RRSP – TFSA Program

One of the many steps that the CWCF has taken to embody its vision is the development of a Self-Directed RRSP Program (SD-RRSP) and Self-Directed TFSA Program (SD-TFSA), which enable co-operatives and similar types of enterprises to capitalize their companies with shares held within a SD-RRSP or SD-TFSA. These programs are registered with the Canada Revenue Agency (CRA) and work with Concentra Trust as their formal trustee. The CWCF SD-RRSP & SD-TFSA programs are completely administered by the CWCF under an agency agreement with Concentra Trust and in accordance with CRA regulations.

The CWCF is pleased that the SD-RRSP & SD-TFSA can be used by any co-operative, Community Economic Development Investment Fund (CEDIF), Community Economic Development Business (CEDB) or Community Economic Development Corporation (CEDC) that has eligible shares.

IMPORTANT NOTE:  As a result of changes made to the rules governing RRSPs in 2011, it is possible to use this program only where each individual plan-holder holds less than 10% of the value of each class of shares in a co-operative.  Investments in co-operatives and business corporations for an amount of 10% or more of shares were previously allowed, but have been declared “prohibited investments” in order to make it more challenging for individuals to engage in tax avoidance.   All of the information below should be read in light of the fact that this applies only where investors will each own less than 10% of each class of shares.  See: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/glssry-eng.html#prohibited 

CWCF DISCLAIMER:  As administrator of the RRSP Plan, CWCF does not take any responsibility for the investments made by the plan-holder.  CWCF does not provide investment advice regarding any of the assets held by the Plan, and acts solely on the plan-holder’s written instructions.

Frequently Asked Questions:

The use of the RRSP Program can assist the capitalization of your co-op. For more information, review the questions and answers below.

ARE CO-OPERATIVE SHARES ELIGIBLE RRSP INVESTMENTS?

Many types of shares in co-operatives are eligible investments in an RRSP. These qualified investments include common, membership, preferred or investment shares.  Qualified investments also include any type of these shares purchased using patronage allocations. One exception to this eligibility is the membership shares of consumer co-operatives, i.e. shares required for membership in a co-operative that one can reasonably expect to pay a patronage allocation in respect to consumer goods or services.  These types of shares are not eligible.

In order to use CWCF’s RRSP and/or TFSA Program, in general a co-op must be a Specified Co-operative Corporation under the Canada Income Tax Act and Regulations, meeting the following requirements:

  • Incorporated under a co-op act
  • 90% of members are individuals, co-operatives, or corporations or partnerships engaged in farming
  • 90% of the shares are held by members
  • The co-op holds out the prospect of allocating patronage returns
  • None of its members (except other cooperatives) have more than one vote

For more detail, see the definition of Specified Co-operative Corporation in Income Tax Regulation section 4901(2), and Income Tax Act section 136(2).  To determine whether or not your shares are RRSP/TFSA-eligible under the Specified Co-operative provisions, your co-operative must have an independent accountant (CA, CMA, CGA) confirm their eligibility, and that each annuitant, together with related parties, owns less than 10% of the issued shares of any class of the co-operative, on the Worker Co-operative and Specified Co-operative Corporation Shares Declaration.

If a co-operative does not meet the definition of Specified Co-operative Corporation above, it may be possible to qualify under other sections of the Income Tax Act as a Non-Specified Co-operative.  In that case, an opinion by an independent lawyer or accountant acceptable to Concentra Trust is required.  To date, the only co-operatives which have been eligible to use the CWCF program as Non-Specified Co-operatives are some of the renewable energy co-operatives in Ontario.

HOW CAN THIS HELP MY CO-OP?

Because the RRSP defers the payment of income tax, it directly benefits the members by reducing their current year’s income tax, which allows before-tax dollars to be invested by the member into the co-op. It also means that the large pool of capital which members and non-members have already placed in RRSPs becomes a potential source of capital for the co-op.

WHAT IS A SELF-DIRECTED RRSP?

