ABOUT OUR RRSP/TFSA PROGRAM:
The Canadian Worker Co-operative Federation (CWCF) administers a Self-Directed RRSP (SD-RRSP) and Self-Directed TFSA (SD-TFSA) Program. This Program was developed to enable co-operatives and similar types of enterprises (Program Members) to capitalize their enterprises with securities held within a Registered Plan. CWCF’s Plans are registered with the Canada Revenue Agency (“CRA”) and are administered in accordance with all CRA regulations. We also work in conjunction with Concentra Trust as our Registered Plan trustee.
A SD-RRSP or SD-TFSA is an account for which the account holder (Annuitant) determines which and what types of investments are to be held. CWCF staff are not permitted to provide any investment guidance or advice, nor can they sell securities on behalf of any Program Members. CWCF may only act on instructions provided by the investor.
ACKNOWLEDGEMENT OF RISK
Investors wishing to purchase securities through a Self-Directed RRSP or TFSA should consult with a tax professional and/or investment advisor before committing their funds to a co-operative, non-profit organization (NPO) or similar entity, such as a Community Economic Development (CED) fund. Investors must remember that these can be high-risk investments. You should not depend on selling your securities – or on income earned from your securities – to fund your retirement.
For RRSP account holders: Although depositing securities into an RRSP can yield a tax deferral today, you may face long-term tax implications and liquidity issues. In general, there is no organized public market through which co-op or CED securities may be sold, which may make it difficult or even impossible for you to sell them, or to determine their Fair Market Value in order to take certain actions within your account.
RELATIONSHIP BETWEEN CWCF, RRSP/TFSA PROGRAM MEMBERS, AND ANNUITANTS
CWCF has Agency Agreements in place with each of our Program Members (i.e. security issuers, also referred to as Account Representatives), authorizing them to act as Sub-Agents on our behalf. This allows Annuitants (account holders) to deal primarily with an Account Representative, rather than with CWCF directly. Account Representatives can assist Annuitants with opening new accounts, contributing funds or securities, purchasing securities within the account, and withdrawing or transferring out funds.
You can expect to receive the following correspondence from CWCF on an annual basis:
– A statement of your account activity for the preceding twelve months (September)
– A T4RSP reflecting the withdrawal value and tax remittance amount, if applicable (by the end of February in the following year)
– A contribution receipt reflecting your total contribution value, if applicable (mailed between January and mid- to late- March)
From time to time, CWCF may update our Declaration of Trust or Fee Schedule. When this happens, the updated version will be provided to you by your Account Representative.
ANNUAL ACCOUNT FEE
CWCF charges an annual fee for administering each registered account. These fees are typically billed to our Program Members each December for accounts held the preceding year. Program Members may decide whether to pay those fees on their investors’ behalf, or invoice their investors to collect them. Your Account Representative should let you know their company’s intended policy when you open your account. If you hold more than one investment in your account, you will only be charged one annual account fee, which will be billed to the Account Representative with whom you opened the account. If you hold more than one account (e.g. an RRSP and a TFSA, or both a spousal and non-spousal RRSP), you will be charged an account fee for each account.
If the securities held within a CWCF-administered Registered Plan (i.e. SD-RRSP or SD-TFSA) gain interest or dividends, those gains must be paid by the security issuer to the Plan; they may not be paid directly to the individual investor. The funds sit as cash in a non-interest-bearing account and are available to be withdrawn, transferred or reinvested upon instruction from the Annuitant. CWCF reaches out semi-annually to Annuitants holding a cash balance of $2,000 or more to make sure they are aware of the available funds and give them the opportunity to take action if they wish.
RRSP ACCOUNT MATURITY
CRA legislation states that an RRSP must mature before the end of the calendar year in which the Annuitant reaches 71 years of age. Annuitants whose RRSP is maturing will be required to withdraw all funds and investments from the account, or transfer them out to a RRIF with another financial institution if they qualify. You will receive a letter from CWCF early in the year in which you turn 71 years of age detailing the various options that may be available to you.
If your investment is withdrawn in-kind (i.e. as securities), you will still be required to report the value of your securities as income even though you did not sell or redeem them for their original cash value. In this case, you would continue to own the securities outside of the RRSP. The CRA views this transaction as an income withdrawal, and as such CWCF is required to withhold tax based on the total Fair Market Value of the assets. If there is insufficient cash in the RRSP to pay the prescribed amount of withholding tax, additional funds must be generated by contributing to the RRSP, transferring in from another registered plan, or redeeming part of the investment (if possible). You will receive a T4RSP for the gross value of the withdrawal to be filed with your personal income taxes.
NOTE: TFSAs may be held at any age, and therefore this legislation does not apply to TFSA investments.