Retirement Compensation Arrangement
The RCA provides an avenue for retaining key employees ... in this case executives. The Company can build in vesting provisions. If the executive leaves the Company before vesting occurs, his or her benefits would either be allocated to the remaining members of the plan or paid back to the Company.
In the case of a family owned business, the RCA provides another means for wealth transfer to the children. In this case, the parent owners set up an RCA and add the children in as members once they begin to work for the business. When the parents retire they access the RCA to provide for themselves. Upon the death of both parents the remaining assets will pass to the children completely tax free.
An RCA can also facilitate an extended buyout of the family business by the children by arranging for the RCA to be funded post-retirement from the pre-tax operating income of the Company. This is a far better arrangement than children borrowing funds from a bank on an after-tax basis to fund the buyout.
Transitions Wealth Strategies provides guidance as to when a RCA is appropriate and coordinates the set-up. We are aligned with an established actuarial and financial consultancy firm that specializes in the provision of tailored RCA programs that meet all of the Canada Revenue Agency guidelines.
