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 Employee
Profit Sharing Plan EPSP
What is an Employee Profit Sharing Plan?
An Employee Profit Sharing Plan is a mechanism available under the
Income Tax Act that allows you to receive income from the corporation
without either the employee or the company being subject to payroll
levies such as Canada Pension Plan (CPP) and Employment Insurance
(EI) contributions.
An EPSP allows an employer to deposit, into a Company Trust, money
that would normally be paid as income to an employee who is part
of the plan (a “participating employee”). This exempts
both the employer and the employee from CPP and EI payroll deductions.
Would I still be entitled to receive Canada Pension Plan benefits
upon retirement?
Yes, however, benefits may be reduced. CPP benefits are
based on the number of years a person contributes into the plan,
as well as the amount contributed in those years. Therefore any
periods where there are no contributions to the plan could reduce
the possible benefits available from the plan. Exceptions to this
include the 15% drop-out rule that eliminates the pensioners’
lowest contribution period from the benefit calculation, as well
as the provision exempting the period for child-rearing for children
up to 7 years old.
What about my entitlement to Employment Insurance?
An employee could become ineligible for Employment Insurance
or other benefits as a result of not contributing EI, and so should
carefully consider participating in the EPSP.
For example, an employee who may be planning a family will need
an uninterrupted twelve-month contributory period prior to claiming
maternity benefits; however, a long-term employee/owner could expect
an exit package upon termination that would make them ineligible
for EI benefits in any case.
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 EPSP
FAQ's
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EPSP
Setup Form
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