Individual, perk-filled pension plans

An ‘upgrade’ to RRSPs, IPPs can be part of total executive benefit package
By Peter J. Merrick
|Canadian HR Reporter|Last Updated: 01/27/2009

Many top executives and business owners in a competitive employment environment want tailor-made benefit packages that suit their individual needs. Fortunately, for these high-income earners employed by an incorporated or professional corporation, there is an option in the form of individual pension plans (IPPs).

IPPs were introduced into the Income Tax Act by the federal government in 1991 to compensate high-income earners disadvantaged by registered retirement savings plan (RRSP) rules.

By using an IPP as part of a total executive benefit package, a company can attract people who are currently employed and are members of a defined benefit (DB) pension plan. Traditionally, such candidates may not have wanted to leave an employer or DB plan before retirement because tax rules prevent them from transferring the full value of their pension credits to a locked-in RRSP. A company can avoid this obstacle by creating an IPP for these employees and transferring existing pension plans to the new IPP without tax implications.