In this Member Workshop with RcF, discover effective strategies to optimize your investment income and minimize taxes, securing a strong retirement for yourself.
Event Information
Join us for an informative workshop focused on passive investment income rules and supplemental pension plans. Discover how to optimize your investment income and effectively reduce taxes. RcF’s expert team will provide you with valuable insights and strategies to secure your retirement savings while maximizing financial growth.
During this engaging session, you will be guided through various techniques and opportunities to mitigate passive investment income rules while planning for your retirement.
Key learnings:
- Tax optimization strategies: Learn effective strategies to minimize tax liabilities without triggering passive investment income clawbacks on small business taxes. Discover how to make your money work for you while avoiding unnecessary tax burdens.
- Understanding passive investment income rules: Get acquainted with the latest rules and regulations surrounding passive investment income and understand how they can impact your financial planning. Gain the knowledge necessary to navigate these rules effectively.
- Supplemental pension planning: For key executives of companies and/or family-owned companies alike, allocating pension resources for future generations responsible for managing the business is crucial. Learn how to create supplemental pension funds that provide tax efficiency while securing the financial future of your family and business.
Workshop Video
Thank you for your interest in our event! The event has now passed, but we are pleased to share that the recording is available for you to review. Catch up on all the valuable insights and information shared during the event. We hope you find it informative and useful.
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okay uh I think we can begin here Andrea and Roy um I just wanted to thank everyone for joining us today and um I
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just have a quick introduction and then I'm GNA hand it off to Roy and Andrea your resident experts on today's webinar
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so allow me to please introduce myself my name is Taylor Curran and I'm the senior coordinator of member engagement here at the CH Board of Trade I would
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like to thank you all for joining us this morning for our value membered Workshop hosted by retirement compensation funding today's topic is
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going to be focused on optimize retirement wealth mastering passive income rules and pension planning before
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we begin I would like to acknowledge this land that we are meeting on which is home to diverse First Nations Inuit
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and mate people though you could be watching from watching or joining us from anywhere please note that the
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board's offices are located on the traditional territory of many indigenous Nations they share with they share with
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us a sense of responsibility for intergenerational Equity the well-being of today and tomorrow if you do have
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questions throughout the webinar please put them in the chat and we we will be sure to address those at the end of the
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presentation and without further Ado I would love to pass it over to Andrea and
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Roy good morning uh my name is Ray C I'm the uh founder and executive partner of
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uh retirement compensation funding uh we have almost 100 people signed up for
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this webinar today uh and for those that uh are uh getting in later uh it is
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being record it and uh the board you will have access to that through the uh
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uh Board of Trade for over 35 years our company uh has been working with public
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corporations and with uh to to fund uh or secure uh their pension promises and
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for private corporations uh to uh help them uh and pension and equity and set
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money aside for retirement two things stand out uh to us
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over uh the this uh 35 years
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slide what uh what we've discovered that most private corporations have in
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common uh is that they do want to set aside some of their annual profits for
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people in the in the company that help earn them family members
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uh but the biggest problem they have uh is how to do this tax effectively and
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they cannot do that by themselves they need professionals to help them uh Set
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uh this up properly I'd like to introduce Andrea letner who is our managing partner and she will uh uh
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introduce us to the uh agenda for this morning's seminar Andrea over to
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you hello everyone thank you for joining us today and
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welcome so let's talk about our agenda our first slide our next slide sorry is
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pension and equity and we feel that pension and Equity stands as a pressing issue that demands our attention and
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scrutiny today's realities paints a vivid picture of p the pension landscape
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fraught with imbalances prompting us to question the root causes and seek viable
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Solutions the lens through which we examine our topic today widens as we
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explore the impact of corporate taxes on pension structures as well we're going to look
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at the Canadian income tax act and how it emerges as a focal point in our
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pursuit of Equitable pension structures and to ground our exploration
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today in practicality a case study will illuminate real world scenarios where
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pension in equity has tangible consequences moving forward encourages
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participants to get in touch with us and in traversing these agenda points we embarked on a journey today to
