What is a Retirement Compensation Arrangement (“RCA”)?

An RCA is a plan that is funded by contributions from employers and employees to a custodian who manages the funds. RCAs are used to fund the retirement of an employee, their loss of employment or a substantial change in the services that they provide.

How it works?

Employers make annual tax deductible contributions to an RCA that are subject to a refundable 50% withholding tax. Since the payments are not made to the employee, they are not subject to any tax implications in the year the contributions are made. When payments are made from the plan to the employee, the refundable taxes paid are recovered at the same rate (e.g. $1 of every $2 paid). All income earned within the plan is subject to the refundable 50% tax and is recoverable at the same rate as above. The employee pays personal tax on distributions from the RCA in the year they are received.

Employees can also make tax deductible contributions to an RCA. The contributions are similarly considered deductible and subject to the 50% refundable withholding tax.

Types of plans

An RCA can be set up as either a Defined Benefit Plan (“DBP”) or a Defined Contribution Plan (“DCP”). As the title suggests, a DBP provides employees with a defined pension amount annually, upon retirement. Whereas employees on a DCP will receive only what was contributed to the plan, plus any income earned or less any losses incurred, a DBP will require the periodic involvement of an actuary to determine whether the plan is properly funded.

A DBP puts the risk of losses on investments in the hands of the employer and a DCP passes that risk to the employees as they will receive what is remaining in the plan.

Who will benefit from RCAs?

Employees

Employees who participate in an RCA will enjoy future pension benefits and peace of mind knowing that, if the employer were to close down and they lost their employment, the assets of the RCA would be protected against the creditors of the employer.

The 50% refundable withholding rate is currently less than the top tax bracket in a number of provinces. As such, the after-tax investment for the pension is no longer considered a disadvantage to RCAs for high-income earning employees as the plan will invest 50% of the amount they are paid as opposed to less than 50%, had they been paid as a salary.

Contributions to the RCA by an employer will not reduce the RRSP contribution room for the employee, which is not the case for contributions made to a Retirement Pension Plan (“RPP”).

Further tax savings can be obtained by paying the employees out of the RCA in future years when their income levels are lower and subject to lower marginal tax rates. When you consider the ability to include income in lower income earning years, employees living in provinces and territories not subject to >50% tax at the top rate can still benefit from an RCA.

Employers

Employers may wish to provide a retirement package for their employees but not pay the high costs of operating an RPP or an Individual Pension Plan (“IPP”). If the owner-manager of the company or someone already within the company completes the required remittance forms and bookkeeping for the plan, the costs associated with an RCA would include the preparation of the trust return, identified above, and investment advisor fees, if an advisor is used. Additional costs may be applicable for DPBs since possible periodic actuarial valuations may be needed to ensure the plan is properly funded.

Employers can also utilize RCAs for what’s referred to as “Golden Handcuffs,” meaning they can require an employee to meet certain length-of-employment requirements before the pension contributions vest. This will help employers retain key employees that are vital to their operations.

Tax benefits for employer

One group that may benefit most from these plans are companies involved in Scientific Research and Experimental Development (“SRED”) that must maintain low taxable income and taxable capital figures to retain their benefits from the enhanced investment tax credits. Since the taxable income and taxable capital figures exceed $500,000 and $10,000,000, respectively, the amount eligible for the enhanced tax credit decreases.

Federally, expenditures eligible for the enhanced tax credit are eligible for a 35% tax credit, whereas expenditures not eligible only provide for a 15% tax credit. When you also consider the provincial tax credit implications, it’s critical for these companies to maintain sufficient expenditure pool levels.

One common method for ensuring low income and taxable capital figures is to declare bonuses for the owner-managers and to pay those bonuses out of the company to reduce taxable capital. This is a good opportunity to use RCAs. The top tax rate in seven of Canada’s thirteen provinces or territories is over 50%. Given the RCA withholding rates are currently 50%, this can provide a deferral of up to 4% depending on your province. When you add the additional payroll costs, this can result in significant savings.

How much should be contributed?

An employer must be careful not to contribute an unreasonable amount to the plan on behalf of an employee as it could result in the plan being re-characterized as an SDA. The starting point for a reasonable DCP amount would be the 18% that is used to create RRSP deduction room annually. A higher rate would likely require a very strong argument as to why it’s reasonable.

A DBP requires a certain level of assets to be held within the plan to support the future pension obligations that an actuary has calculated. Given that the plan will require a certain amount, a reasonable contribution will be the amount that brings the assets of that plan to a sufficient level to fund that obligation. The pension benefit, however, must be considered a reasonable amount. Again, a reasonable amount will vary based on the facts of each situation.

The CRA has indicated that it will permit a deduction for recognition of an employee’s years of services even if it occurred prior to the establishment of the RCA.¹ Since past years of service can be recognized, large contributions may be eligible when the RCA is initially established.

