Upgrading to theFamily
Pension Plan

The FPP sits at the very apex of the hierarchy of tax-assisted retirement solutions provided for under the Income Tax Act.

By not taking advantage of the Family Pension Plan, an individual could lose up to around $136 EVERY DAY that they choose to wait to upgrade to the FPP.

Optimizing Deductions

Placing bonds and GICs in the Defined Benefit (DB) subaccount of an FPP allows for additional corporate deductions through special payments, while maintaining high yield assets in the other two sub accounts (Defined Contribution and Additional Voluntary Contributions), rather than suffering lower overall returns within the commingled account of the IPP.

A Turnkey Solution For Greater Retirement Savings

In the past, challenges with the IPP’s complex administrative requirements prevented business owners and professionals from pursuing pension benefits. But there is no longer a need to assemble a team of actuaries, custodians or investment managers to take full advantage of advanced tax savings – full administration is already built into the Family Pension Plan.

Dealing Tax-EfficientlyWith "Excess Surplus"

One of the drawbacks of the conventional IPP occurs when the assets of the plan achieve higher than expected returns.  Once the IPP is deemed to be in “excess surplus”, the tax authorities automatically require the corporate sponsor to cease all contributions, which effectively eliminates the corresponding tax deductions. Further compounding this problem, when an IPP accrues an additional year of service it triggers a mandatory pension adjustment that reduces the employee’s personal RRSP contribution room.

The FPP fixes this problem by allowing the employee to shift from the Defined Benefit component of the plan, into the Defined Contribution/Additional Voluntary Contribution portion of the pension plan. Under those rules, the employee would still be entitled to make a personal contribution (up to 17% of salary/bonus). Best of all, that personal contribution would be fully tax deductible in the hands of the employee.

See why choosing
a Family Pension Plan canEliminate the Common Problems of the IPP

Incorporated professionals are often surprised to discover that their chief complaints regarding the more limited structure of the IPP can be completely avoided by switching to a Family Pension Plan. The following chart outlines how the FPP can solve those key complaints.

Plan Features IPP Problem FPP Solution
Flexibility of Contributions Schedule Contributions are mainly based on age of member and do not take into consideration the financial health of the plan sponsor. Ability to switch from DB to DC and back and to control the level of contributions and timing thereof. This provides a cash flow ‘escape hatch’.
Ability to Generate Economies of Scale The IPP is meant for a single plan member. All of the service providers seek compensation out of a single pension fund thereby greatly reducing the ability to seek cost savings. All FPP plan texts are identical and the resources of ITI Financial are spread over the entire client pool, therefore economies of scale can now be passed down to the client. Fees drop as the number of plans increase.
Plan Administration Responsibility Under an IPP, the client is responsible for plan administration. Under the FPP, the client delegates the plan administrative duties to ITI Financial and INTEGRIS Pension Management.
Requirement to be Age 40+ to Benefit Below age 40, the RRSP limit is more generous than the IPP limit. (ex: $3,000 less at age 30). This makes it tax-inefficient to establish an IPP for younger employees. Individuals under age 40 can save more under the DC/AVC components of the FPP and contribute up to $660 more than in an RRSP each year from age 18 to 40.
Fiduciary Obligations The Client’s Corporation as the legal plan administrator has the responsibility of plan administration and is the fiduciary of the plan. While the Client’s Corporation is the legal plan administrator under the FPP model, it appoints INTEGRIS Pension Management to be the delegated plan administrator and a fiduciary of the FPP.
Locked-in Nature of Pension Amounts In an IPP, all contributions and monies transferred as a qualifying transfer to purchase past service is locked-in by applicable provincial laws and can only be accessed at retirement. The following are not locked-in under the FPP:

  1. Transfers of RRSPs into the AVC subaccount
  2. Voluntary Contributions made by the employee to the AVC subaccount.