LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's employer contributes to a plan for her out of company profits, and she cannot add her own money. This Deferred Profit Sharing Plan:
- Is employer-funded from profits, vests over time, and reduces RRSP room through the pension adjustment
- BIs a registered pension plan, so the benefit is a formula based on service and earnings
- CAccepts employee contributions, which are deductible in the same way as RRSP contributions
- DIs tax-free on withdrawal, since the employer paid tax on the profits before contributing them
Correct answer: A) Is employer-funded from profits, vests over time, and reduces RRSP room through the pension adjustment
DPSPs are employer-only plans. Vesting rules and the pension adjustment are the assessment points.
Why the other options are wrong
- BIt is a profit-sharing plan, not a pension.
- CEmployees cannot contribute to a DPSP.
- DWithdrawals are taxable to the employee.
Exam tip
DPSP: employer-only, vesting, reduces RRSP room.
Common mistake
Ignoring the pension adjustment when calculating RRSP room.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.