Clear writing is important for effective benefits communication

Clear writing can have a big impact on your benefits program. A logically organized, well-laid out and clearly written benefits brochure will be better understood – and your program more well-used – by your employees.

We have excerpted from two internal RRSP documents. Document 1 was written by a financial advisor, as part of an actual proposal to “Fargo,” (not the company’s real name) a large manufacturing company, to implement and manage a Group RRSP. Document 2 is the rewritten and reformatted version by communications expert Jody Bruner.

Jody Bruner is a communications expert. She can be reached at (416) 781-0141 or www.jodybrunerbiz.com.

original document…

TO: ALL FARGO STAFF

We have recently conducted a review of Fargo’s compensation and benefits programs. As part of this review, we have given careful consideration to the issue of our employees’ long-term financial well-being.

It is the view of the Company that an essential component of our commitment to your well-being is the need to ensure that a program can be initiated to facilitate your needs during your retirement years.

It is with pride that with effective from July 1, 2000, a retirement program will be established. The new program will be a combined Deferred Profit Sharing Plan (DPSP) and a Group RRSP (“The Fargo Retirement Investment Plan” hereafter referred to as “FRIP).

Why the need for such a program?

We are initiating this program because we believe that your long-term interests would be well served by the availability of a retirement investment and savings strategy that would take advantage of tax deferrals that are available to employers and employees.

Such a program must also allow you to tailor the investment strategy based on your age and other important factors.

The FRIP encourages each employee to assume responsibility for their own long-term financial security. As soon as the Company’s contributions are vested in the DPSP, the employee will have full control of all the investments in the Plan.

…rewritten for clarity

To Fargo Employees:

Fargo is pleased to announce a program designed to ensure your financial well-being during retirement. This program, described below, is an expression of our commitment to you. We’re sure you will be pleased with it.

This retirement program starts July 1, 1996. You are eligible to participate at this time if you have been employed full-time by Fargo for at least one year. Otherwise, you can begin participating on the anniversary of your first full-time year with the company.

The retirement program consists of two separate but connected savings plans:

The Fargo Group RRSP: the fund into which employee contributions go. Each employee who chooses (and is eligible) to participate in the program must contribute at least 2% of their gross salary into their individual account. They can (and probably should) invest more than this.

Deferred Profit Sharing Plan (DPSP): the vehicle through which Fargo makes contributions into your individual RRSP. Fargo will match employees’ monthly contributions up to a maximum of 3% of their gross salary. For example, if you earn $30,000 per year ($2,500 per month) a 3% monthly contribution to your Group RRSP comes out to $90. Fargo will match your $90, giving you a total of $180 in your individual RRSP each month.

What are the benefits of investing in an RRSP?

In general, you save for your retirement and defer paying income tax.

The money you invest is deducted from your income, and isn’t taxed until you withdraw it. You are permitted to invest up to 18% of your gross income, up to a yearly maximum.

And the income generated by the funds in your RRSP compounds tax-free until it is withdrawn.



original document…

What is the Group RRSP and how does it work?

It is a collection of individual RRSPs for employees.

All contributions are tax deductible and any growth is not subject to tax until withdrawn.

The employee’s funds in his/her account in the Group RRSP is fully portable should any employee leave the Company. A departing employee would have the choice to leave the RRSP with investment Financial or have it transferred to another financial institution.

The Group RRSP offers employees an opportunity for income splitting at retirement by investing contributions into a spousal plan.

Existing retirement funds held at other institutions can be transferred into the employee’s Group plan.

Contribution limits are 18% of the employee’s prior year’s earned income to a yearly maximum less the Company’s DPSP contribution, plus any carry forward.

Vesting: Immediate.

Withdrawals: Allowed at any time, subject to any applicable redemption fee and income tax withholding at source.

At Retirement/Termination:

Cash Refund (subject to tax and any applicable redemption fee)

Term Annuity or purchase of Life Annuity

Transfer to Individual RRSP, RRIF, RPP

Annual Fee covering all record-keeping and administration costs for the Group RRSP to be paid by Fargo.

…rewritten for clarity

What is a Group RRSP?

The term “Group RRSP” is a bit misleading, because it seems to imply a pooling of money into one big RRSP. Rather, it refers to the way contributions are made: by direct payroll deductions.

What are the benefits of participating

in the Fargo RRSP?

Fargo contributes substantially to your retirement fund.

As in a regular RRSP, your contributions are deducted from your gross income, and you don’t pay taxes on them until you draw upon your RRSP. When you contribute to a Group RRSP, because your contribution is deducted at source you reduce the amount of taxes paid immediately. You actually put more money into your hands now, because you’ll be paying tax on your income after your RRSP contribution has been deducted – not before. Why wait to receive your tax return and let your money work for the government, when it can be working for you?

It’s a disciplined and relatively painless way to save. It’s often difficult to come up with a lump sum of money to invest in your RRSP. Investing a small portion of your pay each month is much easier than coming up with a large amount.

You can earn more money in the long run because your money compounds on a monthly basis. One of the main benefits of investing in an RRSP is compounding. Compounding is when interest earned on your initial investment itself beings to earn interest. With annual contributions, the effects of compounding are considerable. And when you invest in your Group RRSP on a monthly basis your money can go to work compounding earnings for you even faster.

The plan is flexible: you can make lump-sum payments at any time to boost your RRSP contributions, as long as you don’t exceed the limits.

The funds you invest in your individual RRSP are fully portable. The employer contributions can only be transferred once the 2-year vesting period is fulfilled.

You can consolidate your investments. Existing RRSPs held at other institutions can be transferred into the employee’s Fargo Group plan.

You can make contributions into an RRSP for your spouse to ensure that you pay less tax as a couple upon retirement. Often when couples retire, one partner has better pension benefits, and consequently pays higher taxes. If the combined retirement income of both spouses is split more evenly between the two partners, you can lower your tax bracket and pay less tax in total.

Save on all record-keeping and administration costs for the Group RRSP. These costs will be covered by Fargo.

This Group RRSP allows you to control your financial destiny. You can choose from a wide range of investment alternatives that suit your individual investment objectives.

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