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unravel the complexities of pension
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inequity so here we have an example the twins to demonstrate the
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concept of pension inequity we have the twins Mr public sector executive and Mr
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private sector business owner in the realm of retirement security the
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contrast between a public sector employee and a private sector business
4:37
owner reveals a stark disparity underscoring the financial challenges
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faced by individuals in different professional spheres so here are our twins in
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retirement so let's examine the pensions of the twins Mr public sector employee
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retires with a pension of 321,000 ,000 and Mr private sector business owner
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with a pension of 104,000 it's obvious there is a
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considerable shortfall 216,000 between the two prompting a
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closer look at the factors contributing to this marked difference in our example Mr public
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sector enjoys a robust pension of $321,000 this pension represents a
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financial safety net that reflects years of service within a structured
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system on the other hand Mr private sector business owners pension of
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104,000 underscores the challenges faced by entrepreneurs and those in the
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private business realm the significant shortfall of $216,000 between those two pensions
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demonstrates the broader pension inequities that exist today I will now pass the presentation
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over to Roy to discuss today's
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realities now to understand uh what it the tax realities are
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today uh we have to go back uh let's go back to the year 2000 uh in 2000 the
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small business rate in Canada was $200,000 and what happened was that for
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every dollar of profits over $200,000 there was a higher rate of tax
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paid uh but it was retroactive to to the first dollar so what was happening in
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the year 2000 was that many business owners were being forced to pay
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themselves bonuses that they did not otherwise want to take and pay personal
6:45
tax on it and it was the year 2000 uh that what we're talking about today uh
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uh became part of uh the uh the landscape for small private corporations
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in a strategic Alliance we had with Canada Life and we were able to help small businesses hundreds of across the
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countries uh with their problem now fast forward to today uh the small business
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rate is $500,000 and if you have a pro a dollar
7:18
of profit over the $500,000 you pay the higher rate of tax but it is not retroactive to the first
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dollar so what this has done it has opened up uh small business uh to make it much
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easier to expand the business and to build the business and on paper uh it
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looks like it's much easier for an owner uh to set aside money uh for themselves
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but what appears on paper is not necessarily what happens in the end
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slide now let's look at this a little bit closer uh when it comes to setting money aside for
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retirement private business owners they really uh have the same uh options as an
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employee would have uh whether it's a money purchase pension plan which is the company equivalent of an RSP or if they
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set up an individual defined benefit pension plan but all these plans have contribution Caps or benefit uh caps and
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for many small businesses you know having to sell uh part of the operating company at some point in time to have
8:33
for funds for retirement is not an option now let's look at the small business tax the the the the pro of it
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is that the small business tax on the first $500,000 of income is only 12 and
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a half per. so an owner could easily think well that's not bad because I can
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make uh up to $500,000 pay 125% tax and set some of
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this money aside uh for myself down the
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road but the government really doesn't want you to do that uh and they show
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that initially uh the first con is the investment income tax because the
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ccpc uh they pay investment income tax of 50.1
9:23
7% uh versus 26 .5% in a non uh C CPC so
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basically what the government is saying to you is okay fine uh we'll let you pay 12.5% on the first $500,000 of earnings
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but if you're going to send if you're if you're not going to reinvest that money back into the business and try to set
9:44
some aside for yourself we're going to ding you with a higher investment income tax now added to that are the new rules
9:52
that came in in 2019 uh called the passive investment tax rules now next
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slide now let's look at these uh new rules uh briefly um they're based on
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what's referred to is your adjusted aggregate investment income and you can see uh with what the
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Minister of Finance said in 2017 uh which underlined what I just
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said to before about the higher investment tax rate the government does
