When an employee hands in their resignation, their workplace retirement savings — whether sitting in a Group Registered Retirement Savings Plan (GRRSP) or a Deferred Profit Sharing Plan (DPSP) — need to go somewhere. The money doesn't vanish, but it doesn't automatically follow them to the next job either.
If you're an employer, you need to know what happens to those funds so you can guide departing employees through their options. If you're the one leaving, you'll want to understand exactly what you're entitled to and how to avoid an unnecessary tax hit. One thing people often don't realize: much of this is your money, and it stays yours when you go — depending on the plan, it doesn't disappear, and you don't have to start from scratch at your next job. The answer for how to handle it depends on which plan type holds the money — and vesting is the concept that makes all the difference.
What is a group RRSP
A GRRSP works like a personal RRSP — it's a tax-sheltered account where contributions grow tax-deferred until withdrawal. The difference is that it's set up through an employer, making it easier for employees to contribute through payroll deductions.
Both the employer and the employee can contribute. Employee contributions are tax-deductible, and investment growth is tax-deferred. Here's the important part for departures: the money in a GRRSP belongs to the employee immediately. There's no waiting period, no vesting schedule. If an employer contributes to an employee's GRRSP, that contribution is considered taxable employment income in the year it's made — but it's still the employee's money from day one.
What is a DPSP
A Deferred Profit Sharing Plan (DPSP) is a registered plan where only the employer contributes — employees can't put money in. Employers fund the plan from company profits and register it with the Canada Revenue Agency (CRA). It's a way for companies to share earnings with their team while getting a tax deduction.
DPSP contributions aren't taxable when they're made. Tax is deferred until the employee eventually withdraws the funds. Many employers pair a DPSP with a GRRSP — the employee contributes to the GRRSP, and the employer contributes to the DPSP. It's a common structure that gives employees a solid retirement benefit while keeping costs manageable.
For 2026, the annual DPSP contribution limit is the lesser of $17,695 or 18% of the employee's compensation. (You can confirm the current figure on the CRA's registered plans page.)
DPSP vs. GRRSP — how they compare
The GRRSP and DPSP frequently run side by side, but the differences between a DPSP vs. GRRSP matter a great deal — especially when an employee leaves.
Vesting is the most consequential difference at departure. With a GRRSP, funds belong to the employee immediately. With a DPSP, the employer can impose a vesting period of up to 2 years — meaning a departing employee might not be entitled to all of their DPSP funds.
Feature | Group RRSP | DPSP |
|---|---|---|
| Who contributes | Employee and/or employer | Employer only |
| Vesting | Immediate — funds belong to employee right away | Up to two-year vesting period may apply |
| Tax treatment of employer contributions | Subject to payroll taxes when contributed; taxable to employee on withdrawal | Not subject to payroll taxes; taxable to employee on withdrawal |
| Affects RRSP room | Yes — employer contributions use the employee's RRSP room in the current year | Yes — creates a Pension Adjustment (PA) on the T4 that reduces RRSP room the following year |
| What you can take when you leave | All of it – fully transferable right away | Only the vested portion |
What happens to a group RRSP when an employee leaves
The employer's side
Because a GRRSP works like a personal RRSP, vesting doesn't apply — employer contributions belong to the employee as soon as they're made. The employer has no claim on any of the money, including their own contributions. Once a contribution hits the employee's GRRSP account, it's theirs.
Your main responsibility as an employer is administrative. In practice, much of the heavy lifting falls to the plan administrator — your role is largely to notify them and let their process take over. You'll need to:
Notify the plan administrator: let them know the employee's last day and that their account should be flagged for departure.
Confirm the administrator communicates options and deadlines to the employee: the administrator typically informs the departing employee directly, including any requirement to transfer funds out within 60 to 90 days of leaving.
Confirm the administrator discloses any fee changes: if the group plan charges higher fees for former employees (or stops offering access to the group rate altogether), the administrator usually notifies the employee — but it's worth confirming this happens.
The employee's options
If you're the one leaving and still saving toward retirement, you typically have four choices for your GRRSP funds:
Transfer to a personal RRSP: this is the most common option. A direct transfer keeps your money tax-sheltered with no withholding tax and no impact on your contribution room.
Transfer to a new employer's plan: if your new workplace offers a group plan and accepts incoming transfers, you can roll the funds over.
Leave the funds with the service provider: this is often the default. Rather than staying in the active employer plan, your account is typically moved into the provider's arrangement for terminated members — a pool of former plan members that usually carries fees somewhere between the group rate and a retail RRSP. (Note: not all providers offer this.)
Withdraw as cash: the plan administrator will withhold tax, the full amount gets added to your taxable income for the year, and you permanently lose that RRSP contribution room. It's almost always the most expensive option.
If you're at or near retirement, your options look different. Instead of continuing to save, you'd typically convert the funds to a Registered Retirement Income Fund (RRIF) or use them to purchase an annuity, both of which let you start drawing retirement income. A direct transfer to either keeps your savings tax-sheltered in the move.
The key takeaway: a direct transfer to another registered account preserves the tax-sheltered status of your savings.
What happens to a DPSP when an employee leaves
Vesting is the critical factor
Under CRA rules, employers can set a vesting period of up to two years for DPSP contributions. If an employee leaves before their contributions are fully vested, the unvested portion is forfeited and returned to the employer.
