We can help you set up a retirement compensation agreement for your organization.

If your organization wants to protect substantial financial assets for either a key employee or a group, turn to us for advice on how Retirement Compensation Arrangements may be advantageous. In some cases, high-income employers and individuals should explore strategies for executives that go beyond typical pension plans or Registered Retirement Savings Plans (RRSPs). For example, if you have significant income that exceeds small business thresholds, anticipate a golden handshake, or plan to relocate outside of Canada, you should look into retirement compensation agreements.

What’s the difference between a Retirement Compensation Agreement and a Retirement Compensation Arrangement?

When discussing retirement planning in Canada, particularly for high-income earners, the term “Retirement Compensation Arrangement” (RCA) is key. You may also hear the term retirement compensation agreement. The “agreement” part is within the arrangement itself.

Here’s a breakdown:
Retirement Compensation Arrangement (RCA):
o An RCA is a plan that allows employers (and sometimes employees) to set aside funds for retirement benefits that exceed the limits of registered plans like Registered Retirement Savings Plans (RRSPs) and Registered Pension Plans (RPPs).
o It’s a non-registered plan, meaning it doesn’t have the same tax-sheltered growth as registered plans.
o A core feature of an RCA is that contributions are subject to a 50% refundable tax, which is held in a Refundable Tax Account (RTA). This tax is refunded as benefits are paid out.
o Essentially, the “agreement” is the set of rules and conditions that govern how the RCA operates, including contributions, investments, and benefit payouts.
o RCAs are often used by business owners and high-income earners.

Key aspects of an RCA:
• Custodian:
o An RCA involves a custodian who holds the funds in a trust.
• Taxation:
o Contributions are subject to a 50% refundable tax.
o Benefits paid out in retirement are taxable income.
• Purpose:
o To provide supplemental retirement income beyond the limitations of registered plans.

Retirement compensation agreements are a type of trust registered with the Canada Revenue Agency that allows your organization to make tax-deductible contributions for the future benefit of the individuals you designate. These arrangements are often used to retain key employees or as part of an executive termination compensation package.

Retirement compensation agreements allow for the highest contribution limits to a tax-sheltered plan and do not have an effect on Registered Retirement Savings Plan or Retirement Savings Plan (RPP) contribution limits. Additionally, they provide benefits such as no age restrictions, creditor protection, and the ability for multiple individuals to participate in a single plan. Additionally, significant deductions can reduce or eliminate taxes, and they can serve as a supplemental pension plan.

Retirement Compensation Arrangements (RCA) are a trust that is recognized by the CRA that allow a company to make contributions that benefit an individual, tax-free.

At BlueRock Wealth Management, we can help you explore your options for retirement compensation arrangements for your operation in Caledon, Ontario. Contact us to speak with one of our advisors and to learn more about how we can set up an arrangement that will benefit your organization.

At BlueRock Wealth Management, we can assist with retirement compensation arrangements in the Southern Georgian Bay Region, including Collingwood, Creemore, Thornbury, and Wasaga Beach. We also serve most of South and Central Ontario, including Toronto, Oakville, Burlington, Kitchener, Waterloo, Guelph, Caledon, Barrie, Orangeville, Newmarket, Saugeen Shores, and Owen Sound.