How RRSP Matching Works in Canada
Some Canadian employers offer registered retirement savings plan (RRSP) matching programs as part of their group RRSP. These contributions are sometimes called "free" retirement money.
What is RRSP matching?
RRSP matching is a feature of some group retirement savings plans.
In a matching program, your employer matches your contributions into the group plan. The employer caps the amount they match at a specific dollar amount or a percentage of your salary. In some cases, employers base RRSP matching on employee performance.
Some group RRSPs don't have employer contributions or a matching feature.
RRSP matching vs. group RRSPs
If offered, all matching takes place within the group RRSP offered by the company. Your employer won’t match contributions to personal RRSPs held outside of the group plan.
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Find out if your company offers RRSP matching
Your employer should tell you if there’s a group RRSP and whether they match contributions when you're hired. They should also explain when you become eligible to participate in the company’s group plan.
Your HR department or plan administrator should have answers to questions about your specific plan.
Group RRSPs are usually administered by major financial institutions or licensed insurance companies.
How employer RRSP matching programs work
To get started, you’ll first need to opt in to your company’s group RRSP matching program.
Once enrolled, you can regularly contribute to the group RRSP via payroll deduction. You can choose to contribute either a fixed dollar amount or a percentage of your paycheque. Your employer then matches your contributions up to a specified amount or percentage of your total salary.
RRSP matching example: Let’s say you earn $100,000 per year and you contribute $5,000 (5% of your income) to your employer’s group RRSP. If your employer matches contributions up to 4% of your salary, they’ll add $4,000 on your behalf. This means you’d be nearly doubling your annual contribution at no additional cost. If you contribute less than 4% in a given year, $1,000 for example, they will match that full amount.
If you don’t opt into the group RRSP or don’t contribute in a given year, you won’t get any “matches” from your employer.
Typically, you choose how to invest your contributions. You choose from investment options offered by the group RRSP provider or investment manager.
In many cases, contributions made by employees and employers into group RRSPs remain in your account whenever leave that employer. You can transfer your RRSP to another account, a retirement vehicle or cash it out.
However, some plans are set up so that the employer portion goes into a deferred profit-sharing plan instead of the group RRSP. In those cases, the employer’s contributions may be subject to a vesting period before you can withdraw them.
Some employers may also place restrictions on withdrawals from the group RRSP while you’re an employee.
Pros and cons of RRSP matching programs
Pros
- RRSP matching is an easy way to top up your retirement savings.
- Joining a group RRSP is generally optional and fairly simple.
- RRSP matching incentivizes employees to save for retirement.
Cons
- Contributions from your employer count toward your annual maximum contribution limit.
- Your employer’s contributions are considered taxable income.
- Unlike an individual RRSP, the group RRSP investment options may be limited.
Should you contribute to an employer-matched RRSP?
Many Canadians consider RRSP employer matching plans to be "free" retirement money worth taking advantage of.
Your decision may also depend on whether you have RRSP contribution room in a given year, which is built up during the previous year. For example, if you’ve only recently started working, you may not have enough contribution room to participate in the plan.
To find out whether you have contribution room, take a look at last year’s Notice of Assessment or log into your CRA My Account.
Frequently asked questions
Is RRSP matching worth it?
Is RRSP matching worth it?
The RRSP matching contributions are guaranteed and provide a substantial boost to your retirement savings. Additionally, you may be able to reduce your total taxable income if you include your and your employer’s RRSP contribution receipts at the end of the year.
Is RRSP matching a taxable benefit?
Is RRSP matching a taxable benefit?
Yes. Any contributions made by the employer to your RRSP account are considered taxable income and will be included on your T4 slip each year at tax time. However, you’ll also get RRSP contribution receipts for your and your employer’s contributions, which may offset the additional income.
Does the government match RRSP contributions?
Does the government match RRSP contributions?
No. Unlike with other registered savings vehicles (such as the Registered Education Savings Plan, or RESP) where the government matches contributions up to a set amount, you won’t receive government matching contributions to your RRSP individual or group accounts.
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