The employer may have set up a retirement compensation arrangement (RCA) for your employees for which you make contributions to a custodian. Distributions may be made by the custodian of the arrangement which must be reported on a T4A-RCA slip, Statement of Distributions from a Retirement Compensation Arrangement (RCA).

This page contains information relevant to you as either an employer or a custodian on your payroll withholding and reporting obligations.

What is an RCA

An RCA is a plan or an arrangement under which an employer, former employer, and in some cases an employee makes contributions to a person or partnership, called a custodian.

The custodian holds the funds in trust with the intent of eventually distributing them to the employee, former employee or other beneficiary on, after, or in contemplation of any of the following:

• an employee's retirement
• an employee's loss of an office or employment
• any substantial change in the services the employee provides (for example, a senior corporate director who, after termination, is kept on a part-time basis to teach a management course to new trainees may be considered to have substantially changed the services being provided for the purposes of the definition of an RCA)

An employer or former employer may receive an interest in a life insurance policy (including an annuity) to fund benefits on, after, or in contemplation of any of the situations listed above. In that case, the Canada Revenue Agency (CRA) would consider the interest to be the property of an RCA and the employer to be the custodian of the RCA.

On this page

• Steps
• References

Steps

1. Determine what you need to do before making contributions to the RCA

   Before you, as the employer, make a contribution to the custodian of your RCA arrangement, you have to send Form T733, Application for a Retirement Compensation Arrangement (RCA) Account Number, with a signed copy of the RCA trust agreement to apply for account numbers for you (as the employer) (RC) and for the custodian of the RCA (T).

   Sent these documents to:

   RCA Unit

   Winnipeg Tax Centre

   66 Stapon Road

   Winnipeg MB R3C 3M2

   Learn more on how to fill out Form T733: Filling out Form T733

2. Withhold refundable tax from contributions you make to the RCA

   If you, as the employer, make contributions to the RCA, you have to deduct a 50% refundable tax on any contributions you make to a custodian of the RCA. This refundable tax must be remitted using Form T901B, Statement of Account, to your RC account number, on or before the 15th day of the month following the month you withheld it.

   Special situation: first RCA refundable tax remittance

   Send your first payment of refundable tax to the RCA Unit at the Winnipeg Tax Centre by cheque or money order made out to the Receiver General for Canada.

   If you have to remit this tax but have not received an RC employer account number, fill out Form T733 and send it with your payment directly to the Winnipeg Tax Centre.

   After your first remittance has been processed, you will be issued Form T901B to make further remittances.

   If you made contributions to the custodian, you must fill out T737-RCA slips, Statement of Contributions Paid to a Custodian of a Retirement Compensation Arrangement (RCA), and a T737-RCA SUM, Summary of Contributions Paid to a Custodian of a Retirement Compensation Arrangement (RCA), to report these contributions. These do not need to be filed if you did not make any contributions during the year.

   You must provide two copies of the T737 slips to the custodian of the RCA. If the custodian agrees in writing, you may provide the T737 slips to them electronically.

   Learn more on how to fill out T737 slip: Filling out T737 slip

   If you withheld any deductible RCA contributions from your employee’s income, you must report these contributions in box 20 of your employee’s T4 slip.

   Special situation: Refunds of specified withholding tax

   A refund of 50% of certain retirement benefits paid may be claimed (up to the amount of specified refundable tax at the end of the tax year) where certain conditions are met. One of the conditions requires the eligible employer to file an election with the CRA under subsection 207.71(2) of the Income Tax Act (ITA).

   If you have to remit this tax but have not received an RC employer account number, fill out Form T733 and send it with your payment directly to the Winnipeg Tax Centre.

   Learn more: Employer One Time Election under Subsection 207.71(2)

3. Withhold refundable tax from income earned in the RCA trust or employee contributions to the RCA

   You, as the custodian, are also required to remit the 50% refundable tax from any income from business or property, any capital gains earned in the RCA trust and any employee contributions which they make directly to the RCA trust.

   You must remit this tax using Form T901B, Statement of Account, which is available only in a personalized, preprinted format. The CRA will issue Form T901B after it processes your first payment.

   Learn more: Remitting the refundable tax

4. Determine what you need to do before making distributions out of the RCA

   Before you, as the custodian, make the first distribution out of the RCA trust to a beneficiary, you must apply for a remittance account number by filling out Form T735, Application for a Remittance Number for Tax Withheld from a Retirement Compensation Arrangement (RCA), and sending it to the Winnipeg Tax Centre.

   The CRA uses Form T735 to open two accounts:

   • The RP payroll program account, which is used as the employer remittance account for the RCA trust
   • The NR account, a non-resident deduction remittance account that begins with the letters NRQ and is used to report payments you make to non-residents and to remit income tax withheld from those payments

   Learn more on how to fill out Form T735: Filling out Form T735

5. Withhold and remit income tax on distributions out of the RCA

   1. Withhold income tax

      You, as the custodian, are required to withhold income tax on distributions you make out of the RCA trust. The calculation to use for distributions to a Canadian resident depends on if the distribution is a periodic or a lump-sum payment.

      If you made a distribution to a non-resident, you are required to withhold tax at a rate of 25%.

   2. Remit income tax withheld

      You, as the custodian, must remit the income tax you withheld on distributions to the account from step four using the following forms:

      • Income tax withheld from distributions to residents is remitted using the Form PD7A, Statement of account for current source deductions, that will be issued to you (as the custodian) after your first remittance has been processed.

      • Withholding tax on payments to non-residents is remitted using Form NR76, Non-resident Tax – Statement of Account, that will be issued to you (as the custodian) after your first remittance has been processed.

6. Report the payment on a slip

   You, as the custodian, must report the distributions paid to beneficiaries on a T4A-RCA slip or an NR4 slip, Statement of Amounts Paid or Credited to Non-Residents of Canada, depending on if the recipient is a resident or a non-resident:

   • Canadian resident – T4A-RCA slip

     • Box 16 – Distributions
     • Box 17 – Distributions eligible for pension income splitting

     Learn more: T4A-RCA slip

   • Non-resident – NR4 slip

     • Box 14 or 24, income code 37

     Learn more: NR4 slip

References

Legislation

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