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does not want you to be setting aside uh any of the profits up to the
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first $500,000 for yourself they want those profits invested back into the company
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and their remedy for the passive investment income uh was that for every
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dollar that your passive investment income exceeded 50,000 they're going to grind down the small business rate by $5
10:58
now I can tell you this is punitive and we will show you that a little bit more
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now next slide in addition to the passive investment rules those of us in
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the pension business and and and many investment advisers who happen to be on the on the um on the seminar there's two
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other things that we worry about we worry about the investment tax rates and and the mitigation of them and also we
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worry about the 21-year tax rule uh for family trusts uh because many wealthy uh
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private corporations uh the operating company is owned by a family holding company and the family holding company
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as well uh is owned by a Family Trust so let's look at these three taxes a little
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bit more closely as they impact uh retirement uh saving now the
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pass investment rules this is a complicated tax it's a moving point in
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time and at its worst depending upon the the province that you that you reside in
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uh the the tax reality is you could end up paying $120 in tax for every dollar of
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investment income over $50,000 which as I said before is
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punitive now what happens with this uh passive investment tax it's a moving
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point in time and every company is going to have their crossover point so what is
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happening now is the accounting firms and investment advisors are having to
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help their clients mitigate this tax uh there are ways that it can be done uh
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but the eye has to be kept on the ball uh because otherwise what happens is a
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company ends up having uh investment earnings over the $50,000 that they were not expecting
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next slide now the price of the small
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business tax deduction as I indicated to you before was a 50.7% investment in tax versus
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26.1% now investment visors will find ways and there are ways that you can try
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to avoid this tax by using tax deferral and that could be corporate class mutual funds the use of corporate own life
13:28
insurance uh deferred uh some Investments where
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the the the money that is paid out is deferred uh but somewhere down the road
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it's going to catch up when money comes out and you could appreciate from from our perspective and anybody in looking
13:45
at building up portfolio wealth but the difference in the tax of 26 versus 50%
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is quite significant now one of the other concerns uh that is creeping in
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there now is that some of the more uh sophisticated uh estate planners and
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accountants have tried to help their clients get around this 50.7% investment income tax by setting
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up other arrangements investment holding companies uh that basically the uh the
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money that's been set aside for long term can be taxed at a lower rate but in the past couple of budgets CRA is
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implementing uh Provisions that will allow them to deem uh some of these arrangements as ccpcs
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so that's one of the concerns that has to be uh looked at next
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slide now this is one of the Hidden taxes that a lot of people
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forget um it's on my mind because I started off my career at Royal trust and was in the trust department but family
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trusts are deemed to have disposed of their assets every 21 years now when you
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think about this a little bit uh the money that we want to set aside for
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ourselves and for our family that money is going to be used
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over quite a long period of time I mean uh an an owner who's 50 years of age
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right now uh could live to 90 so the money that is being set aside uh could
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go uh could be used over a period of 40 years if you add children into it it
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could be over a period of 60 years so what can happen is that the exposure on
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the pool of assets uh that is held in a holding
15:39
company impacts the value uh of the the Family Trust And so
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what can happen down the road is money that you might otherwise have wanted to set
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aside uh to pay other people ends up having to be go up to the family TR
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press to to pay the 21-year tax next
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slide so what does this all mean well there's lots of potential tax liability
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now I underlined the the word potential because uh we have a lot of uh smart accountants and smart investment people
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who are going to try to help you mitigate these uh these liabilities but
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they have to keep their eye on the ball now you cannot blame a business owner
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for thinking that the government is out to get you but it's not quite as bad as
