Dan Kelly, the new president and CEO of the Canadian Federation of Independent Business (CFIB), recently spoke to the Leader-Post about Canadian payroll legislation
and the Pooled Retirement Pension Plan (PRPP), a voluntary program introduced by the federal government with the aim of helping more citizens save for retirement. Kelly, who previously served as the organization's policy analyst and director of provincial affairs for Manitoba, comes into his new position with formidable knowledge of both federal and provincial political and business climates, as well as some strong opinions about PRPPs.
In Kelly's opinion, now that the federal government has done its part, the next step is for one province to become the first to adopt provincial laws that allow PRPPs to be put into practice. He put forward Saskatchewan as an optimal test case, as 40 percent of Saskatchewanian CFIB members said they would consider incorporating PRPPs into their businesses.
"This isn't a panacea, but the fact that four out of 10 businesses in Saskatchewan say they're interested in offering them is progress," Kelly told the Leader-Post.Advocating for PRPPs
PRPPs have been controversial in Canada, but Kelly is a staunch advocate, maintaining that the plans offer a number of advantages that have not been widely publicized.
"One of them is the difference in tax treatment between pensions and retirement savings plans," he noted, as quoted by the news source. "If a big company puts money into your pension, that employer pays no [payroll] taxes on the amount they put into your pension."
In contrast, employers that put money into their workers' registered retirement savings plans (RSPs) must also contribute toward the following:
- Employment insurance (EI), which provides temporary financial assistance to those who are currently unemployed
- Canada Pension Plan (CPP), which protects contributors and their families in the event of loss of income caused by retirement, disability or death
- Workers' compensation premiums
- Provincial payroll taxes as dictated by Canadian payroll compliance
"If you're in a high workers' comp rate (code), you could be putting an extra 20 percent into payroll taxes before you've paid any money into the employee's RSP," Kelly explained
. "So the benefit of the PRPPs is that they would be payroll exempt."