A self-directed RRSP in one in which the individual (called the “plan-holder) determines which and what types of investments are to be held.  The individual sets up a self –directed contract under a government approved Registered Plan. The CWCF has such a Plan, which has been registered through Concentra Trust.

CAN CO-OP SHARES I’VE INVESTED PREVIOUSLY BE PLACED IN MY RRSP?

Yes.  The provision making co-op shares RRSP-eligible applies to both contributions of new co-op shares, and to the rolling over of currently owned shares.  If you’re rolling current shares into your self-directed RRSP, this is called a contribution “in-kind”.  This is the simplest way to make a contribution. One just buys the shares from your co-operative in the usual way and then uses them to make the contribution on the appropriate forms provided by the CWCF.

CAN I USE MONEY IN AN EXISTING RRSP TO BUY SHARES IN MY CO-OP?

Yes, you can take money from an existing RRSP and transfer it into your self-directed RRSP, and purchase new shares in you co-op as part of your new Self-Directed RRSP. This is called a Transfer In and the CWCF provides specific forms to complete this type of transaction.

HOW DO I DETERMINE THE “MARKET VALUE” OF MY SHARES?

This is a very important question.  Even though most co-ops have par value shares, the “market value” is the relevant measure used by the Canada Revenue Agency (CRA) to determine the value of the shares you are placing inside your RRSP.  It is essential that you realistically estimate the market value of your shares at the time of making the RRSP contribution.  For most purposes the par value is the appropriate value.  However, the safest way to determine market value is to have a business appraisal done.  As this is impractical for most co-ops, we make the following suggestions to assist you in valuing your shares.

Generally, the market value of a share would be the amount the member would receive for that share if the co-op were dissolved, and the proceeds distributed, on the day of valuation.  The simplest way to value your shares may be, in fact, to take the par value.  However, if your co-op has been operating with substantial losses, you will either have to allocate the losses to the shares to reduce their true value, or else have a very good justification for claiming their market value is still their par value. If you are purchasing new shares, the market value will be the price you pay.

WHO IS RESPONSIBLE FOR DETERMINING THE MARKET VALUE OF SHARES?

It is the individual plan-holder’s responsibility to ensure the shares are contributed at their “market value”.   It is each individual’s responsibility to ensure that the market value reported is accurate.  If an individual is audited by the CRA, she or he is legally responsible to defend the accuracy of the share valuation.  To meet this requirement, the investee co-operative is required to complete a form called “Issuer Representation Letter” which provides the current market value of the shares. The CWCF provides this form.

WHAT ARE THE RESPECTIVE RESPONSIBILITIES OF THE CWCF, EACH CO-OP AND THE PLAN-HOLDER UNDER THE CWCF GROUP PLAN?

For a full explanation, each plan-holder is responsible to read the complete Agency Agreement.  Please note that samples of all required documents are attached to the Agreement, so that your co-op will not need to draft any documents, but simply use those provided as required in each particular case.  What follows is a brief summary of each party’s responsibility. For complete instructions see the CWCF’s “Self-Directed RRSP Support Manual for Co-operatives” attached below.

  1. The CWCF will market the group plan to its members, provide information about the group plan,  provide all required documentation and receive and verify completeness of documentation.
  2. CWCF will carry out all required administration of the Plan including issuing receipts to the plan-holder for tax deduction purposes, keeping the accounting records for the plan, providing annual statements to the plan-holder and reporting to the CRA.
  3. The Co-op will sign the Agency Agreement in triplicate, remit administration fees annually to the CWCF and receive from its members the required documentation, verify its completeness and forward it to the CWCF. An officer of the Co-op must also confirm the market value of the shares being contributed to the SD RRSP.
  4. The individual plan-holder will complete and sign the following:  (1) the self-directed RRSP application form, (2) the member authorization form, (3) the Small Business Shares Annuitants Declaration (4) Fees Schedule, and (4) a Deposit Form.

IS THERE AN ANNUAL FEE FOR THE SELF-DIRECTED RRSP?

