FAQs for Program Members

Please note: In the following section, the terms “Security Issuer,” “Program Member” and “Account Representative” may be used interchangeably.

Q: How can membership in CWCF’s RRSP/TFSA Program help my organization?
A: Because an RRSP defers the payment of income tax, it directly benefits investors by reducing their current year’s income tax, which allows for pre-tax dollars to be invested by the account holder into the organization. It also means that the large pool of capital that members and non-members have already placed in RRSPs or TFSAs becomes a potential source of capital for the organization.

Q: Does our enterprise have to be a member of the Canadian Worker Cooperative Federation to take advantage of the RRSP/TFSA Program?
A: Yes, only CWCF members are permitted to use the RRSP/TFSA Program. If your enterprise is a worker co-op (including a multi-stakeholder co-op with substantial worker control), you can apply for Regular Membership; if it is a different type of co-op or another eligible entity (e.g. Community Economic Development Fund or non-profit organization), you can apply for Associate Membership. Your enterprise must remain a member in good standing by paying annual Membership Dues in order to continue using CWCF’s RRSP/TFSA Program. Current dues rates are as follows.
– Regular Members: $50 + applicable G/HST for the first two years, after which time the annual dues rate is determined by a sliding scale based on the co-op’s payroll figure for the year.
– Associate Members: $100 + applicable G/HST annually.

Q: Are co-operative shares and other securities eligible investments for Registered Plans (i.e. RRSP or TFSA accounts)?
A: Many types of co-operative securities are eligible investments for a Registered Plan. These qualified investments include common, membership, preferred or investment shares, and in some cases, bonds. 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, a co-op must generally 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 your shares are RRSP/TFSA-eligible under the Specified Co-operative provisions, your co-operative must have an independent accountant (CA, CMA, or CGA) confirm their eligibility. The accountant must also confirm that each Annuitant, together with related parties, owns less than 10% of the issued shares of any class of the co-operative. To provide said confirmation, the accountant must complete CWCF’s Worker Co-operative and Specified Co-operative Corporation Shares Declaration form each time an investment is made through a registered plan.

Q: What other types of investments are eligible to be held in Registered Plans administered by CWCF?
A: If a co-operative does not meet the definition of Specified Co-operative Corporation (see previous question), it may be possible to qualify for RRSP/TFSA eligibility under another section of the Income Tax Act as a Non-Specified Co-operative. In that case, a letter of opinion by an independent lawyer or accountant as deemed acceptable by our Trustee, Concentra, 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-ops in Ontario.

In addition to Specified Co-operative Corporation securities, CWCF is able to hold securities for any Community Economic Development Investment Fund (CEDIF – Nova Scotia) or Community Economic Development Investment Business (CEDB – Prince Edward Island), as each of these provinces have legislation in place deeming such securities as Qualified Investments for registered plans.

CWCF is also authorized to hold securities for Community Economic Development Corporations (CEDCs – New Brunswick). Unfortunately, NB does not have the same type of blanket legislation as NS and PEI, so CEDCs must provide an Opinion Letter from an independent lawyer or accountant confirming that the securities are Qualified Investments for the purpose of being held in a Registered Plan, and outlining which specific sections of the Income Tax Act and Regulations this determination has been based upon.

Community Bonds for non-profit organizations (NPOs) may also be held in Registered Plans by CWCF, with the same requirement that a letter of opinion from an independent lawyer or accountant must be provided and deemed acceptable by CWCF’s Trustee.

Q: How does our enterprise determine the Fair Market Value of its securities?
A: This is a very important question, and there is no simple answer. Although most co-ops and similar types of businesses have par value securities, the Fair Market Value (FMV) is the relevant measure used by the Canada Revenue Agency (CRA) to determine the value of the securities being placed inside a Registered Plan. The FMV must be estimated realistically at the time an investor initiates a security-related transaction within a Registered Plan. An ideal way to determine FMV is to have a business appraisal completed. However, we recognize that this can be a costly and impractical undertaking for many of CWCF’s members, so we offer the following suggestions to assist you in valuing your securities:

  • When an offering is in progress, the sale price of the securities represents the current FMV, assuming the securities are actually being purchased for that price by investors.
  • If an audit or similar examination has been conducted, the security value may be determinable by taking all assets and deficits into account. The FMV would be the amount that an investor would receive per security if the issuer were to dissolve and its proceeds distributed on the day of the valuation.
  • Sometimes the last known trade value (either as sold by the issuer or traded privately between investors) can represent the FMV. In the case of a private sale between investors, it must be considered whether both parties were acting reasonably in their best interests to make the market for the purchase/sale of the securities, and that they were acting at arms’ length from each other. This method may be considered appropriate to determine a security’s FMV is if the trade occurred within the last twelve months.
  • As a last resort, and under very limited circumstances, FMV may be determined using the Net Book Value. This should only be used if there is no other option (i.e., a maturing account), otherwise the transaction involving securities where a current value is needed should be delayed until a FMV can be determined. 