Careful planning is required to ensure that the plan meets the criteria of an RCA as adverse tax effects could result otherwise. You should seek professional advice if you are setting up an RCA.

Jesse Genereaux is a tax manager in the Durham office of Collins Barrow.

Want to get in touch with Jesse?
Connect with him by email at [email protected].

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Agriculture

End Supply Management—For the Sake of Canadian Consumers

Published on December 22, 2025

Todayville

This is a special preview article from the:

By Gwyn Morgan

U.S. President Donald Trump’s trade policy is often chaotic and punitive. But on one point, he is right: Canada’s agricultural supply management system has to go. Not because it is unfair to the United States, though it clearly is, but because it punishes Canadians. Supply management is a government-enforced price-fixing scheme that limits consumer choice, inflates grocery bills, wastes food, and shields a small, politically powerful group of producers from competition—at the direct expense of millions of households.

And yet Ottawa continues to support this socialist shakedown. Last week, Prime Minister Mark Carney told reporters supply management was “not on the table” in negotiations for a renewed United States-Mexico-Canada Trade Agreement, despite U.S. negotiators citing it as a roadblock to a new deal.

Supply management relies on a web of production quotas, fixed farmgate prices, strict import limits, and punitive tariffs that can approach 300 percent. Bureaucrats decide how much milk, chicken, eggs, and poultry Canadians farmers produce and which farmers can produce how much. When officials misjudge demand—as they recently did with chicken and eggs—farmers are legally barred from responding. The result is predictable: shortages, soaring prices, and frustrated consumers staring at emptier shelves and higher bills.

This is not a theoretical problem. Canada’s most recent chicken production cycle, ending in May 2025, produced one of the worst supply shortfalls in decades. Demand rose unexpectedly, but quotas froze supply in place. Canadian farmers could not increase production. Instead, consumers paid more for scarce domestic poultry while last-minute imports filled the gap at premium prices. Eggs followed a similar pattern, with shortages triggering a convoluted “allocation” system that opened the door to massive foreign imports rather than empowering Canadian farmers to respond.

Over a century of global experience has shown that central economic planning fails. Governments are simply not good at “matching” supply with demand. There is no reason to believe Ottawa’s attempts to manage a handful of food categories should fare any better. And yet supply management persists, even as its costs mount.

Those costs fall squarely on consumers. According to a Fraser Institute estimate, supply management adds roughly $375 a year to the average Canadian household’s grocery bill. Because lower-income families spend a much higher proportion of their income on food, the burden falls most heavily on them.
The system also strangles consumer choice. European countries produce thousands of varieties of high-quality cheeses at prices far below what Canadians pay for largely industrial domestic products. But our import quotas are tiny, and anything above them is hit with tariffs exceeding 245 percent. As a result, imported cheeses can cost $60 per kilogram or more in Canadian grocery stores. In Switzerland, one of the world’s most eye-poppingly expensive countries, where a thimble-sized coffee will set you back $9, premium cheeses are barely half the price you’ll find at Loblaw or Safeway.

Canada’s supply-managed farmers defend their monopoly by insisting it provides a “fair return” for famers, guarantees Canadians have access to “homegrown food” and assures the “right amount of food is produced to meet Canadian needs.” Is there a shred of evidence Canadians are being denied the “right amount” of bread, tuna, asparagus or applesauce? Of course not; the market readily supplies all these and many thousands of other non-supply-managed foods.

Like all price-fixing systems, Canada’s supply management provides only the illusion of stability and security. We’ve seen above what happens when production falls short. But perversely, if a farmer manages to get more milk out of his cows than his quota, there’s no reward: the excess must be
dumped. Last year alone, enough milk was discarded to feed 4.2 million people.

Over time, supply management has become less about farming and more about quota ownership. Artificial scarcity has turned quotas into highly valuable assets, locking out young farmers and rewarding incumbents.

Why does such a dysfunctional system persist? The answer is politics. Supply management is of outsized importance in Quebec, where producers hold a disproportionate share of quotas and are numerous enough to swing election results in key ridings. Federal parties of all stripes have learned the cost of crossing this lobby. That political cowardice now collides with reality. The USMCA is heading toward mandatory renegotiation, and supply management is squarely in Washington’s sights. Canada depends on tariff-free access to the U.S. market for hundreds of billions of dollars in exports. Trading away a deeply-flawed system to secure that access would make economic sense.

Instead, Ottawa has doubled down. Not just with Carney’s remarks last week but with Bill C-202, which makes it illegal for Canadian ministers to reduce tariffs or expand quotas on supply-managed goods in future trade talks. Formally signalling that Canada’s negotiating position is hostage to a tiny domestic lobby group is reckless, and weakens Canada’s hand before talks even begin.

