How RRSP Matching Works in Canada

Registered retirement savings plan matching programs offered as part of your employer’s group RRSP can provide a big boost to your annual contributions. But there are some important considerations to keep in mind before deciding if an RRSP matching program is right for you.

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What is RRSP matching?

RRSP matching is a feature of some group retirement savings plans. In a matching program, the employer matches the employee’s contribution into the plan dollar for dollar, up to a certain amount, or up to a percentage of the employee’s salary.

In some cases, RRSP matching is based on employee performance or productivity.

Ultimately, whether contributions are matched, and how much is matched, is up to the employer.

RRSP matching vs. group RRSPs

Think of RRSP matching as an add-on to some group RRSPs.

Not all group RRSPs will opt to have an employer contribution or matching feature, but 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.

How to find out if your company offers RRSP matching

Not every company matches RRSP contributions. At the time of hiring, your employer should provide you with information about when you are eligible to participate in the company’s group plan (for some employees, this may be day one, for others, it may not until you’ve worked there for a few months). The employer should also clearly set out whether, and to what extent, they match contributions to the group RRSP.

For specific questions about how your company’s group RRSP works and whether they offer matching, it’s best to connect with your HR department or the plan’s administrator.

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 into your company’s group RRSP matching program.

Once enrolled, you can then regularly contribute to the group RRSP via a deduction from your payroll — either a fixed dollar amount or a percentage of their paycheque — which the employer then matches up to a specified amount or a percentage of your total salary.

You’ll typically be able to decide how to invest the contributions, based on investment options offered by the group RRSP provider or investment manager.

For example, let’s say you earn $100,000 per year and you make a $5,000 contribution (5% of your income) to your employer’s group RRSP. If your employer matches contributions to a maximum of 4% of your salary, they’ll match that to the tune of $4,000. If you contribute less than 4% in a given year, $1,000 for example, they will match that full amount instead.

Keep in mind that there are no bonus contributions. 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, as these always hinge on your contributions into the plan.

In many cases, contributions made by employees and employers into group RRSPs are not locked in and the money is yours if you leave your company, meaning you’ll be able to transfer your RRSP to another account, retirement vehicle or cash out the RRSP.

If the plan is set up so that the employer portion goes into a deferred profit sharing plan instead of the group RRSP, the employer’s contributions may be subject to a vesting period before you’ll be able to withdraw them, however.

Some employers may also place restrictions on withdrawals from the group RRSP while you’re an employee.

Pros and cons of RRSP matching programs

There are a number of factors to consider if your employer offers an RRSP matching program.

Pros

RRSP matching is an easy way to top up your retirement savings, with the help of your employer.
RRSP matching provides an incentive for employees to save for retirement in the group plan and can be a valuable benefit in their compensation package.
The guaranteed RRSP match provides a return that is likely unmatched by other investments.
Joining a group RRSP is fairly simple, employees can take advantage of RRSP matching programs at the time of hiring (or when they become eligible), or at any point during their employment.
If you’re unsure about joining the RRSP matching program initially, you can usually opt in later.
You’ll receive RRSP contribution receipts for both your and the employer’s contributions at the end of the year, which may reduce the amount of tax owing on your income.

Cons

There aren’t many downsides to taking advantage of RRSP matching in a group plan, but there are a few features that some employees may need to consider carefully, depending on their situation.

Contributions from your employer do count toward your annual maximum contribution limit.
There are tax implications for an employer’s contributions because they are considered taxable income and will be included on your T4 slip each year at tax time.
Unlike an individual RRSP, however, group RRSP investment options will likely be limited to those provided by the investment manager.

» MORE: 10 RRSP Benefits You Shouldn’t Ignore

Should you contribute to an employer-matched RRSP?

Whether to participate in your workplace’s group RRSP and any employer matching program is usually an individual decision (unless your employer’s group plan is mandatory). That being said, 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.

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 an RRSP contribution receipt for your contributions, as well as your employer’s, which may offset the additional income.

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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