Defined Contribution Pension Plans for Ontario Employers

Current as of October 2026. Government programs, tax rules and prices change. Check the official sources listed at the end of this page before making a decision, and confirm details with a licensed advisor.

What a defined contribution pension plan is

A defined contribution (DC) pension plan is a registered pension plan where the contributions are set out in advance, but the retirement income is not. The employer, and usually the employee, put a set amount into an account for each member, often a percentage of pay. That money is invested, and what the employee eventually has depends on how much went in and how the investments performed.

This is the key difference from a defined benefit plan, which promises a specific pension at retirement. With a DC plan, the employer knows its cost each pay period, and employees get an individual account they can track, much like checking a savings balance before booking a trip or planning a home renovation.

In tax terms, the Canada Revenue Agency (CRA) calls this a "money purchase" provision. You will see that phrase on tax slips and in contribution limits.

Registration with FSRA and the CRA

A DC pension plan is more formal than a group RRSP. In Ontario, pension plans are governed by the Pension Benefits Act, and section 9 of the Act requires the plan administrator to apply to the Financial Services Regulatory Authority of Ontario (FSRA) to register the plan. The plan is also registered with the CRA so contributions receive registered tax treatment.

Registration is not a one-time task. As of October 2026, FSRA lists ongoing filings for DC plans, including an Annual Information Return and financial statements due six months after the end of the plan year, and a Statement of Investment Policies and Procedures (SIPP) filed within 60 days of registration. FSRA notes that plans providing only DC benefits are exempt from filing an auditor's report, and may be exempt from the SIPP requirement where members direct their own investments. Filing rules and fees can change, so check FSRA's current requirements before you launch.

Because the employer typically acts as plan administrator, these duties land on your desk (or your HR team's). Many employers work with a recordkeeper and a licensed advisor to set up the plan documents, investment menu and filing calendar.

Contribution rules and tax treatment

The plan text sets how much you and your employees contribute. A common design is a matching formula, for example the employer matching what an employee contributes up to a set percentage of pay, but the formula is your choice within the tax rules.

As of October 2026, the CRA caps the pension adjustment for a single-employer plan at the lesser of 18% of the member's compensation and the money purchase limit for the year. The CRA lists the 2026 money purchase limit as $35,390. For a DC plan, the pension adjustment includes both employer and employee contributions for the year.

Here is how the tax side works, as of October 2026:

• Employer contributions to an accepted registered pension plan are not a taxable benefit to the employee, according to the CRA.
• The pension adjustment is reported in box 52 of the employee's T4 slip and reduces how much they can contribute to an RRSP the following year.
• Limits change yearly. The CRA publishes new money purchase, DPSP and RRSP limits each year, so confirm the current figures before setting contribution formulas.

Vesting and locking-in

Vesting means the employee owns the employer's contributions. In Ontario, the Pension Benefits Act was amended to provide immediate vesting effective July 1, 2012. FSRA guidance states that a member who terminates employment on or after that date is entitled to immediate vesting whether or not the plan terms were amended. In practice, employer money in a DC pension plan belongs to the employee from day one.

Pension money is also generally locked in. When an employee leaves, FSRA explains that options can include leaving the money in the plan, or transferring the commuted value to another pension plan, a Locked-in Retirement Account (LIRA) or Life Income Fund (LIF), or an insurer to buy a life annuity, and that transferred amounts remain locked in. The plan administrator must give the departing member a written statement of their options within 30 days of employment ending.

Locking-in is good for long-term retirement security, but it means employees cannot cash out for a down payment or a new car the way they might with some savings plans. That trade-off is worth explaining at enrolment.

DC pension vs. group RRSP vs. DPSP

Many small and mid-sized employers compare three options. A group RRSP is simpler to run and is not registered with FSRA as a pension plan, but the CRA treats employer contributions to an RRSP as a taxable benefit in most cases. A deferred profit sharing plan (DPSP) is often paired with a group RRSP as a tax-efficient home for the employer's share of contributions.

For DPSPs, the CRA does not permit employee contributions, caps employer contributions at the lesser of 18% of compensation and half the money purchase limit ($17,695 for 2026, as of October 2026), and requires vesting after no more than two years of membership. Our guide to group RRSP vs. DPSP walks through that pairing in more detail.

A DC pension plan generally carries more administration and regulatory oversight, immediate vesting and locked-in money. In exchange, employer contributions go in without being treated as a taxable benefit, and the plan signals a long-term commitment that can help with hiring and retention.

• Choose a group RRSP when flexibility and simple setup matter most.
• Choose a group RRSP plus DPSP when you want tax-efficient employer contributions and a vesting period of up to two years.
• Choose a DC pension when you want a formal pension with locked-in savings and are ready for FSRA registration and filings.

Is a DC pension right for your business?

A DC pension tends to suit employers with a stable workforce, an HR function that can manage filings, and a goal of offering a "real pension" alongside health benefits. Smaller teams sometimes start with a group RRSP and move to a pension later as the company grows. Costs depend on plan size, recordkeeping fees, investment options and how much you choose to contribute, so there is no single price.

Retirement savings work best alongside the rest of your package. Pairing a plan with solid health and dental coverage and thoughtful plan design gives employees support now and later. You can see all options on our group retirement plans overview.

If you are weighing a DC pension against other options, you can get matched with a licensed benefits advisor who can explain the setup steps, compare recordkeepers and help you choose a contribution formula that fits your budget.

Common questions

Do I have to register a defined contribution pension plan with FSRA?

Yes. Under section 9 of Ontario's Pension Benefits Act, the plan administrator must apply to FSRA to register a pension plan, and the plan is also registered with the CRA. As of October 2026, FSRA also requires ongoing annual filings for DC plans.

How much can go into a DC pension plan each year?

As of October 2026, the CRA limits the pension adjustment for a single-employer plan to the lesser of 18% of the member's compensation and the money purchase limit, which the CRA lists as $35,390 for 2026. Employer and employee contributions both count.

Can employees take their pension money when they leave?

Generally the money stays locked in. FSRA explains that departing members can usually leave it in the plan or transfer the commuted value to another pension plan, a LIRA or LIF, or use it to buy a life annuity, and transferred amounts remain locked in. The administrator must provide a written statement of options within 30 days.

Does a DC pension affect an employee's RRSP room?

Yes. Contributions create a pension adjustment, reported in box 52 of the T4, which reduces the employee's RRSP contribution room for the following year, according to the CRA.

Is a DC pension better than a group RRSP?

Neither is better for every employer. A DC pension offers tax-efficient employer contributions and locked-in savings but more administration. A group RRSP is simpler and more flexible. A licensed advisor can compare both against your goals and budget.

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