LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
A small-business owner wants to enrol himself, his wife and his staff in the company's DPSP. The plan cannot include as members:
- Significant shareholders and their relatives, under the Income Tax Act; it is employer-funded only
- BFull-time employees, since the plan is designed for part-time and contract workers
- CAny employee who already belongs to the employer's registered pension plan
- DUnion members, since collective agreements must provide a registered pension plan instead of profit sharing
Correct answer: A) Significant shareholders and their relatives, under the Income Tax Act; it is employer-funded only
DPSP restrictions prevent owners from using the plan for themselves. Employer contributions are deductible and vest after a maximum period.
Why the other options are wrong
- BEmployees are the intended members.
- CPension membership does not bar DPSP membership.
- DUnion status is irrelevant.
Exam tip
DPSP: no significant shareholders or relatives; employer-only funding.
Common mistake
Enrolling the owner's spouse in the DPSP.
What this tests
CISRO competency component 2.4 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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