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that because there is a provision in the income tax act that can basically wipe
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these three taxes right off the table for part of your profits and I'm going
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to turn it over to Andrea now uh to tell you what that is
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Andrea thank you Roy who doesn't love to talk about the income tax act
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well the good news is there is a meaningful solution to part of the pension inequity problem in the Canadian
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income tax act within the income tax act we have found a solution and it's called a
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retirement compensation Arrangement it has been in the income tax act since 1986 and it was RCF
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working with a major accounting firm that established the first RCA in Canada
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for a public corporation an interesting statistic over 90% of
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public corporations with defined benefit plans now use rcas to either secure or
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fund pension shortfalls private corporations can also use rcas to address the pension inequity
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we see with the twins the RCF products Focus primarily
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on family group supplemental pension plans utilizing rcas
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under Section 22481 sorry of the income tax act the
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term RCA refers to a retirement compensation Arrangement an RCA is a
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specialized form of arrangement established by employers to provide retirement benefits to
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employees unlike traditional pension plans rcas are subject to Unique tax
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rules as outlined in the Canadian income tax act some of the key features are
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employer establishment I just talked about they're established and maintained by employers to fund retirement benefits
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for their employees I.E family members funding and contributions
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employers contribute the funds to the RCA on behalf of the employees unlike other pension products there are no caps
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if the entitlement guidelines are followed these contributions are based on a predetermined formula and are
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intended to fund retirement benefits let's talk about how n RCA
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Works contributions money is divided into two accounts and split
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5050 the RC AIA is held by a corporate trustee the RTA account is held in a
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special division of the CRA all the money comes back to the plan members in the form of benefit
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payments so here we have a Graphic with three
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circles we call that contributions in hitting the sweet spot in the middle
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some of the benefits of an RCA include no limitations on Final T4 average earnings no constraints on corporate tax
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deduction if entitlement calculations are followed and unlimited potential for
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retirement income additional
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advantages well the trust is credit or protected no matter what happens down the road the RCA trust is also exempt
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from the 21-year vesting rules that typically apply to trusts RCA are also exempt from the
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rules regarding the safe income test for intercorporate transfers RCA contributions for past
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service can be financed potentially leading to a reduction in retainer
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and any unused contributions can be carried forward RCA's diminish passive
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investment income for corporations alleviating the impact of the decrease in the small business limit from
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$500,000 and potentially mitigating concerns about incurring a higher general tax
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rate Roy would you please take us through the case study thank you
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Andrea now this case study is based upon an
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actual uh family group RCA that we have in the office and the full case study is
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available for those that uh would like it it includes all of the uh uh entitlement calculations and the funding
21:15
calculations and the RCA ledgers what I've done today is just take out uh a
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few of the slides uh to to basically show uh the significance of what this
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does for family corporations now in this case here we have a dad and two children uh that are
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in the business now what's important to understand is that these family members
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and they're working in the company but they do not own any shares of the company and this is important for people
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to get their minds around because the operating the shares of the operating company are owned by a family holding
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company and the family holding company is in turn owned by a Family
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Trust now you can see here that the the base salaries of the uh of dad and and and
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the Son and the daughter are basically just sufficient to cover whatever they
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need to to run their uh their life on a day-to-day
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basis any additional share of the the profits that they might be entitled to
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the only way that those profits can come out to these individuals would be by a
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taxable bonus but we know what happens to taxable bonuses they are subject to the
