![](https://bac-lac.wayback.archive-it.org/web/20061123012303im_/http://www.gov.mb.ca/images1/spacer.gif) |
Simplified Money Purchase Pension Plan—SMPPP
July 2001
In past years, small business employers have had few options when
choosing a retirement plan for their employees. Employers found
traditional plans to be complex, expensive and difficult to explain.
While other types of arrangements provided flexibility and inexpensive
administration, they did not offer the security of a guaranteed
retirement income or the protection of provincial legislation.
In order to bridge the gap and offer small business employers a
viable solution to their retirement plan dilemma, the provincial
government has created a Simplified Money Purchase Pension Plan (SMPPP).
This brochure provides a brief description of the Plan’s features
and benefits. More information is available by phoning the Pension
Commission.
The SMPPP invites participation by small business because of its
uncomplicated approach to providing retirement income for employees. A
SMPPP is:
- Best suited for Manitoba-based companies with 250 or fewer
employees,
- Less expensive because there are no registration or annual
fees,
- Administered by financial institutions with minimal employer
involvement,
- Easy to operate and simple for employees to understand,
- Offered with the support and resources of the staff of the
Pension Commission of Manitoba.
Employer Advantages
Employers interested in offering a SMPPP to employees rather
than another type of plan can look forward to a number of
advantages:
Cost Effectiveness
- With fewer legal requirements, and no fees for filing, SMPPPs
are less expensive to operate than existing traditional plans.
- Unlike Group RRSPs, no Canada Pension Plan, Employment
Insurance premiums, or Workers Compensation premiums are paid on
employer contributions.
- An employer’s minimum contribution requirement is 1% of an
employee’s salary. Since employers decide how much to
contribute to a SMPPP, their costs are up front and easily
identified.
Simplicity
- Registration is easy and hassle-free. Employers just call any
financial institution offering a SMPPP for registration and
further information. There are no forms for employers to fill
out —and no on-going reporting with the Pension Commission.
Flexibility
Employers may choose to:
- make membership voluntary for any group (identified by
occupation),
- vary the levels of contributions for any group (identified by
occupation), and
- offer employees a choice of investment options.
Security
- Only certain financial institutions— life insurers, trust
companies, credit unions, and banks—are allowed to sell SMPPPs
to small employers.
- Under a SMPPP, employee and employer contributions are
immediately vested and locked-in. Employees are not allowed to
withdraw contributions while employed.
- Employers may be confident that contributions are used to
provide a retirement income for employees.
Employee Advantages
- Employees will appreciate the availability of an accessible,
flexible and secure method of saving through their employer and
a recognized financial institution.
- Employees can look forward to a minimum 1% employer
contribution in addition to their own contributions for a future
retirement income.
- Employee contributions are immediately vested with employer
contributions, and benefits are locked-in providing increased
retirement income.
- As with a traditional plan, employees can rely on the built-in
creditor protection of their retirement income in case of
financial difficulty. This is not the case for many Group RRSP
products.
Key Provisions of a SMPPP
Although some of the requirements of the Pension Benefits Act (PBA)
remain in place for the SMPPP, there are significant differences in
key areas of legislation.
Membership
Under a SMPPP, employers may make participation voluntary for a
particular group of employees (identified by occupation). The
employer is free to determine which group of employees are eligible
to join and the eligibility period for membership (up to the 24
month maximum set by legislation).
Contributions
The employer maintains control over both the employee and
employer contribution level with a 1% employer minimum contribution
requirement.
Additional voluntary contributions are permitted and are not
locked-in.
Vesting and Lock-In
Required contributions to a SMPPP are immediately vested and
locked-in.
Termination
Employees who terminate their employment have the option of
transferring funds to either a LIRA or purchasing a deferred or
immediate Life Annuity.
To speed up the transfer process, employees may waive their right
to receive a termination statement, and choose the transfer option
immediately upon termination of employment.
Converting a Registered Pension Plan to a SMPPP
Existing pension plans may convert to a SMPPP. To simplify
administration, only active employees participating in the existing
plan will be allowed to participate in the SMPPP. All employees’
existing benefits will be vested immediately.
Disclosure by the Financial Institution
The financial institution administering the SMPPP is responsible
for providing an annual member statement, and statements upon death,
retirement, and termination. Also, the institution must provide new
employees with a description of the SMPPP.
A Plan for the Future
Employees are beginning to see how the changing times are
affecting the future guarantee of their retirement income. Now more
than ever, employees need help to save for a secure financial
future.
With a SMPPP, small employers have an opportunity to work in
partnership with employees. The cost-saving, simplicity, flexibility
and income guarantee of a SMPPP make it an attractive retirement
program for both employees and small employers.
|
![](https://bac-lac.wayback.archive-it.org/web/20061123012303im_/http://www.gov.mb.ca/images1/spacer.gif) |