Retirement Compensation Arrangements (RCA)

Retirement Compensation Arrangements        

An RCA is defined under subsection 248(1) of the Income Tax Act (the Act) as a plan or arrangement under which an employer makes contributions to another person, called a custodian, “in connection with benefits that are to be or may be received or enjoyed by a person on, after, or in contemplation of a substantial change in the services rendered by the taxpayer, the retirement of the taxpayer or the loss of office or employment of the taxpayer.”

The definition of RCAs in subsection 248(1) of the Act specifically excludes a number of plans, including the following:
RRSPs, RPPs, DPSPs, and EPSPs;
an employee life and health trust;
a group sickness/accident insurance plan;
a salary deferral arrangement; and
a plan established to defer the salary of certain professional athletes.

RCA Funding Approaches
There are various alternatives available to fund an RCA. Three alternatives are: funding with taxable investments, funding with life insurance and funding using letters of credit.

More information can be provided based on client’s need, requirements of legislation and admissibility.