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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Storm clouds of uncertainty as BC courts deal another blow to industry and investment

Published on December 9, 2025

Todayville

From the Fraser Institute

By Tegan Hill and Jason Clemens

Recent court decision adds to growing uncertainty in B.C.

A recent decision by the B.C. Court of Appeal further clouds private property rights and undermines investment in the province. Specifically, the court determined British Columbia’s mineral claims system did not follow the province’s Declaration on the Rights of Indigenous Peoples Act (DRIPA), which incorporated the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) into law.

DRIPA (2019) requires the B.C. provincial government to “take all measures necessary to ensure the laws of British Columbia are consistent with the Declaration,” meaning that all legislation in B.C. must conform to the principles outlined in the UNDRIP, which states that “Indigenous peoples have the right to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired.” The court’s ruling that the provincial government is not abiding by its own legislation (DRIPA) is the latest hit for the province in terms of ongoing uncertainty regarding property rights across the province, which will impose massive economic costs on all British Columbians until it’s resolved.

Consider the Cowichan First Nations legal case. The B.C. Supreme Court recently granted Aboriginal title to over 800 acres of land in Richmond valued at $2.5 billion, and where such aboriginal title is determined to exist, the court ruled that it is “prior and senior right” to other property interests. Put simply, the case puts private property at risk in BC.

The Eby government is appealing the case, yet it’s simultaneously negotiating bilateral agreements that similarly give First Nations priority rights over land swaths in B.C.

Consider Haida Gwaii, an archipelago on Canada’s west coast where around 5,000 people live—half of which are non-Haida. In April 2024, the Eby government granted Haida Aboriginal title over the land as part of a bilateral agreement. And while the agreement says private property must be honoured, private property rights are incompatible with communal Aboriginal title and it’s unclear how this conflict will be resolved.

Moreover, the Eby government attempted to pass legislation that effectively gives First Nations veto power over public land use in B.C. in 2024. While the legislation was rescinded after significant public backlash, the Eby’s government’s continued bilateral negotiations and proposed changes to other laws indicate it’s supportive of the general move towards Aboriginal title over significant parts of the province.

UNDRIP was adopted by the United Nations in 2007 and the B.C. Legislature adopted DRIPA in 2019. DRIPA requires that the government must secure “free, prior and informed consent” before approving projects on claimed land. Premier Eby is directly tied to DRIPA since he was the attorney general and actually drafted the interpretation memo.

The recent case centres around mineral exploration. Two First Nations groups—the Gitxaala Nation and the Ehattesaht First Nation—claimed the duty to consult was not adequately met and that granting mineral claims in their land “harms their cultural, spiritual, economic, and governance rights over their traditional territories,” which is inconsistent with DRIPA.

According to a 2024 survey of mining executives, more uncertainty is the last thing B.C. needs. Indeed, 76 per cent of respondents for B.C. said uncertainty around protected land and disputed land claims deters investment compared to only 29 per cent and 44 per cent (respectively) for Saskatchewan.

This series of developments have and will continue to fuel uncertainty in B.C. Who would move to or invest in B.C. when their private property, business, and investment is potentially at risk?

It’s no wonder British Columbians are leaving the province in droves. According to the B.C. Business Council, nearly 70,000 residents left B.C. for other parts of Canada last year. Similarly, business investment (inflation-adjusted) fell by nearly 5 per cent last year, exports and housing starts were down, and living standards in the province (as measured by per-person GDP) contracted in both 2023 and 2024.

B.C.’s recent developments will only worsen uncertainty in the province, deterring investment and leading to stagnant or even declining living standards for British Columbians. The Eby government should do its part to reaffirm private property rights, rather than continue fuelling uncertainty.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Jason Clemens

Executive Vice President, Fraser Institute

Business

Conservative MP warns Liberals’ national AI plan could increase gov’t surveillance

Published on December 9, 2025

Todayville

From LifeSiteNews

By Clare Marie Merkowsky

Conservative MP Leslyn Lewis raised concerns about the Liberals’ major investment in AI, which could lead to digital ids and loss of freedoms.

Conservative MP Leslyn Lewis is sounding the alarm over the Liberals’ nearly billion-dollar AI infrastructure investment, which could lead to digital IDs

In a December 2 post on X, Lewis raised concerns over the Liberals’ 2025 budget, which funds a $925.6 million “Sovereign Canadian Cloud” and national AI compute infrastructure at the same time as the Liberals are pushing digital identification on Canadians.

“Who audits the algorithms behind government’s new digital systems?” Lewis challenged. “What protections exist for Canadians in this new infrastructure? Who builds it? Who controls it? Who owns the data?”

“Good technology isn’t the issue, our freedoms, surveillance and good accountable governance in a digital era are the real issues,” she warned.

“Digital infrastructure is power, and it must never be implemented in secrecy or without parliamentary scrutiny,” Lewis declared.

Despite spending nearly one billion taxpayer dollars on the project, Prime Minister Mark Carney provides surprisingly few details on how the infrastructure will work and what its purpose will be.

“Budget 2025 proposes to provide $925.6 million over five years, starting in 2025-26, to support a large-scale sovereign public AI infrastructure that will boost AI compute availability and support access to sovereign AI compute capacity for public and private research,” the budget read.

“The investment will ensure Canada has the capacity needed to be globally competitive in a secure and sovereign environment,” it continued.

Alarmingly, the funding comes at the same time as Liberals are moving forward with digital identification systems, despite warnings that they will infringe on Canadians freedoms.

Additionally, the Canadian government hired outside consultants tasked with looking into whether or not officials should proceed with creating a digital ID system for all citizens and residents.

Per a May 20 Digital Credentials Issue memo, and as noted by Blacklock’s Reporter, the “adoption” of such a digital ID system may be difficult.

Canada’s Privy Council research from 2023 noted that there is strong public resistance to the use of digital IDs to access government services.

Nonetheless, Conservative leader Pierre Poilievre sounded the alarm by promising to introduce a bill that would “expressly prohibit” digital IDs in Canada.

Critics have warned that the purpose of such IDs is actually to centralize control over citizens. This opinion seems to be mirrored by the general public, with a Bank of Canada survey finding that Canadians are wary of a government-backed digital currency, concluding that a “significant number” of citizens would resist the implementation of such a system.

Digital IDs and similar systems have long been pushed by globalist groups like the World Economic Forum, an organization with which Carney has extensive ties, under the guise of ease of access and security.