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ADVERTORIAL
Do you know of a business or individual DOLLARS & SENSE

that should be recognized for their

contributions to Cambridge? IPP’s an Intergenerational

Nominations are now being acccepted in the following categories for the Annual
Cambridge Chamber of Commerce Business Excellence Awards Approach to your Pension.
• Business Of The Year – 1-49 Employees • New Venture of the Year
• Business Of The Year – 50 Employees & Over • Marketing Excellence Award
• Outstanding Workplace – Employer of the • Young Entrepreneur Award When you own a Family business there is much to think about The terms outlined in the IPP Plan Text are written to allow flexibility in
the contributions made by the Plan Sponsor for the different plan mem-
Year • Sustainability Award as you approach retirement. Succession planning and ensuring bers. For members under the age of 37, corporate contributions are to be
the financial comfort of your loved ones are two topics that often made to the DC component of the plan.
make the top of the list. An IPP can help you achieve both.
Once it becomes advantageous to do so, members can elect to transfer into
Upon retirement, many small businesses are sold or passed on to family the defined benefit (DB) component of the plan.
members. In these situations, the family members who will continue the op-
erations of the business can be added as members of the existing individual This approach allows all plan members, regardless of their age when they
pension plan (IPP). joined the IPP, to accumulate the maximum tax-deferred retirement sav-
ings allowable under the Income Tax Act.
Transferring Registered Assets to the Next Genera-
tion on a Tax-deferred Basis Getting a Tax Deduction with Terminal Funding
Many business owners choose to sell or pass on their busi-
The normal form of pension payable from an IPP is a lifetime ness to family members. With an IPP, an optional contribu-
pension, 2/3 of which reverts to the surviving spouse for his/ tion can be made at retirement to fund benefits that could
her lifetime upon the retired member’s death. Upon the sur- not be paid in advance. This contribution is called terminal
viving spouse’s own death, any remaining assets in the IPP funding and can represent a significant amount that can be
are considered surplus and are fully taxable to the beneficiary tax-deductible for the company.
or estate as the plan is then wound up.
Where the IPP family plan is concerned, it is important to
Nomination forms available at www.cambridgechamber.com/EventsBusinessAwards.htm However, surplus can remain in the IPP if there remains at know that it is possible for the terminal funding contribu-
least one member in it. So, in the case of a family plan, once tion amount to be deducted from the sale price of the com-
both mom and dad are deceased, the surplus, if any, stays put pany.
and no taxes are paid as long as the child keeps the IPP open.
Funds are not paid out until the child receives his/her own This means that the company will be more affordable for
benefits, or the plan is eventually wound up. Erica Tennenbaum, CFP, FCSI the children. Talk to your accountant when the time comes
Vice President & Wealth Advisor to see if this approach may be appropriate for you.
With a family plan, rather than implement three separate one-
member IPPs, one single multi-member IPP is put in place: one pension Since many business owners wish to take some money out of their com-
plan for dad, mom and children. When both the plan member and their pany in a tax-efficient manner at retirement, the IPP family plan may be
spouse have passed away, the IPP remains active because the children are the perfect vehicle to do so.
still members of the pension plan.
Assuring Pension Payments to Retired Parents
While surplus can stay in the IPP family plan for the children in the ongoing Keeping the family business going after parents retire not only allows
IPP, current service contributions will likely be impacted in the event of the for good succession planning, but also allows children to help ensure a
premature death of both parents. It is possible that the company will be un- healthy and happy retirement for their parents.
able to make further tax-deductible contributions to the IPP for a number of
years to come. However, taxes continue to be deferred on monies remaining A family plan increases the certainty of the parents’ retirement future as
in the plan until they are paid out as benefits or surplus when the plan is the sponsoring company continues to be active after they retire, allowing
eventually terminated. That could be many years down the road. them to keep the IPP active so they can receive a pension at retirement.
If you would like more information please feel free to call our office 519-
Enjoying the Benefits of a Combined DB and DC Pension Plan 621-1307.
After age 37, IPP contribution limits become higher than those permitted
for RRSPs. For the child that is not yet over the age of 37 (when a defined Erica Tennenbaum, CFP, FCSI, Vice President
benefit (DB) plan becomes more advantageous than a defined contribution Associate Portfolio Manager and Wealth Advisor
(DC) plan) and the parents are planning their retirement, joining a family RBC Wealth Management
IPP with a combination of DC and DB components can be an effective www.ericatennenbaum.com
option.

Professional Wealth Management Since 1901

This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered
properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor
its employees, agents, or information suppliers can guarantee its accuracy or completeness. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities
Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business
segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under licence. © 2017 RBC Dominion Securities Inc. All rights reserved.
32 www.cambridgechamber.com www.cambridgechamber.com 33
Winter 2018 Winter 2018