What is a DPSP in Canada?

A Deferred Profit Sharing Plan is an employer-sponsored plan where employers share company profits with employees. Contributions are tax-deferred and reduce your RRSP room. Only employers can contribute—employees cannot.

How is a DPSP taxed in Canada?

Employer contributions are not taxable when made. You pay tax when you withdraw—either as income or by transferring to an RRSP/RRIF/annuity. Withdrawals before vesting may be forfeited.

What is the difference between DPSP and RRSP?

DPSP: only employer contributes, tied to profits, vesting period, reduces RRSP room. RRSP: you contribute, your choice, immediate ownership, uses RRSP room. Both are tax-deferred.

DPSP Canada Guide | Deferred Profit Sharing Plan

What is a DPSP?

Basics

Feature	Details
Full name	Deferred Profit Sharing Plan
Who contributes	Employer only
Tax treatment	Contributions not taxed
Tied to	Company profits
Vesting	Up to 2 years

How It Works

Step	What Happens
Company has profits	Contribution made
Money goes to	Your DPSP account
Investments	Grow tax-deferred
At withdrawal	You pay tax

DPSP Contributions

Who Can Contribute

Contributor	Allowed
Employer	Yes
Employee	No
No matching	Unlike Group RRSP

Contribution Limits

2024 Limit
Maximum	Lesser of:
	18% of employee’s compensation
	Half of “money purchase limit”
Approximately	~$17,000

Pension Adjustment (PA)

Effect
DPSP contributions	Create a PA
PA reduces	Your RRSP room
On following year’s	Notice of Assessment

Vesting

What is Vesting?

Definition
Vesting	When you own the contributions
Before vesting	Employer can take back
After vesting	Money is yours

Vesting Rules

Maximum	2 years
May be	Immediate or shorter
Check	Your plan documents

If You Leave Before Vesting

Scenario	Result
Leave before vested	May forfeit some/all
Forfeited money	Returns to plan
Only own	Vested portion

Tax Treatment

While in the Plan

Tax
On contributions	No tax
On investment growth	No tax
Compounds	Tax-free

At Withdrawal

Method	Tax Treatment
Cash withdrawal	Fully taxable as income
Transfer to RRSP	Tax-deferred
Transfer to RRIF	Tax-deferred, withdraw later
Buy annuity	Tax-deferred

Withholding Tax (Cash Out)

Amount	Withholding
Up to $5,000	10%
$5,001-$15,000	20%
Over $15,000	30%

(May not be your final tax rate)

DPSP vs Other Plans

DPSP vs Group RRSP

Feature	DPSP	Group RRSP
Who contributes	Employer only	Both
Employee match	No	Often
Vesting	Up to 2 years	Usually immediate
Contribution source	Profits	Salary/employer
RRSP room impact	Reduces	Uses directly

DPSP vs Pension

Feature	DPSP	Defined Benefit
Contribution	Employer	Employer (+ employee)
Amount	Based on profits	Based on formula
Retirement benefit	Account balance	Guaranteed payment
Investment risk	You bear	Employer bears

DPSP vs ESPP

Feature	DPSP	ESPP
What you get	Cash contributions	Company shares
Contribution source	Employer	Your salary (discounted)
Investment	Your choice	Company stock

When You Leave Your Job

Options at Departure

Option	Details
Transfer to RRSP	Most common, tax-deferred
Transfer to new employer plan	If allowed
Cash out	Taxable, withholding
Transfer to RRIF	If near retirement

Best Option Usually

Recommendation	Transfer to RRSP
Why	Maintains tax deferral
No withholding	If direct transfer
Preserves	Retirement savings

Withdrawal Rules

During Employment

Generally	Cannot withdraw
Exception	Some plans allow partial
Check	Plan rules

At Retirement

Typical Age	65 or when you retire
Must transfer/withdraw	By end of year you turn 71
Similar to	RRSP rules

Investment Options

Common Investments

Within DPSP	Options
Mutual funds	Usually
GICs	Sometimes
Company stock	Sometimes
Target-date funds	Increasingly

Investment Control

Varies by Plan
Some plans	You choose investments
Other plans	Employer/trustee chooses
Check	Your plan documentation

Tracking Your DPSP

Statements

Information	Details
Contribution amounts	Employer contributions
Investment performance	How it’s growing
Vested amount	What’s yours

On Your Tax Documents

Where	What
T4 Box 52	Pension adjustment
NOA	Reduced RRSP room
T4A (at withdrawal)	Income reported

Advantages

Benefits of DPSP

Advantage	Details
Extra retirement savings	Beyond RRSP
Employer-funded	You don’t contribute
Tax-deferred growth	Compounds faster
Share in success	Company profits

Disadvantages

Disadvantage	Details
Reduces RRSP room	Can’t contribute as much
No control over contributions	Employer decides
Vesting period	May forfeit if leave early
Tied to profits	May vary year to year

DPSP + Group RRSP Combination

Common Setup

Structure
DPSP	Employer contributions
Group RRSP	Your contributions + match
Together	Comprehensive plan

Example

Component	Contribution
DPSP (employer, from profits)	3% of salary
Group RRSP (your contribution)	4% of salary
Group RRSP (employer match)	4% of salary
Total	11% of salary