An EPSP allows you to share in the profits of the company you work for. Your employer is required to make contributions to the EPSP according to a formula based on its profits.
Three things to know about EPSPs
- EPSP contributions are allocated to employees each year. You may also be allowed to make contributions.
- An EPSP is not a registered plan. Your contributions are made from your after-tax earnings. You must pay tax on employer contributions allocated to you each year, and on any investment earnings these allocations earn.
- Some employers let you choose each year between having your EPSP allocation paid out to you or having it remain in the EPSP account.
The federal government is concerned that EPSPs may be used to steer profits to family members in order to reduce or defer taxes, or to avoid making Canada Pension Plan (CPP) contributions and paying EI premiums. They have engaged in a consultative process with stakeholders to review the existing rules.
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