Retirement compensation arrangements (RCAs) are made between an employer and a custodian. The employer makes contributions to the custodian in connection with benefits paid to their employee. These are paid out to the employee on, after or during retirement (or loss of office).
The contributions made to an RCA are subject to a 50% refundable tax, including 100% of capital gains, earned within the RCA. As an employer, you can also fully deduct the contributions in the year of contribution, with no taxable benefit accruing to the employee. This 50% refundable tax credit, with no interest paid by Canada Revenue Agency (CRA), is repaid to the employer at a rate of 50% of the benefits paid from the trust.