Deferred profit sharing plan (DPSP)

These plans are set up by employers as a way to share profits with their employees. Contributions depend on the profits of the company. Employee contributions aren’t allowed. The plan is registered with the Canada Revenue Agency (CRA) and contributions are tax-deductible to the employer within certain limits, as defined by the Income Tax Act.

The contribution limit is half of the defined contribution limit subject to a dollar maximum. Investment income isn’t taxed until it’s paid out of the plan. A DPSP often substitutes for, or supplements, a group RRSP.