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top marginal tax rates for that individual so what we have set up for
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this family here becomes particularly significant now dad is 60 and he likes
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working and he is going to extend his retirement to 70 uh he wants to give the children another five years of getting
23:07
some expertise before they take over for him the two children uh they're they've
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indicated they want to retire at 60 because they hope to have their children in the business and they want to be able
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to pass the uh the the torch a little bit um sooner Now understand that if we
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had not not set this up the benefits I'm about to show you
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that go to the dad and the Son and the daughter would not go to them what would
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happen is the corporation would pay would pay the tax and the money would
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then go by dividend up to the holding company now in the holding company dad's
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only entitlement is equal to the preferred shares that he would have taken back uh when the State freeze was
23:58
done and the value of those preferred shares is probably lower than what they
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really worth because the accountants would try to get CRA to accept the low valuation the children the only way that
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they would access any of this money is if it goes from the holding company to
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the Family Trust but guess what uh there is one child that's not in the business
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and these two children aren't the only beneficiaries of the Family Trust so let me show you now the significance of this
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to the to the son the founder the Son and the daughter let's look at dad first now his normal life expectancy is
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to 84 so you can see here what we've done with this RSP we've just uh uh as an
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offset we've just assumed that the RSP is more or less paid out in anity format
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uh and spread uh out over the years they have you have there's other way ways that you can take uh
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rsps uh but this is just to show what it would be over a long period of time now look what the RCA is
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providing uh this is 194,000 starting at 194,000 so for for the from what the day
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he retires at age 70 to his normal life expecting he's going to pick up $3.3
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million that he would not otherwise pick up now Dad could live longer next
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sline uh today uh once you're over 60 uh longevity benefits start kicking in and
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we have clients right now uh rcas that we set up many many years ago uh that
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are now still alive over the original life expectancy that that we projected
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so if Dad lives to 90 for example there's another 1.3 million now dad also
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has a spous so what happens is uh dad lives to 90
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his spous could live to to to 94 and so there's an extra $1.6 million there so
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what this is what does is add up to the RCA can pay dad an extra $6.3
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million and this is money that he would NE otherwise not get he's got two
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choices either it's paid to him by way of a bonus he pays High personal tax uh
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he or he sets up the RCA otherwise if the money goes into the holding company
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all he's going to get out of it is uh is is preferred share Redemption now let's
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look at the sun now the son over his life expectancy
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can pick up $6 million now think about this for the son he's working hard in the business the last thing in the world
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he wants to do is to get a bonus today that he has to pay tax of 50% on or a
26:57
high marginal rate but if he doesn't if this is not done for him this
27:04
money he might never see it because uh what would happen is that the underlying
27:10
value would go to the holding company and initially that money is going to go to redeem his dad's preferred shares and
27:17
then what's left over is going to go up to the uh up to the Family Trust now the
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son also has a spouse so between the Son and the spouse
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and Longevity benefits all of a sudden there's $9.5 million of
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benefits uh that can fly into the that go into the son's hands now let's look
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at the daughter the daughter I mean we she's
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married but we can't illustrate survivor benefits for her husband they're there and the reason why we can't illustrate
27:51
them is because uh women live longer than men uh but the total amount of
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cash uh that's there for the daughter is $10 million so what does that what does add
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this up in total so between the three of them uh they and the third generation
28:12
benefit and let me tell you about the third generation benefit in this particular uh family group RCA the dad
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had a concern he was concerned because his children were young he was concerned
28:25
as to what would happen if the children died prior to normal retirement and so
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what we did in this RCA is that there's a provision uh that if a child dies uh
28:40
before normal retirement they are deemed to have retired but the problem for the RCA is
28:48
funding that so with the son and daughter uh their funding was with uh
28:53
one of the insurance companies and as part of that funding If the child died
28:59
prior to uh normal uh retirement uh the insurance company would kick back in
29:05
money to cover the survivor benefits uh in this case that we've had them all