Here's what that means in practice:
Unvested contributions: these go back to the employer. The employee has no claim to them. It's a clean, clearly defined process under the plan terms.
Vested contributions: these belong entirely to the employee. The employer cannot withhold, delay, or redirect them.
The employer's side
As with a GRRSP, the practical work is largely delegated to the plan administrator. Your role as an employer is to notify them promptly and provide the documentation they need; from there, the administrator handles the mechanics:
Determining vested vs. unvested amounts by checking the employee's start date against the plan's vesting schedule.
Returning unvested contributions to the employer's account.
Facilitating the transfer of vested funds to the employee, who is entitled to them.
Your main responsibility is to trigger the process and keep it moving — the smoother the handoff to the administrator, the fewer headaches for everyone.
Employee options for vested DPSP funds
If you're still saving toward retirement, the vested portion can be:
Transferred to an RRSP: this is generally the most tax-efficient option. A direct transfer means no withholding tax.
Transferred to a new employer's plan: if your new workplace offers a group plan and accepts incoming transfers, you can roll the funds over.
Withdrawn as cash: fully taxable as income, so withholding tax applies.
If you're at or near retirement, the same retirement-stage options apply as with a GRRSP: convert the vested funds to a Registered Retirement Income Fund (RRIF) or use them to purchase an annuity to start drawing income. A direct transfer keeps the money tax-sheltered in the move.
One point to be crystal clear on: unvested DPSP funds cannot be transferred. They revert to the employer — full stop.
Does a DPSP affect RRSP contribution room
Yes, and this is where it can get confusing. When an employer contributes to a DPSP on your behalf, it creates something called a Pension Adjustment (PA). The PA is reported in Box 52 of your T4 slip, and it reduces your RRSP contribution room for the following year.
The logic behind the PA is straightforward: it prevents "double-dipping" on tax-sheltered savings. Since the employer's DPSP contribution already gets tax-deferred treatment, the government adjusts your RRSP room accordingly.
Note that GRRSP employer contributions work a bit differently — they reduce your contribution room in the year they're made, not the following year. So the timing of the impact differs between the two plan types. Either way, it's worth checking your Notice of Assessment from the CRA to confirm your available RRSP room before making additional contributions.
How to transfer a DPSP to an RRSP
If transfers are allowed, a direct transfer is the only way to move DPSP funds into an RRSP without triggering withholding tax. The money must go directly from one registered account to another — it can't pass through your hands first. The key thing to understand is that the transfer is coordinated by the institution receiving the money, not the one sending it. Here's the step-by-step process:
Open or identify your receiving RRSP
Decide which RRSP will receive the funds and make sure the account is open and ready. This is the institution you'll work with to initiate the transfer — not your former employer's DPSP administrator.
Ask the receiving institution to start the transfer
Tell your RRSP provider you want to transfer in funds from a DPSP. They'll typically supply a pre-filled CRA Form T2151 — Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3 — which is the form that authorizes a direct, tax-sheltered transfer.
Complete and sign the form
Review the pre-filled details, fill in anything outstanding, and sign. You return it to the receiving institution — they handle forwarding it to the DPSP administrator (the "successor" side) for processing. You generally don't need to contact your former employer's administrator yourself.
Confirm the transfer is complete
Follow up with the receiving institution to confirm the funds have arrived. Processing typically takes two to six weeks. Check your RRSP account to verify the deposit matches the expected amount.
Tax implications of withdrawing instead of transferring
Withdrawing your retirement savings as cash when you leave a job is almost always the most expensive option. The plan administrator must withhold tax on the spot, and the full amount gets added to your taxable income for the year — potentially bumping you into a higher tax bracket.
Withdrawing from a group RRSP
When you withdraw from a GRRSP, the amount is treated as income. Withholding tax is deducted immediately, and you'll settle up with the CRA when you file your return. The contribution room you used for those funds is permanently lost — you don't get it back.
Withdrawing from a DPSP
DPSP withdrawals are also fully taxable as income. However, since only the employer made contributions, you don't lose any personal RRSP contribution room. The withholding tax still applies, and the amount still gets added to your taxable income. A direct transfer to a registered account avoids all of this.
Withholding tax rates
When you withdraw from either plan type, the plan administrator must withhold tax at the following federal rates (outside Quebec):
Withdrawal amount | Federal withholding tax |
|---|---|
| Up to $5,000 | 10% |
| $5,001 to $15,000 | 20% |
| Over $15,000 | 30% |
These are withholding rates, not your final tax liability. The actual tax you owe depends on your total income for the year. Quebec residents face additional provincial withholding on top of the federal rates.
Your options for group RRSP and DPSP funds after leaving
Here's a quick summary of what you can do with your workplace retirement savings when you leave a job:
Transfer to a personal RRSP
This is the most common choice. A direct transfer keeps your savings tax-sheltered, avoids withholding tax, and gives you full control over your investments going forward.
Transfer to a new employer's plan
If your next workplace offers a GRRSP or RPP that accepts incoming transfers, you can roll your funds into the new plan. This keeps everything consolidated under one roof.
Withdraw the funds and pay tax
You can take the money as cash, but withholding tax applies immediately, the amount is added to your taxable income, and — in the case of a GRRSP — you permanently lose that contribution room. This option typically makes sense only in genuine financial emergencies.
