A Pension Plan for Small and Medium-Sized Businesses

Offering a workplace pension plan is a smart strategic move for small and medium-sized businesses. Not only does it provide long-term financial stability for employees, a workplace pension plan helps employers to attract and retain talent in a competitive job market. 80 percent of workers will change jobs just for a pension plan. Despite this, small and medium-sized enterprises rarely establish single-employer workplace pension plans because pension management is complex and risky.

The world of pensions has changed. New, 21st century multi-employer pension plan (MEPP) options are now available that offer fully-outsourced pension services. This can make offering a pension plan – even for a small business – both feasible and attractive. MEPPs are an increasingly popular choice because they deliver real pensions without the work and risk of pension administration. A defined-contribution (DC) MEPP is a particularly flexible and low-risk solution, both in terms of cost control and the retirement-income options it offers.

Blue Pier’s collective DC MEPP – Canada’s first Pension Plan as a Service – stands out as the pioneering provider of outsourced pension solutions. Open to any employer in Canada, Blue Pier™ offers a fully-customized, low-cost, low-risk, and high-performing pension solution that relieves both employers and employees of administrative tasks while delivering institutional-level investment management. This unbeatable combination makes it the best small business pension plan, a plan that owners of small and medium-sized businesses can “set and forget” with confidence in the knowledge that a Board of Trustees is there to provide continuing oversight.

Pension plans for small to medium-sized businesses

When selecting a pension provider for your business, features matter. These are the ones you want:

Quick signup
and withdrawal
No payroll taxes
on contributions
Institutional asset
Low member
No cross-subsidization risk
among members/employers
Multiple retirement

Why these features matter:

  • Delegating pension management to experts lets you focus on what matters – your business.
  • You need flexibility. You need a pension provider that can move as quickly as you need to.
  • A workplace pension solution should fit your business needs and budget, both now and in the future.
  • You know every dollar counts. So should your pension provider.
  • With some plans, contributing to your employees’ retirement drives up your payroll taxes. That shouldn’t happen.
  • Professional, institutional asset management costs less. It can also deliver better outcomes than retail funds.
  • Most group retirement plans try to get employees involved with investment management. This costs money and creates work, stress, and poor outcomes.
  • You probably don’t want your business or your employees paying for the pensions of people you don’t even know.
  • For some people and their families, taking a lifetime pension is a good option. For others, not so much. A pension plan should accommodate everyone’s needs.
  • A pension plan should work for all your employees, no matter where in Canada they work.
  • Real pension plans provide robust creditor protection so your employees have the best chance of having a financially secure retirement.

Choosing a Pension Provider for Your Small or Medium-Sized Business

When choosing a pension plan provider, there are some questions you’ll want to ask:

In a pension plan for small to medium-sized businesses, who manages the money?

You know that a small change in your mortgage interest rate translates to a big difference in your monthly payment. It works the same way with pensions: money management is the most important thing to get right. Over a career, a one percent difference in net investment returns – or fees – translates to a 20 percent difference in your pension income.

Most group retirement plans ask members to choose their investments from mutual funds provided by the plan sponsor. Yet most people don’t like managing money and don’t engage with the process.

That’s why Blue Pier, Canada’s largest, most-successful asset manager, does it for your employees under the supervision of our Board of Trustees. That saves time and money, for you and your employees.

What are the start-up and ongoing administration costs of a pension plan for small business owners?

Costs matter. Some plans cost two percent – or more – of plan assets annually, which may include trailer fees. Employers may also have additional consulting fees, regulatory filing fees, and internal costs for staff to manage the plan, report to regulators and communicate it to employees. Employees may even have to take time off work to attend educational sessions on investments. All these hard and soft costs can add up quickly.

Blue Pier charges a modest startup fee and a low annual fee on assets under management. Best of all, fees can be tax-deductible and there are no trailer fees. Get in touch with us for more information.

How long does it take to set up a pension plan for small to medium-sized businesses?