29:10
living to a long time so the money is still coming back in and that can be used for the third
29:16
generation uh that will be coming along after the children so so in total uh
29:23
what we've done is that this uh We've managed to to basically carve out $33
29:28
million of benefits to these working family members uh that are generating
29:34
the profits and they are going to be piding directly to them and to their
29:39
spouses and and to their to the third generation and they are bypassing the
29:45
holding company and they are bypassing the Family Trust now what does this
29:51
cost now here's where it gets rather interesting let's look at the individual
29:58
funding for each of the three members we can see that for Dad until his
30:04
retirement it's $387,000 a year and for the son it's 215
30:10
and for the daughter 213 now in actual fact in this company this represents
30:17
actually not a bad distribution of the profits uh that they
30:23
are making if they were going to be Distributing them uh to the family but
30:29
you can understand that the last thing in the world that the family wants is to
30:35
get the dad doesn't want a bonus of $387,000 uh because that could uh he'd
30:43
have to pay a high marginal tax rate on that so what we've been able to do here
30:51
is we've been able to set aside a fair amount of money now just one cautionary
30:56
uh Tale here a company cannot just decide oh we have a million dollars
31:04
worth of profits this year and we want to allocate them among family members
31:09
let's just put them into an RCA so they don't have to pay the personal tax on it CRA can come back and deem that an RCA
31:18
is a salary deferral Arrangement so what happens uh is that you have to set it up
31:25
as a retirement compensation Arrangement and you have to follow the funding
31:30
guidelines uh because an RCA cannot take all of a company's profits It could only
31:36
take the portion of the company's profits that relate to the individual
31:43
entitlements under the CRA formulas so in this situation here what we've been
31:48
able to do is the company can divert $14 million of profits into the RCA the net
31:55
cost to the company is $10 million now let's look at the tax savings on
32:01
this now this is an approximate uh
32:06
presentation because what we do is for every case we that we put together
32:13
we uh provide the accountant uh a schedule that says okay
32:20
if this money didn't go into the RCA and went in uh they paid the tax on
32:27
it and it went in the holding company what would it look like down the
32:33
road uh as to the taxes that would impact that now this assumes that the
32:40
money that goes in is all free and clear there could be other uh tax losses and
32:45
carry forwards that we're not aware of but it acts as a guideline and what we find is uh that the tax savings uh run
32:54
from 50% to in this case here 73% now the reason why this one is so high uh is
33:02
that they're saving corporate tax of 3.8 million they're saving investment income tax of 2.1 million uh they're re saving
33:10
the grind down tax of the passive investment of 325 but this company here uh because of
33:17
the fact that they don't have any big liabilities uh in the uh the holding
33:22
company uh that their exposure to 21-year tax is quite substantial there's
33:27
under $4.3 million so there's a lot of tax that can be saved over to you
33:36
Andrea hi so I'm going to talk to you about a corporate trustee uh just give you a brief
33:44
explanation of what they are and how they function so a corporate trusty is a financial institution and they're
33:49
appointed to oversee and manage trust assets on behalf of businesses to
33:55
fulfill fiduciary responsibility ilities ensuring the proper Administration and
34:00
execution of a trust according to its terms and relevant legal
34:08
requirements so how do clients benefit from a corporate trustee well safety all
34:14
RCA investment accounts are held in the name of the trustee for the benefit of the plan members as per the planed
34:22
document arms length the C ra knows the generally
34:28
accepted guidelines are followed with no overfunding continuity a corporate
34:33
trustee cannot die or become disabled they are there for the entirety of the RCA which can go on for
34:41
decades experience family or corporate circumstances can change a corporate
34:47
trustee has the relationship with both the CRA and the RCA provider retirement
34:54
compensation funding to provide Solutions Administration a corporate
35:00
trustee has the systems to ensure that monthly payments reach the plan member
35:06
provide indexing as per the plan document and ensure that all required
35:12
tax filings are complete last but not least relationship over time the trustee
35:19
builds family knowledge to assist through Family Life
35:25
events RCA benefits to a family well assets are exempt from the estate and
35:32
not subject to probate tax rewards the next generation of Working Families for their contribution
35:40
to corporate growth can also include key non-family member
35:45
employees spousal benefits can be directly paid from the trust without
35:51
affecting the estate leav the remaining funding for succeeding generation of working family
36:00
members and if pension plus funding is using is utilized sorry it offers
36:05
longevity benefits at no extra funding cost what are the business
36:12
benefits well rcas offer an exemption from the safe income test rules for
36:18
intercorporate transfers to a holding company they provide flexible funding
36:23
options for past service allowing the carry forward of UN made contributions funds held in an RCA are
36:31
creditor protected and the stre sorry the Strategic funding allocation prioritizes
36:38
the benefit of the next generation of working family members what are the tax
36:45
benefits well you get to channel pre-tax corporate earnings into a creditor
36:51
protected pension exempt from the 21-year vesting Rule and decreases the
36:56
assessed 21-year tax for companies owned by Family trusts our saves are ideal for those
37:03
qualifying for the small business tax rate and helps to diminish the corporate
37:09
passive investment income for eligible firms RCA alleviate the risk of
37:15
reduction in the small business limit from $500,000 an RCA supplemental pension
37:22
also has the potential to generate significant tax savings for companies
37:27
subject to the general rate of 26% they also provide a safeguard
37:34
against future potential corporate tax increases or
37:39
modifications corporate contributed funds are tax deductible and
37:45
contributions remain tax deductible for plan members until benefits are accessed
37:50
in retirement so here's our key points in
37:57
summary RCF supplemental pension projects they are the solution
38:03
addressing the prevalent issue of pension inequity between public and private sectors RCF offers Innovative products
38:12
that stand out and potentially eliminate caps on both corporate contributions and
38:18
plan member benefits one of the key advantages of the RCF supplemental pension products is
38:25
their unique approach to corporate contributions and plan member benefits
38:31
