CRA rules on an RCA trust that permits the retired employee to request an immediate payout on “a material deterioration in the Canadian economy”

CRA ruled that a new supplemental pension plan would qualify as a retirement compensation arrangement and that s. 207.6(7) would apply to the transfer from the old RCA trust to this new one (which would also entail CRA being asked to now hold the existing 50% refundable tax for the account of the new trust).

One of the features of the new plan was that, following the occurrence of a “Specified Event,” the retired “Participant” employee could request that the plan custodian pay out the property in the new RCA Trust and the resulting refundable tax that was generated. “Specified Event” was defined as the occurrence of:

(i) a significant health event or other emergency that … creates an unexpected change in financial circumstances and/or financial need, (ii) a material deterioration in the Canadian economy, (iii) a material change in personal income tax rates …, or (iv) any other event that could not have reasonably been foreseen by the Participant and creates an immediate need by the Participant for the use of funds held by the Trustee under the terms of the New RCA Trust.

In addition, "following material changes in the Canadian economy or the financial needs of the Participant or Participant’s family, [the Participant may] apply in writing to the Custodian to vary the amount of annual benefits."

Neal Armstrong. Summary of 2019 Ruling 2019-0803761R3 under s. 248(1) - retirement compensation arrangement.