The time required to establish a single-employer group plan and start contributions depends on the type of plan. If the plan must be registered individually with the CRA and a pension-standards regulator, it will likely take several months before a registration number is obtained.

With Blue Pier™, you can have a customized pension plan for your small to medium-sized business up and running in 6 to 10 weeks.

Who’s responsible for pension plan administration? How much work will I have to do?

With traditional, single-employer group retirement plans, you are the plan administrator and it’s your responsibility to ensure all the annually-recurring plan management tasks get done. Some of these tasks include annual reporting, paying regulatory fees, issuing statements to members, monitoring the performance of investment options, monitoring members’ use of investment information and decision-making resources – the list goes on and on. If these tasks are not done correctly and on time, there can even be regulatory financial penalties. With little or no expertise with group retirement plans, most employers rely on consultants who are paid by the employer or from trailer fees charged to plan members’ accounts.

With Blue Pier, you’re not the plan administrator. Pension management is our responsibility. All you need to do is keep us informed about staff changes, make contributions, and report Pension Adjustments. We help with that. Get in touch with us to find out more.

Who is the plan sponsor?

The plan sponsor is your small or medium-sized business. As the sponsor, you determine who participates in the plan and the contribution rates, distribute enrolment forms, and inform the administrator (Blue Pier) about member events like termination of employment, retirement, etc.

Who are the members?

The members are the employees of the small and medium-sized businesses which have joined Blue Pier as participating employers.

Are contributions made by my small or medium-sized business or my employees going to be used for someone else’s pension?

This question often arises with defined-benefit (DB) pension plans. In a DB plan, all the plan assets, liabilities and risks are pooled among all the active, inactive and retired members of the plan. If the DB plan is a MEPP, the risk of pooling extends to all employers and members. Practically, this means that cross-subsidization among unrelated employers and members will inevitably occur over time. What does “cross-subsidization” mean? It means that some of the contributions made by your small or medium-sized business or your employees may well end up paying for pensions of other members working for employers you don’t even know.

With Blue Pier, this doesn’t happen. Your pension money is always yours.

Is the pension portable? Can my employees transfer their pension funds out tax-free?

With DB plans, there’s a limit on the amount of pension money you can transfer to another registered plan like a DC plan, an RRSP or RRIF. Anything over the CRA-prescribed transfer limit will be taxed immediately as income.

With Blue Pier, you don’t have to worry about this. Transfers from Blue Pier to other registered plans are tax-free. Always.

Are my employees’ retirement funds “locked-in”?

In most provinces, pension legislation requires that pension funds arising from employer contributions and matched member contributions are to be used to provide pension income. In other words, they cannot be withdrawn in cash or transferred to regular RRSP. With a Defined-Benefit Pension Plan (DB), you must receive benefits in the form of a lifetime pension income.

With Blue Pier, you have some flexibility to decide how much of employees’ pension money is locked in.

What if my business needs change? Can I terminate or withdraw from the plan?

This is a very important consideration when choosing a pension solution for your small or medium-sized business. Some plans require a minimum participation period – e.g. five years – when you sign up. Other plans may be difficult to terminate and wind up, especially if some members don’t make a choice as to what to do with their pension funds or cannot be located, which often happens when members terminate employment and don’t immediately transfer their funds from a plan.

Here at Blue Pier, we understand your need to be careful about long-term financial commitments. We’d like you and your employees to stay with us for life, but you don’t have to. To terminate participation, just give us 90 days’ advance notice.

What are my employees’ options when they retire?

It depends on the type of plan. With a DB plan, the only option is a pension payable for life. With a single-employer Group RRSP, DC plan, or DPSP, employees will have to transfer their funds to a personal plan or buy an annuity from an insurance company.

With Blue Pier, your employees have more choices. They can receive retirement income directly from Blue Pier, transfer their pension money to a personal plan, or buy an annuity from an insurance company.

