What is Registered Pension Plan (RPP)

A registered pension plan is a form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the Canada Revenue Agency. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires.

BREAKING DOWN Registered Pension Plan (RPP)

Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax-deferred, so the funds are taxed when they are withdrawn from the plan.

Single Employer Registered Pension Plans 

A single employer pension plan (SEPP) is one in which a single employer, or several related employers within a corporate group, participate and contribute to the same pension plan. A SEPP can be provided to all employees or certain classes of employees. It is usually governed and administered by the plan sponsor without input from plan members.

Contributions to SEPPs are always made by the employer. However, some SEPPs are contributory plans, as plan members are also required to contribute to the plan. A SEPP can be either a defined benefit or defined contribution plan or a combination of both. Employers are required to make contributions to the plan, which provide pension benefits. They must also cover any shortfalls.

Multi-Employer Registered Pension Plans 

A multi-employer pension plan (MEPP) is one in which two or more unrelated employers participate and contribute to the same pension fund. It can be a defined benefit or defined contribution plan—or a combination of both types of plans. It can be a collectively bargained plan or a non-negotiated plan. 

A defined benefit MEPP recognizes years of membership in the MEPP when calculating benefits. Years of employment with other employers that are part of the MEPP may also count. MEPPs are usually established by a union or by laws or other agreements. 

If a MEPP provides defined benefits and an employer's contributions are not enough to cover the pension benefits, benefits may be reduced. In these types of pension plans, benefits are not fixed and may be reduced. As a result, these types of benefits are sometimes referred to as target benefits.

Jointly Sponsored Registered Pension Plans 

A jointly sponsored pension plan (JSPP) is a registered pension plan in which decisions and contributions are shared by both plan members and employers. A JSPP provides defined benefits to plan members. Contributions are always made by both plan members and their employers.