Product Description:
Defined under subsection 248(1) of the Income Tax Act as an arrangement under which an employer makes contributions to a custodian in connection with benefits payable to an employee on, after or in contemplation of, the retirement or loss of office/employment of that employee.
Contributions made to an RCA are subject to a 50% refundable tax, as is any income - including 100% of capital gains - earned within the RCA. Furthermore, these contributions are fully deductible by the employer in the year of contribution, with no taxable benefit accruing to the employee.
This 50% refundable tax credit, with no interest paid thereon by Canada Revenue Agency ["CRA"], is repaid to the employer at a rate of 50% of the benefits paid from the trust.
Product Benefits:
Many employers wishing to compensate senior employees at levels above those in effect in RRSPs, Pension Plans, etc. look to RCAs as an alternative.
Canadian Western Trust ["CWT"] provides RCA services, as follows
- Preparation and execution of Trust Agreement,
- Overall safekeeping of plan assets,
- Accepting contributions,
- Processing benefit payments, and remitting refundable tax amounts to CRA,
- Settling all purchases &/or redemptions of pooled &/or mutual funds AND securities,
- Processing dividends, interest payments,
- Issuing CRA tax forms and preparing/filing the annual T3RCA tax return and other CRA summaries,
- Preparing activity statements for the plan-owner and the employer.
Fees:
Fees are determined in accordance with the responsibilities outlined in the specific plan agreements.