Module 2
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Questions and Answers

What is a key characteristic of a Registered Retirement Savings Plan (RRSP) in terms of contributions?

  • Contributions can only be made by the employer
  • Contributions are not deductible for tax purposes
  • Contributions are tax-deductible within Income Tax Act limits (correct)
  • Contributions are tax-exempt at the time of withdrawal

    • What happens to investment earnings in a Registered Retirement Savings Plan (RRSP)?

  • Investment earnings are tax-sheltered (correct)
  • Investment earnings are taxed annually
  • Investment earnings are taxed at a reduced rate
  • Investment earnings are exempt from taxation

    • In a Group RRSP, what is the main advantage of having centralized administration?

  • Employer contributions are considered additional employee earnings (correct)
  • Individuals have less control over their investments
  • It requires higher contribution amounts from employees
  • Employees can opt out of contributing if they choose

    • What is the purpose of a 'spousal' account in a Group RRSP?

    <p>To allow the spouse to contribute to the employee's retirement savings</p> Signup and view all the answers

    What distinguishes Spousal RRSP withdrawals from regular RRSP withdrawals?

    <p>Spousal RRSP withdrawals have different tax rules than regular RRSP withdrawals</p> Signup and view all the answers

    At what age must an individual purchase an annuity or transfer their RRSP to a RRIF?

    <p>71 years old</p> Signup and view all the answers

    What is the main purpose of a spousal RRSP?

    <p>To allow the employee to contribute to their spouse's retirement savings</p> Signup and view all the answers

    In the context of RRSP contribution limits, how are historical contributions taken into account?

    <p>They are not relevant in determining the contribution limit</p> Signup and view all the answers

    What are some examples of 'earned income' as defined by the Income Tax Act for RRSP purposes?

    <p>Business income</p> Signup and view all the answers

    What additional costs might a plan sponsor experience in relation to contributions to a Group RRSP under the ITA?

    <p>Additional payroll taxes</p> Signup and view all the answers

    What is the maximum amount a plan sponsor can contribute to a DPSP in respect of a plan member?

    <p>$18,000 per year</p> Signup and view all the answers

    What is the tax implication of withdrawing funds from a Group RRSP or DPSP before retirement?

    <p>Tax deducted on withdrawals ranges from 10% to 30%</p> Signup and view all the answers

    Which retirement income option allows a member to defer income from an RRSP portion to age 85?

    <p>Advanced Life Deferred Annuity</p> Signup and view all the answers

    What feature of a Group RRSP makes it advantageous for employees compared to an individual RRSP?

    <p>Convenient payroll deductions</p> Signup and view all the answers

    In the context of retirement income options, what is a key difference between a Life Income Fund (LIF) and a Registered Retirement Income Fund (RRIF)?

    <p>Maximum withdrawal amount</p> Signup and view all the answers

    What is a significant advantage of a Group RRSP and DPSP combination for employers compared to a DC registered pension plan?

    <p>Flexible employer contribution provisions</p> Signup and view all the answers

    Why might an employer choose to contribute to a DPSP instead of a Group RRSP?

    <p>Employee retention incentives</p> Signup and view all the answers

    What is the main factor determining how plan sponsors set contribution amounts to Group RRSPs and DPSPs?

    <p>Company profits</p> Signup and view all the answers

    What is a potential advantage of a DPSP compared to a Group RRSP for employees?

    <p>More accessible funds at termination</p> Signup and view all the answers

    What happens to forfeited amounts in a DPSP if an employee leaves before the vesting period is complete?

    <p>They are retained by the employer</p> Signup and view all the answers

    How does a DPSP incentivize employees to contribute to increasing company profits?

    <p>Higher contribution matching</p> Signup and view all the answers

    What is one way in which a DPSP differs from a DC registered pension plan in terms of accessibility of funds?

    <p>Lump sums allowed before termination</p> Signup and view all the answers

    What is a key aspect of the fiduciary responsibility of a plan sponsor of a Group RRSP or a DPSP?

    <p>Setting parameters for administrators and fund managers</p> Signup and view all the answers

    In what way are Group RRSP/DPSP with multiple investment choices affected by the Capital Accumulation Plan Guidelines?

    <p>'Non-discrimination' requirements enforced</p> Signup and view all the answers

    What is one reason an employer might choose to contribute to a DPSP instead of a Group RRSP?

    <p>Contributions are tax deductible</p> Signup and view all the answers

    Contributions to DPSP are not tax deductible.

    <p>False</p> Signup and view all the answers

    Vesting in a DPSP can only take up to 1 year.

    <p>False</p> Signup and view all the answers

    In a DPSP, in-service withdrawals are always allowed.

    <p>False</p> Signup and view all the answers

    Employees have no incentive to increase company profits with DPSP.

    <p>False</p> Signup and view all the answers

    Contributions to DPSP are always required, even in non-profitable years.

    <p>False</p> Signup and view all the answers

    Funds in a DPSP are less accessible at termination compared to a DC registered pension plan.

    <p>False</p> Signup and view all the answers

    Non-locked-in payments are allowed in a DPSP.

    <p>True</p> Signup and view all the answers

    Plan sponsors of non-registered retirement plans have no fiduciary responsibilities.

    <p>False</p> Signup and view all the answers

    In a Group RRSP/DPSP, participant benefits are not tied to fund manager performance.

    <p>False</p> Signup and view all the answers

    Group RRSP/DPSP with multiple investment choice options are not subject to Capital Accumulation Plan Guidelines.

    <p>False</p> Signup and view all the answers

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