Retirement Compensation Arrangement

Administrative Policy

May 1998 Conference for Advanced Life Underwriting Round Table, Q. 3, No. 9807000

Where amounts paid to an RCA are returned in some manner to the employer, Revenue Canada "may question whether or not an RCA exists, as contributions under the arrangement may not be made in connection with benefits that are to be received by the taxpayer".

29 January 1996 External T.I. 5-960042 -

Discussion of the distinction in the positions taken on letters of credit in question 21 of the 1995 APFF Round Table and question 48 of the 1992 Canadian Tax Foundation Round Table.

27 January 1994 T.I. HAA7284-1 (C.T.O. "Pension Plan Wind-up")

A registered pension which is revoked or deregistered will be considered to be a retirement compensation arrangement from the date of revocation or deregistration. However, the tax under Part XI.3 is not exigible on accumulated contributions and investment income accruing before the date registration is revoked.

1 April 1993 T.I. (Tax Window, No. 30, p. 12, ¶2492)

The exclusion in paragraph (m) does not apply where an employer agrees to provide periodic pension payments on retirement or a lump-sum payment on termination of employment and the employer purchases insurance to ensure that the payments will be made should the employer be unable to meet its obligations under such arrangement because of bankruptcy or other legal reasons specified in the insurance policy.

22 July 1992 External T.I. 5-921803 -

If a fund was excluded from the salary deferral arrangement definition by virtue of the exclusion in paragraph (k) thereof for a three-year bonus arrangement and it could be shown that the purpose of the arrangement was not to fund retirement benefits, the fund also would be exempted from the retirement compensation arrangement rules even though the three-year deferral period might end in a year after retirement.

18 June 1992 External T.I. 5-921789 -

An amalgamation of an employer should not effect the beneficiary of a retirement compensation arrangement.

4 June 1992 Internal T.I. 7-921449 -

An arrangement under which an employee elects to receive a retiring allowance over a three-year period and advises the employer to place the amount in the interim in a joint escrow account, constitutes a retirement compensation arrangement.

24 January 1992 External T.I. 5-913334 -

If the custodian to whom money is paid is an agent of the employer and the contributed funds do not become its property, no Part XII.3 tax is payable. If the custodian receives contributions as an agent of the employee or at the employee's direction, the arrangement will not be a retirement compensation arrangement provided that the establishment of the trust is not part of an encompassing arrangement.

8 November 1991 T.I. (Tax Window, No. 13, p. 1, ¶1590)

A trust established by a corporation in order to fund any personal liability of directors under various provincial statutes would not constitute a retirement compensation arrangement.

6 September 1991 T.I. (Tax Window, No. 10, p. 21, ¶1475)

The setting up of a fund to finance payment of retiring allowances to elected municipal officers who seek to hold office will probably constitute a retirement compensation arrangement.

19 September 1991 T.I. (Tax Window, No. 9, p. 13, ¶1455)

Any security arrangement can be considered a contribution, including the pledging of property as security for the plan, letters of credit, mortgages or asset-backed bank guarantees. An employer who sets apart assets for the benefit of employees in such a way that the assets are not available to creditors also may be considered to have made a contribution.

Dath and Fuoco, "Flexible Employee Benefit Arrangements", 1991 Corporate Management Tax Conference Report, c. 6

Discussion of cafeteria plans.

16 July 1991 T.I. (Tax Window, No. 6, p. 11, ¶1351)

Discussion of employee thrift plan.

90 C.R. - Q6

There is no retirement compensation arrangement where a major shareholder provides a personal guarantee to an employee in connection with certain retirement benefits to be provided by the corporation.

18 October 89 Meeting with Quebec Accountants, Q.10 (April 90 Access Letter, ¶1166)

An arrangement to fund a leave of absence, where the deferred salary will be paid by the employer to a person other than the taxpayer to be held for eventual payment to the employee during the leave of absence, will not constitute a retirement compensation arrangement.

88 C.R. - Q.29

The fair market value of a letter of credit which is acquired by an employer to guarantee the payment of retirement benefits to an employee is a contribution to a retirement compensation arrangement.


Jim Kahane, Uros Karadzic, Simon Létourneau-Laroche, "A Fresh Look at Retirement Compensation Arrangement: A Flexible Vehicle for Retirement Planning", Canadian Tax Journal (2013) 61:2, 479 – 502.

Meaning of "substantial changes in the services" (p. 481)

CRA... will consider that there has been a substantial change in services for the purposes of the definition of an RCA when the person retires or is terminated but continues to render different services than the ones formerly rendered to the employer. For example, a senior executive providing training as a part-time employee after termination would be considered to have experienced a substantial change in services. [fn 4: …guide T4041…]

Simon Thompson, "Canada's Income Tax Rules for Non-Registered Plans: Implications for Foreign Pensions", A Journal of International Taxation, Vol. 15, No. 10, October 2004, p. 34.

David Ross, "Secular Trust: An Alternative to a Retirement Compensation Arrangement in the Right Circumstances", Taxation of Executive Compensation in Retirement, Vol. 16, No. 1, July/August 2004, p. 431.

T. Moriarty, "The Use of Supplementary Executive Retirement Plans for the Mobile Employee", Taxation of Executive Compensation and Retirement, Vol. 9, No. 10, June 1998.

Stephens, "Use of Life Insurance Policies as Funding Vehicles", Taxation of Executive Compensation and Retirement, Vol. 9, No. 1, July/august 1997, p. 3.

Marilyn Lurz, "A Practical Guide to Administering a Retirement Compensation Arrangement", Taxation of Executive Compensation and Retirement, Volume 8, No. 4, November 1996, p. 211.

Dionne, "RCA Cash Flow Problems May be Alleviated by Filing Early Trust Tax Return", Taxation of Executive Compensation and Retirement, December 1990/January 1991, p. 371.

Singer, "Personal Guarantee by Shareholder May Avoid RCA Tax on Supplemental Pension Funding", Taxation of Executive Compensation and Retirement, June 1990, p. 293.