unlike traditional pension plans our Solutions don't impose any caps again as
38:37
long as entitlement calculations are followed ensuring that both corporations
38:42
and plan members can maximize their financial benefits without
38:48
constraints furthermore RCF supplemental pension products aren't just a pension
38:53
plan our products are strategic iic Financial tools for businesses by leveraging our innovative
39:01
solutions corporations can unlock substantial tax savings the potential for significant corporate tax benefits
39:08
adds a layer of financial efficiency making the RCF supplemental pension
39:13
products a smart choice for businesses aiming to optimize their financial
39:20
resources in summary the RCF supplemental pension products are a game changer
39:27
in the pension landscape addressing inequity concerns and providing unmatched
39:33
flexibility it's a powerful Financial tool that aligns with the dynamic needs
39:38
of modern businesses please don't hesitate to
39:44
reach out to us if you need more details thank you very much for participating in today's webinar and we look forward to
39:51
contacting you in the future one last comment I appreciate you
39:58
those of you who have attended the U the the seminar today uh we have hundreds of
40:05
rcas uh established um in fact the first RCA we established back in 1988 1988 is
40:12
still in pay so we do know that what we offer uh uh can be of tremendous
40:19
advantage to many companies uh we work closely with your accountants and with your lawyers and with your uh uh
40:26
financial advisers uh and we look forward to helping anybody that uh requires help uh
40:34
I'm turning it over now back to Taylor uh there might be some questions that have come in or anybody that has a
40:41
question uh can ask it now thank you very much awesome well thank you Roy and
40:46
Andrea it was an amazing presentation um just a couple of housekeeping items before we get to the questions this
40:51
session is going to be is recorded and you will have access to the slides um Roy and Andrea will take care of sending
40:57
that out to those of you that are interested in having those um she has your contact information Andrea does so
41:03
she'll take care of doing that and this session will be uploaded on the board of Trades YouTube website so I will be sure
41:08
to share that link with Andrea to share with all of you as well if you're interested in watching it again um we
41:14
did have a couple of questions that came through the chat so to either Andrea or Roy um the first question that came in
41:20
is what happens if a family leaves the company do you want to address that Andrea
41:27
uh or do you want yeah you go ahead what was the question again Tanner what
41:33
happens if a family member leaves the company well that's a good question and and and we have had that happen uh many
41:41
times um when family members uh decide they don't want to continue working uh in the company anymore what normally
41:48
happens uh is that the the the funding that's in there for that family member
41:55
um uh what it will do is that we we we recalculate an RCA should be updated
42:02
every three years in other words the the entitlement calculations and the funding calculations and so what happens is that
42:08
if there's money in the RCA that was allocated to a family member who's no longer there that gets reallocated to
42:16
other family members and what it does is is it reduces the contributions uh going
42:21
forward to uh support the the family members that are still in the business
42:28
uh great thank you we did have another one come through the chat uh can an RCA be established if the founder is over
42:34
the age of 71 what was that with game Taylor can an
42:40
RCA be established if the founder is over the age of 71 uh yes it can um as
42:46
long as you're uh I'm a good example of that uh as long as you're working in the
42:53
company uh an RCA can be established for you and uh we have actually quite a few
43:00
rcas uh that we established uh where the um the
43:05
owners uh are are over 71 and one of the significant uh things about this is that
43:12
we have companies uh that all of a sudden uh the
43:19
time has come to pass the wand so to speak some companies uh have children
43:24
they can pass the wand to but other companies uh they don't uh so so that
43:30
the wand has to be passed to maybe employees now the real advantage of the
43:36
RCA uh is that Dad could be say 75 years of age he's had 35 years of service with
43:43
the company he's entitled to a 70% pension uh based upon his average say
43:51
last three or five years earnings uh up to 75 what he has not lost is all his past
43:58
service so that what could happen uh for these older people is the company can
44:04
set up a an RCA for that at age 75 uh if the company has enough funds uh
44:13
they can they can lump some funded because all this past Services earned uh
44:18
if they do lump some funded as Andrea mentioned before that might carve up part of the the the retained earnings
44:26
uh it might require uh the company to to borrow uh some money from the bank but
44:32
what's going to happen is the dad is going to get his funded pension and then the wand can be transferred to whoever
44:40
is going to uh take over the company uh on terms that are acceptable to them and
44:47
uh if there is bank borrowings or retained earnings used uh they get replaced uh over time with uh future
44:54
earnings so the the RCA becomes a very viable tool for uh succession planning
45:01
uh for older people awesome thank you Roy sorry one
45:07
more question here what happens if the business cannot allocate funds to the RCA for a few months or even a year
45:14
Andrea why don't you handle that so if if a company has to pause
45:21
their RCA contributions they are able to do that uh they can make those up in
45:27
future years or they can borrow in future years to um meet those funding
45:33
requirements down the road well that's all the questions we
45:39
have in the chat here thank you Taylor I just like to thank all of you
45:45
that attended and uh and joined us today thank you behalf of uh RCF and the traa Board of Trade for attending today's
45:51
webinar Roy and Andrea um thank you both for your presentation it was amazing you have any final words for our attendees
45:58
today uh thank you very much for everyone who attended um please feel free to contact us if you have any
46:04
questions we'd be glad to hear from you and for those that uh that didn't able
46:10
to that registered but didn't attend uh hopefully you'll be able to pick up the seminar through the board of Trades
46:15
website thank you thanks everybody have a great day
Workshop Agenda
- 10:00 AM - Virtual Check-in
- 10:05 AM - Workshop Programming
- 10:50 AM - Q&A
Speakers
Roy W. Craik, Executive Partner at Retirement Compensation Funding
Andrea Lettner, Managing Partner at Retirement Compensation Funding
About our member:
RcF is Canada's foremost company specializing in pension shortfall funding solutions. With a rich history dating back to 1988, RcF has established itself as the premier choice for companies and individuals seeking reliable and effective strategies to address their pension shortfall concerns.