extra service or pay advisors commissions.
• All contributions are LOCKED IN
• Access to the Home Buyers Plan and Lifelong Learning Plan tax free withdrawals/loans are not allowed
• Investments will presumably be a list of funds similar to today, but likely focusing more on Asset Allocation and Target Date/Retirement Date Funds
• There is currently no default fund selected but it is expected to be a Retirement Date fund targeting retirement at age 65.
• This is likely a good thing for Canadian, as our savings rate is abysmally low, however, as this is currently voluntary, it is doubtful that many employees will participate in the PRPP if employers don't match, and even then there are drawbacks to the PRPP such as the locking in provision and loss of Home Buyers Plan and Life Long Learning Plan when compared to the also voluntary RRSP.
• Broker are going to hate the PRPPs. They will pay little or no commissions. Pension managers with large blocks of business are already terrified that their commission stream is going to dry up. There will certainly be a shift in how we as advisors market and sell group savings plans. Many will switch to a fee for service model, provide little or no service, or exit the market all together. It will be interesting to see how the industry reacts to this new plan and its implications on our bottom line.
• Similar plans have recently been launched in Australia and the UK. in those countries the employer must match employee contributions, which some expect may come to the PRPP if adoption rates are low.

Everything listed above is correct to the best of my knowledge at the time of writing, as many details have still yet to be finalized they may change in the future. That being said take everything above with a grain of salt, as very little is concrete at this point in time.

Standard Life Summary


*edit; Spelling


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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.

Long time no post, here is some marketing jargon I put together recently

A more affordable Health and Dental plan 

where you control the rates!

You may have heard of the recent bankruptcy of Nortel which left thousands of employees without benefits or pensions. This is because Nortel used a “Defined Benefit” plan. A Defined Benefit plan means essentially “you get this benefit, no matter the cost”. That’s how bankruptcy happens.

While the world of Pensions have long since made the switch away from Defined Benefit, and towards Defined Contribution plans. The land of Health and Dental insurance has stayed firmly in the world of Defined Benefit. A Defined Contribution plan is just that, a plan where you can control exactly how much you as an employer contribute.

Do you provide the same benefits as 10 years ago? But the price has doubled or even tripled? Double digit increases each year are becoming unsustainable for many businesses’. We have a way to put the control firmly back into your hands.

Health Care Spending Accounts  (HCSA) are the “Defined Contribution” plan of the Health Insurance world. Each employee receives a defined amount of benefit dollars each year, say $1000 or 3% of salary. The employee can spend these funds on healthcare, dental care, glasses, massage etc. There is no plan design, so the benefits are entirely flexible for the employee, no more “one size fits all” insurance plans.

While employees love the flexibility HCSA’s provide, employers love the ability to budget and control costs. Since the amount of benefit is not tied to an insurance policy, there is no insurance company to raise the rates year after year. If you have 10 employees and they each get $1,000 per year, you know your budget is $10,000 year after year. No surprises at renewal time. You can increase benefits to fight off the effects of inflation or decrease the benefits to keep in sync with the profitability of your business. You are in the driver’s seat.

Health Care Spending Accounts are low cost, and low administration. Administration fees are typically 10-15% of paid claims; rather than the 30-40% overhead build into the rates of most group insurance plans. Affordable stop loss policies are also and attractive option to reduce risk in event of a catastrophic claim.

If you would like more information on how a Health Care Spending Account might be right for your business, please contact me

Robert Reynolds, Certified Group Benefits Advisor

Hendry Swinton McKenzie Insurance Services Ltd.

Toll Free: 1-888-592-4614 or rob@hmrinsurance.ca

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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.