WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE IPP COMPARED TO AN RRSP?
The advantages of the IPP are:
- Higher contribution amounts
- Creditor-proof assets
- Flexible benefit settlement options
- Higher investment standards e.g., maximum of 10% invested in any one company
- Deficits can be made up using pre-tax dollars
The disadvantages of the IPP are:
- No access to funds while employed
- Locking-in
- More legislation, therefore, higher expenses
- Excess Surplus may reduce future contributions
WHAT ARE THE DIFFERENCES BETWEEN IPP CURRENT SERVICE COSTS AND MAXIMUM RRSP CONTRIBUTIONS FOR A 60-YEAR-OLD PLAN MEMBER COMMENCING AN IPP ON JANUARY 1, 2009?
HOW MUCH CAN THE IPP PLAN MEMBER WHO IS A CONNECTED PERSON TAX-SHELTER IN 2009?
Consider a 60 year-old (assumed born on January 1, 1949) Connected Person with 18 years of Past Service as at January 1, 2009 while not a member of another DC Plan or DB Plan. From 1991 through 2007, this member had earned income of at least $111,111 per year and $116,667 in 2008. Furthermore, the plan member is expected to earn at least $122,222 in 2009.
The Current Service cost for 2009 is $33,517.00.
The Past Service liability is $580,132.00. To partially fund the Past Service liability, the member must satisfy a PSPA of $320,800.00 through a Qualifying Transfer, certification of a provisional PSPA, or a combination of both. Thus, the net funding for the Past Service unfunded liability is $259,332.00 ($580,132.00 above less $320,800.00). The entire $259,332.00 may be contributed and deducted by the Company in 2009.
In summary, the Company could contribute and deduct $292,849.00 ($259,332.00 for Past Service unfunded liability plus $33,517.00 for 2008 Current Service cost) in 2009 as well as the member transferring $320,800.00 from his RRSP to the IPP.
If Past Service is being considered then you can generate a quotation via our IPP On-Line Quoting System©.
For a free, no-obligation IPP Online Quote, please contact us via telephone @ 1-866-300-7786, or email.