The individual plan-holder pays an annual fee of $50 (including HST) subject to any fee changes the CWCF deems necessary. This fee is collected by the Co-op and remitted by the Co-op as noted in above.

DOES MY CO-OP HAVE TO BE A MEMBER OF THE CWCF FOR ME TO TAKE ADVANTAGE OF THIS  RRSP PLAN?

Yes, your co-op must be a CWCF member.  If your co-op is a worker co-op, it becomes a Regular Member; if another type of co-op, then it becomes an Associate Member.  If your co-op has not become a member, it may join by completing the appropriate attached application form (p. 5 or p. 6 of this document, below). Annual dues for Associate Member Co-ops that use the RRSP program are $100.  Annual dues for Regular Worker Co-op Members are $50 for the first year, then on a sliding scale.  For more information contact Hazel Corcoran, Executive Director (re: membership) at 403-276-8250 – hazel@canadianworker.coop or Kirstin Van Hattem, RRSP Program Manager (re: the RRSP Program), 902- 678-1683 – rrsp@canadianworker.coop

WHAT IS THE DEADLINE FOR THE CO-OP TO RETURN DOCUMENTATION AND CHEQUES OR SHARES TO THE CWCF?

Each time a member applies for, or makes an additional contribution to, a self-directed RRSP under the group plan, the co-op must receive and remit required documentation within 5 business days to the CWCF.  However, in the second half of February, the end of “RRSP season”, the co-op must ensure that any new self-directed RRSP application form is faxed by the last day of February to CWCF, at fax number 902- 678-0780 The co-op must then mail the completed package (regular mail is accepted, as long as it’s mailed out by that year’s RRSP deadline) to the CWCF RRSP Program Manager in Nova Scotia.

WHAT KINDS OF INVESTMENTS CAN I PLACE IN A SELF-DIRECTED RRSP UNDER THE CWCF GROUP PLAN?

Only the following are eligible instruments:  eligible securities in participating co-ops.

ARE MEMBER LOANS IN MY CO-OP, IN ADDITION TO SHARES, ALSO ELIGIBLE?

Yes, but only where there are more than 100 members in your co-op and certain other conditions are met.  If you want to take advantage of the self-directed RRSP provisions, in most cases you will have to convert your loans into shares.

HOW MUCH CAN I CONTRIBUTE TO A SELF-DIRECTED RRSP?

The same limits that apply to RRSP contributions generally apply to self-directed RRSPs.   Your deduction limit appears on the Notice of Assessment sent to you by CRA.

ARE THERE ANY DOWN-SIDES TO PLACING MY CO-OP SHARES IN A SELF-DIRECTED RRSP?

There is a certain level of risk associated with placing all or much of your RRSP investments inside your co-op.  If your co-op fails, you will have lost the RRSP funds held by your co-op.  This risk will have to be weighed by each individual as you decide whether to place co-op shares, or more secure investment instruments, in your RRSP.  On the other hand, if you would not be contributing to an RRSP outside your co-op anyway, by investing in your co-op shares inside an RRSP you are not incurring any additional risk.  The level of risk you are comfortable with in your RRSP is something only you can decide.

LIST OF RRSP/TFSA MEMBERS

Below is a partial listing of Specified Corporate Co-operatives, Non-Specified Co-operatives, Community Economic Development Investment Funds (CEDIFs), and Community Economic Development Businesses (CEDBs) who are members of CWCF’s RRSP/TFSA Program. Individuals with investments in these companies may choose to hold those securities in an RRSP or TFSA account administered by CWCF. Similarly, individuals who currently have securities held in trust by CWCF may opt to re-invest funds earned on their current investments with another of our program members.
 