Food prices continue to rise faster than inflation. Forecasts suggest the average family will spend $1,000 more on groceries next year alone. Supply management is not the only cause, but it remains a major one. Ending it would lower prices, expand choice, reduce waste, and reward entrepreneurial farmers willing to compete.

If Donald Trump can succeed in forcing supply management onto the negotiating table, he will be doing Canadian consumers—and Canadian agriculture—a favour our own political class has long refused to deliver.

The original, full-length version of this article was recently published in C2C Journal. Gwyn Morgan is a retired business leader who was a director of five global corporations.

Automotive

Canada’s EV gamble is starting to backfire

Published on December 22, 2025

Dan McTeague

Things have only gone from bad to worse for the global Electric Vehicle industry. And that’s a problem for Canada, because successive Liberal governments have done everything in their power to hitch our cart to that horse.

Earlier this month, the Trump Administration rolled back more Biden-era regulations that effectively served as a back-door EV mandate in the United States. These rules mandated that all passenger cars be able to travel at least 65.1 miles (and for light trucks, 45.2 miles) per gallon of gasoline or diesel, by the year 2031. Since no Internal Combustion Engine (ICE) vehicle could realistically conform to those standards, that would have essentially boxed them out of the market.

Trump’s rolling them back was a fulfillment of his campaign promise to end the Biden Administration’s stealth EV mandates. But it was also a simple recognition of the reality that EVs can’t compete on their own merits.

For proof of that, look no further than our second bit of bad news for EVs: Ford Motor Company has just announced a massive $19.5 billion write-down, almost entirely linked to its aggressive push into EVs. They’ve lost $13 billion on EVs in the past two years alone.

The company invested tens of billions on these go-carts, and lost their shirt when it turned out the market for them was miniscule.

Ford’s EV division president Andrew Frick explained, “Ford is following the customer. We are looking at the market as it is today, not just as everyone predicted it to be five years ago.”

Of course, five years ago, the market was assuming that government subsidies-plus-mandates would create a market for EVs at scale, which hasn’t happened.

As to what this portends for the market, the Wall Street Journal argued, “The company’s pivot from all-electric vehicles is a fresh sign that America’s roadways – after a push to remake them – will continue to look in the near future much like they do today, with a large number of gas-powered cars and trucks and growing use of hybrids.”

And that’s not just true in the U.S. Across the Atlantic, reports suggest the European Union is preparing to delay their own EV mandates to 2040. And the U.K.’s Labour government is considering postponing their own 2030 ICE vehicle ban to align with any EU change in policy.

It’s looking like fewer people around the world will be forced by their governments to buy EVs. Which means that fewer people will be buying EVs.

Now, that is a headache for Canada. Our leaders, at both the federal and provincial levels, have bet big on the success of EVs, investing billions in taxpayer dollars in the hopes of making Canada a major player in the global EV supply chain.

To bolster those investments, Ottawa introduced its Electric Vehicle mandate, requiring 100 per cent of new light-duty vehicle sales to be electric by 2035. This, despite the fact that EVs remain significantly more expensive than gas-and-diesel driven vehicles, they’re poorly suited to Canada’s vast distances and cold climate, and our charging infrastructure is wholly inadequate for a total transition to EVs.

But even if these things weren’t true, there still aren’t enough of us to make the government’s investment make sense. Their entire strategy depends on exporting to foreign markets that are rapidly cooling on EVs.

Collapsing demand south of the border – where the vast majority of the autos we build are sent – means that Canadian EVs will be left without buyers. And postponed (perhaps eventually canceled) mandates in Europe mean that we will be left without a fallback market.

Canadian industry voices are growing louder in their concern. Meanwhile, plants are already idling, scaling back production, or even closing, leaving workers out in the cold.

As GM Canada’s president, Kristian Aquilina, said when announcing her company’s cancellation of the BrightDrop Electric delivery van, “Quite simply, we just have not seen demand for these vehicles climb to the levels that we initially anticipated…. It’s simply a demand and a market-driven response.”

Prime Minister Mark Carney, while sharing much of the same environmental outlook as his predecessor, has already been compelled by economic realities to make a small adjustment – delaying the enforcement of the 2026 EV sales quotas by one year.

But a one-year pause doesn’t solve the problem. It kicks the can down the road.

Mr. Carney must now make a choice. He can double down on this troubled policy, continuing to throw good money after bad, endangering a lot of jobs in our automotive sector, while making transportation more expensive and less reliable for Canadians. Or he can change course: scrap the mandates, end the subsidies, and start putting people and prosperity ahead of ideology.

Here’s hoping he chooses the latter.

The writing is on the wall. Around the world, the forced transition to EVs is crashing into economic reality. If Canada doesn’t wake up soon, we’ll be left holding the bag.