Page 139 - A Canuck's Guide to Financial Literacy 2020
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Defined Contribution Plans
In a Defined Contribution Plan, also called "Money Purchase Plan", the final retirement
benefit is not known. A plan member would know how much they're putting in the plan but
don't know how much they'll be taking out in retirement. The final amount depends
on several factors mentioned below
o Salary or wage levels and the resulting contributions made
o Investment selection
o Investment return
o Annuity and/or interest rates at the time the plan member retires
Amount of Contributions
The employee and the employer contributions into a DC plan are usually determined as a
percentage of earnings/salary. The total employee, employer, and voluntary
contributions cannot exceed the lesser of the following amounts:
▪ 18% of the employee's salary determined under the plan
or
▪ The MP limit for the year as determined by Income Tax Act
Year MP limit DB limit
2020 $27,830 $3,092.22
2019 $27,230 $3,025.56
2018 $26,500 $2,944.44
2017 $26,230 $2,914.44
2016 $26,010 $2,890.00