Note: As a Self-Directed RRSP/TFSA Program, CWCF is not permitted to provide information regarding current or upcoming offerings. However, please feel free to contact any of our listed members to inquire about potential investment opportunities.
Member Name Contact Name Phone Email Address 1 Address 2 Website
Local Investing YYC info@localinvestingyyc.ca AB  www.localinvestingyyc.ca
Sangudo Opportunity Development Cooperative Dan Ohler (780) 785-3700 SangudoODC@gmail.com Box 422 Sangudo, AB  T0E 2A0
Crowsnest Opportunity Development Cooperative Shar Cartwright (403) 562-8858 scartwright@albertacf.com Box 2040 Blairmore, AB T0K 0E0
Ottawa Renewable Energy Co-operative Inc. 1 (855) 338-OREC (6732) info@orec.ca 969 Wellington St. W., Suite 200 Ottawa, ON K1Y 2X7
Community Energy Development Co-operative (CED Co-op) (519) 279-4045 invest@cedco-op.com 1633 Snyder’s Rd E (PO Box 67) Petersburg, ON  N0B 2H0 www.cedco-op.com
Carte Blanche Co-operative International Inc. Roxanne Forde (416) 728-8393 r_dforde@hotmail.com 3 – 1750 The Queensway Suite 213 Etobicoke, ON M9C 5H5
SolarShare 1 (866) 560-9463 invest@solarbonds.ca 240-401 Richmond St. West Toronto, ON M5V 3A8 www.solarbonds.ca
PEI Craft Brewery Investment Inc. David McGuire (902) 629-0029 PEI
Still The Water Movie Inc. (902) 724-2883 info@stillthewatermovie.com 629 Water St E Summerside, PE C1N 4H8 https://stillthewatermovie.ca/
Solar Island Electric Steve Howard (902) 436 7111 steve@renewablelifestyles.ca 4 Slemon Park Drive Suite 6 Slemon PArk PE C0B 1A0 http://renewablelifestyles.ca/solar-island-electric.php
Northumberland Wind Field Inc. Sharon Henderson (902) 485-9173 sharon.henderson@ns.sympatico.ca RR2 Scotsburn NS B0K 1R0
Sou’West Wind Field Richard Nickerson (902) 765-3330 nicsue@ns.sympatico.ca 9 Robie Ave. Greenwood, NS   B0P 1R0
Watts Wind Energy Candice Blaney (902) 482 0920 cblaney@wattswind.com 230 Lucasville Road Middle Sackville, NS www.wattswind.com
KA’NATA Investment Fund Inc Fiona Diamond fiona@brookesdiamond.com NS
Scotian Wind Inc. Terry Norman, President & CEO (902) 429-8810 terry@scotianwind.ca 211-94 Bedros Lane Halifax, NS B3M 4X3 www.scotianwind.ca
FarmWorks Investment Co-operative Limited Linda Best (902) 542-3442 lbest@ns.sympatico.ca 70 Eden Row Greenwich, NS B4P 2R2 http://farmworks.ca/home/
The Chebucto Wind Field Inc. Shelley Wilcox (902) 209-5911 swilcox@cedifmgmt.com 5 Bligh St Dartmouth, NS B3A 1K8
Horton Ridge Malt & Grain Company Alan Stewart (902) 542-1942 alan@hortonridgemalt.com  2512 Ridge Rd. RR#3 Wolfville, NS B4P 2R3
BCA Growth Fund Ltd. Gerald Campbell (902) 567-0000 geraldc55@gmail.com PO Box 1201 Sydney, NS B1P 6J9
Mutual Alliance Co-operative Limited John Wall (780) 263-0651 mutualalliancecooperative@hotmail.com 1420-1801 Hollis St. Halifax, NS B3T3N4 mutualalliancecoop.com
Newcapeland Properties Co-op Ltd. John Wall (780) 263-0651 nclcoop@hotmail.com 99 Wise Rd. Suite 1100 Dartmouth, NS B3A4S5 www.nclcoop.com
Solar Scotia Energy Inc. Lee Kaizer (902) 701-3801 info@solarscotiaenergy.ca 57 Webster Street #201 Kentville, NS B4N 1H4 www.solarscotiaenergy.ca