For this type of plan, employer and employee contributions are generally determined as a percentage of salary. The total maximum contribution is limited to 18% of member's earnings up to a maximum of $26,010 in 2016 as defined by Canada Revenue Agency.
Contributions are accumulated with investment income until retirement and the account's final value is used to generate a retirement income in the form of an annuity or Life Income Fund (LIF).
Defined contribution pension plans must be registered with the provincial authority of the province where the majority of employees of the employer work as well as with the Canada Revenue Agency. However, if a company sponsoring a plan is under federal jurisdiction (e.g. telecommunications, interprovincial transport companies, banks, etc.), the plan needs to be registered with the Office of the Superintendent of the Financial Institutions of Canada.