Will the plan increase payroll taxes for my business or its employees?

Payroll taxes are an important consideration when choosing a plan for your small or medium-sized business. Payroll taxes are based on the amount of employment income paid to employees, individually or collectively. Examples of payroll taxes include contributions to the Canada Pension Plan or the Quebec Pension Plan, Employment Insurance premiums, workplace-safety insurance premiums, employer health taxes, post-secondary education taxes, etc. With some group plans, employer contributions increase the amount of income based on which payroll taxes are determined. This, in turn, can increase the total amount of payroll taxes for your small or medium-sized business and can also increase the payroll taxes that your employees have to pay.

With Blue Pier, this doesn’t happen. Contributions are tax-deductible and don’t increase payroll taxes for a small or medium-sized business or for its employees.

Can the plan be customized for my small or medium-sized business?

Business owners need the flexibility to design a workplace retirement program that is affordable for the business and its employees and achieves its objectives. Some of these objectives could be to improve employee morale, support staff recruitment and retention, or improve the tax effectiveness of total compensation.

Some plans have limited design flexibility. For example, they may require that both employees and the employer pay contributions in equal amounts, which can create a financial burden for lower-income employees. Ideally, a pension plan for small and medium-sized businesses should allow for a broad range of designs that can include mandatory contributions, matched contributions, voluntary contributions, service-based contributions, results-based contributions as well as different contribution structures for different employee classes.

With Blue Pier, it’s your plan, designed your way to fit your budget. Employees don’t have to contribute (unless you want them to). The minimum employer contribution is just one percent of the salary or wages for eligible employees. You can have different plans for different employee classes and even an “executive plan” for management and salaried employees.

The Blue Pier™ Advantage – Simply, Better Performance

As a business owner, we understand that your time is precious. We understand that you need a low-touch, high-performing plan that is designed around your business needs and not the other way around. We understand you need a plan that will be there for the long haul but doesn’t tie you down with risky, long-term commitments. We understand you need a plan that reduces your workload, rather than adding to it.

Your employees need a plan that gives them peace of mind. They need a plan that helps them save for retirement without asking them to become investment managers. They need a plan that will be with them for life if they want and provides tax-free portability if they don’t. Your employees need a plan that offers a lifetime pension along with other options that might be a better fit for their unique personal and family circumstances.

If your small or medium-sized business needs a pension plan, you need Blue Pier™. Flexible, low-cost, low-touch, and gimmick-free, Blue Pier™ is a real workplace pension plan that simply gets the job done right.

  Blue Pierᵀᴹ Single-Employer
DC Plan
Avoids payroll taxes on employer contributions
Low member / employer workload
Institutional asset management
Long-term commitment No Yes No Depends Yes
Cross-subsidies among employers / members No No No No Yes

Setting up a pension plan for small and medium-sized businesses: The Blue Pier™ Advantage – Fast Sign Up

In 10 weeks or less, your small or medium-sized business can have its fully-customized workplace pension program up and running. Here’s how it works:

  • Week 0 – 1: Virtual meeting with Blue Pier™ to capture your desired pension plan features.
  • Week 1 – 3: Review and execute sign-up documents.
  • Week 3 – 7: Employee enrolment begins. Online accounts are established.
  • Week 8 – 10: Contributions and pension accrual begin.

Secure Your Future with Blue Pier™

Don’t leave your retirement or that of your employees to chance. Book a free consultation or get in touch with Blue Pier™ today to start creating your customized pension solution. Experience the peace of mind that comes with a low-risk pension plan designed exclusively for business owners like you.

Important Note: The information provided here should not be considered or used as personalized or other financial advice. Always do your own research. For personal financial planning, Blue Pier™ recommends seeking independent financial advice from a licensed, fee-only financial planner.

Blue Pier™ is a registered trademark. The Blue Pier Retirement Plan is a pension plan registered under the Pension Benefits Act (Ontario) and the Income Tax Act (Canada).