Generally, the FMV of a security would be the amount the member would receive for that security if the issuer were dissolved and its proceeds distributed on the day of valuation. If an offering is ongoing, the FMV may be considered the current sale price. Similarly, if a private sale has recently (i.e. within the past 12 months) taken place between two investors who were acting at arms’ length and reasonably in their best interests, that may be considered the FMV. The simplest, most accurate way to value your securities may be, in fact, to take the par value. However, if your enterprise has been operating with substantial losses, you will either have to allocate the losses to the securities to reduce their FMV, or else have a very good justification for claiming their FMV is still their par value.

Q: Who is responsible for determining the Fair Market Value of securities?
A: It is the individual investor’s (i.e. Annuitant’s) responsibility to ensure that securities are being contributed to a registered plan at their Fair Market Value (FMV). The Annuitant must ensure that the FMV being reported is accurate. If an Annuitant is audited by the Canada Revenue Agency (CRA), they are legally responsible to defend the accuracy of the security valuation. To meet this requirement, the Security Issuer is required to submit a form to CWCF called the Issuer Representation Letter (IRL), which provides the current FMV for one security. Please contact CWCF to request a template for this form.

Q: What are the respective responsibilities of the Canadian Worker Cooperative Federation, the Security Issuer, and the Annuitant under CWCF’s RRSP/TFSA Program?
A: For a full explanation, each Security Issuer (i.e. Program Member / Account Representative) is required to read and sign CWCF’s Agency Agreement, as well as refer to the Support Manual provided to the Designated Representative for the organization. Each Annuitant (i.e., account holder) is required to read the complete Declaration of Trust when completing their account-opening paperwork, as well as read and sign CWCF’s Program Overview & Risk Acknowledgement form. A brief summary of each party’s responsibilities is below.

The Canadian Worker Cooperative Federation (CWCF) will:

  • offer its Group Registered Plan services (i.e. Self-Directed RRSPs and Self-Directed TFSAs) to its members, upon the members’ acceptance to the Program;
  • provide information and updates about the Program, including policies, procedures and paperwork, to the Designated Representative for the Security Issuer;
  • provide all required documentation to the Security Issuer in electronic format;
  • receive and verify completeness of paperwork submitted by or on behalf of Annuitants; and
  • carry out all required administration of the Registered Plans, including processing transactions, issuing tax receipts to Annuitants as necessary, providing annual account statements to Annuitants, maintaining the accounting records for the Plan, and filing all requisite reports with the Canada Revenue Agency (CRA).

The Security Issuer will:

  • read, sign and abide by the terms of its Agency Agreement with CWCF;
  • remain a member in good standing by paying annual membership dues to CWCF;
  • provide its investors with the most current versions of all required documentation and assist them with completing it as necessary;
  • verify the completeness and accuracy of paperwork before forwarding it to CWCF for processing, referring to the Support Manual to ensure compliance with all requirements; and
  • confirm the Fair Market Value (FMV) of the Issuer’s securities as necessary for applicable transactions, or as otherwise requested by CWCF.

The Annuitant will:  

  • complete all paperwork required to open a Registered Plan, with assistance from the Account Representative as necessary;
  • ensure CWCF is updated if their contact information changes;
  • notify CWCF immediately of any inaccuracies on official tax slips, receipts, and/or account statements;
  • provide an accurate FMV to CWCF if requested; and
  • pay any and all fees levied on their account either directly to CWCF or to their Account Representative, as arranged at the time the account is opened.

Q: What is the deadline for the Security Issuer to return documentation, cheques or certificates to the CWCF?
A: Each time an investor applies to open, or makes a contribution to, a self-directed RRSP or TFSA, the Security Issuer must remit the funds and applicable paperwork to CWCF within thirty (30) days of receipt for deposit to the account. Subsequently, the Security Issuer must provide to CWCF, within sixty (60) days of receipt of funds intended for the purchase of securities, the corresponding Certificate or Register Confirmation Letter for said purchase.

The CRA’s RRSP contribution deadline for a given tax year is typically the 60th day of the following calendar year. In the event that day falls on a weekend, the deadline will be extended to the next business day. It is important to ensure that all contribution funds and paperwork are received by CWCF on or before this deadline. Please note that given our office’s rural location, “overnight delivery” can sometimes take 2-3 business days to reach us. If you have concerns about being able to get all required documents to us by the contribution deadline, please reach out as early in the new year as possible so that we can discuss possible alternate arrangements.

Q: Are member loans in a co-op a Qualified Investment for a registered plan?
A: Yes, but only if there are more than 100 members in the co-op and certain other conditions are met as well. If you want to take advantage of the registered plan provisions, in most cases you will need to convert your loans into shares.