Deferred Profit Sharing Plans are not regulated by pension legislation, but
are registered under and must comply with the Income Tax Act.
The contributions to the plan are made based on the
profits of the company.
This plan may be set up for some or all of the employees.
Employees cannot contribute to the plan, other than a direct transfer from
another DPSP, after 1990.
Contributions are not taxable to the employee.
Income in the plan is not taxable.
Pension adjustment (PA) from DPSP reduces the amount that the employee
can contribute to an RRSP.
The employee is taxed when withdrawals are made from
A DPSP that, on election by the beneficiary, all
or any part of the amounts payable to the beneficiary may be paid:
s. 147(2)(k)(v) in equal instalments payable not less frequently than
annually over a period not exceeding 10 years from the day on which the
amount became payable, or
s. 147(2)(k)(vi) to a licensed annuities provider to purchase an
annuity for the beneficiary, where:
(A) annuity payments begin no later than the end of the year in
which the beneficiary attains 71 years of age, and
(B) the guaranteed term, if any, of the annuity does not exceed 15
DPSP lump sum payments can be transferred tax-free to an
See also the Canada Revenue Agency (CRA) information circular
Deferred Profit Sharing Plans.
For information on different types of profit-sharing
plans, see the
chart on the Human Resources and Social Development
Canada (HRSDC) website.
Revised: September 14, 2021