A supplemental pension plan established by a company to invest for the retirement of key employees.
An RCA is an arrangement where contributions are made by the company to another party (called the Custodian) in respect of benefits that are to be paid to the employee after the employee’s retirement or termination. When the company makes a contribution to the RCA, 50% of the contribution is deposited with the custodian of the RCA Trust to be invested in an investment account and the other 50% is deposited with the Canada Revenue Agency (“CRA”) as a refundable tax in a non-interest bearing account. Furthermore, 50% of all interest income, dividends and realized capital gains earned in the investment account must be remitted to the refundable tax account. As the employee receives benefits, the CRA refunds $1 from the refundable tax account for every $2 paid out of the RCA Trust. RCA payments can be a lump-sum payment or as supplementary retirement benefits.
RCAs are intended to provide retirement benefits to an employee over and above those available from RRSPs, pension and other statutory plans.