Employees profit sharing plan (EPSP)

If a target pays staff profit shares through a trustee rather than through payroll, the arrangement may be an EPSP. A buyer finds it in the trust documents and in the T4PS slips given to employees. It is a different plan from a deferred profit sharing plan.

How it works

Section 144 describes an arrangement under which payments computed by reference to the employer’s profits from its business, or the profits of a corporation with which the employer does not deal at arm’s length, are required to be made by the employer to a trustee for the benefit of employees of the employer or of such a corporation, and in respect of which the trustee has allocated amounts to those employees. The CRA says amounts are paid to a trustee to be held and invested for the employees who are beneficiaries, and that no CPP contributions, EI premiums or income tax deductions are withheld from amounts allocated or paid to them. The trustee or employer issues a T4PS slip.

What to ask

• The plan document and the trust agreement.
• Who the trustee is and what allocation records exist.
• Whether T4PS slips were issued for recent years.
• Whether any contingent allocations have been forfeited.