What is true regarding Deferred Profit Sharing Plans (DPSPs)?

The correct understanding revolves around the nature of Deferred Profit Sharing Plans (DPSPs) and their relationship to Registered Retirement Savings Plans (RRSPs). DPSPs are employer-sponsored plans designed to share the profits of a company with its employees. One of the defining characteristics of contributions to these plans is that they do not reduce an individual’s RRSP contribution room.

However, it’s important to note that contributions made to a DPSP are subject to different rules compared to RRSPs. Since the contributions are made by the employer, employees are not required to include these contributions in their own personal RRSP contribution limits. This is a crucial distinction that highlights that, although both plans are part of an employee's retirement savings strategy, the treatment of contributions differs significantly.

Additional context about the other options clarifies that while DPSPs are indeed governed by pension legislation, they typically grant the employer significant discretion in terms of investment and contribution policies. The funds within DPSPs are also subject to certain conditions, but the "locked-in" status, which refers specifically to the inability to access funds until retirement, is more characteristic of Registered Pension Plans than of DPSPs. Additionally, it is not accurate to say that DPSPs provide a guaranteed income for retirement; rather