RRIF MINIMUM WITHDRAWALS REDUCED 25% FOR 2020
On March 18, 2020, the Government of Canada announced portions of its COVID-19 Economic Response Plan, including details of Bill C-13, the COVID-19 Emergency Response Act which included proposed changes to the calculation of the 2020 required minimum withdrawal for registered retirement income funds (RRIFs). Recognizing current market conditions may impact many seniors’ retirement savings, the bill reduces minimum withdrawals from RRIFs for 2020 by 25%.
To help clients understand the impact of these changes on their clients’ RRIFs, CWB Trust Services has prepared the following Frequently Asked Questions:
1. How will the reduced minimum apply for an annuitant that is transferring their RRIF from one institution to another?
The relinquishing institution should pay the minimum unless instructed otherwise by the annuitant. The annuitant can request the minimum payout to be reduced by 25% less than the original calculated amount. For annuitants who do not choose to reduce their minimum payments, the original calculated minimum can still be applied without withholding tax.
2. How will the reduced minimum apply for annuitants with scheduled payments?
Annuitants may request to reduce their remaining schedule of payments to meet the reduced minimum amount.
3. For investors who have already received their full 2020 minimum, can they recontribute the 25% reduction back to their RRIF?
At this time, CRA has indicated that re-contributions of the 25% will not be permitted.
4. Is this reduction mandatory or optional?
The 25% reduction in the annual minimum payment is optional.
5. Are Life Income Fund minimum payments included in this?
Yes, LIFs would follow the same minimum requirements and options.
6. Are these changes effective January 1, 2020 or on a go-forward basis?
This change is applicable for 2020 only and only in those situations where the full minimum amount has not yet been paid to an annuitant.
7. What happens if annuitants have already taken their annual minimum payment prior to March 2020?
This change will not apply to them as they have already received their 2020 minimum required payment.
8. Is the taxable amount on any excess based on the unreduced minimum, or the newly reduced 25% minimum?
Withholding tax will be due on amounts greater than the unreduced minimum amount.
Clients looking for additional clarity on the Act and its impacts on RRIFs are encouraged to visit the Government of Canada’s official page here: https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/registered-retirement-savings-plans-registered-retirement-income-funds-rrsps-rrifs/economic-statement-measure-annuitants-rrsp-rrif.html
To our valued Investors,
As we are all making adjustments to the new realities in our lives due to COVID-19, we want to communicate to you that we will continue to provide services to our investors.
We have had inquiries from investors with questions about how the fall in the equity markets is affecting their investments with CCMBC Investments. We would like to assure you that your investments continue to pay interest and dividends as outlined in the Offering Memorandum (OM). Currently the interest rate on the Notes is 2.9%. This is subject to change on July 1 and January 1 of each year based on the Bank of Canada Overnight Rate at that time. The Preferred Shares dividend rate remains constant at 1%.
Also, as noted in the OM, your investments are used to provide mortgage loans to MB churches, other MB entities, and MB pastors. Any excess funds are invested in a diversified portfolio that is focused on capital preservation. At this time, the portfolio is not exposed to the public equity markets. Currently, approximately 60% of CCMBC Investment Ltd’s assets are held in MB mortgages.
As you could expect, some churches may need to defer payments for a short time as their donations come in at a slower rate. The loans are still earning interest and we expect to collect full payments at a later date.
In an effort to practice social distancing, while balancing service to you with the self-care of our employees, we are providing opportunities for our staff to work from home or alternate days in the office. While we focus on meeting your needs, we ask for your grace and patience as our response times may be longer than you have experienced in the past.
We continue to thank you for your investment in ministry by supporting the work of the churches through the funding of mortgages.
Blessings and peace to you,
Bertha Dyck, Chief Financial Officer
Jim Davidson, Chief Executive Officer
Jim Davidson only planned to make a short stop on his way to retirement when he accepted the role of interim CFO of CCMBC in 2015, but the transformation of the investment program into a new legal entity took longer than expected.
Reorganization of the CCMBC deposit program and transfer of lending and borrowing into the newly created CCMBC Investments Ltd. (a wholly owned subsidiary of CCMBC Legacy Fund Inc.) was formally completed Aug. 30, 2019.
“I naively thought this process would only take 6 months,” says Davidson. “Four and a half years later, I am pleased to present the current solution.”
The process began in 2012 when the third-party legal and accounting consultants engaged to review the denomination’s unique RRSP and mortgage lending program flagged the need to make regulatory changes to bring the program into compliance with securities law.
This led to the creation of a separate entity, CCMBC Legacy Fund Inc. (Legacy).
Legacy performs administrative functions transferred from CCMBC including the employees working in finance, payroll, and accounting services. The for-profit entity CCMBC Investments Ltd. now carries out the lending and investment activities. Legacy is the only voting shareholder of CCMBC Investments Ltd.
Unique in Canada, CCMBC Investments was developed through discussions with legal and financial consultants to meet the needs of CCMBC’s investors, continued ministry, and comply with Canadian tax and securities law.
“The ministry remains the same,” says Legacy CFO Bertha Dyck. “We continue to offer cash accounts, TFSA, and RRSP/RRIF accounts. The funds you invest with us continues to provide mortgages for MB churches, camps, schools, and pastors. Excess funds not currently needed for mortgages are invested in order to earn a return and remain liquid enough to provide mortgages when needed.”
Amid structural changes behind the scenes, Davidson wanted investors to see as little disruption to their experience as possible. “This structure most closely resembles the program we have been running for the past four decades,” says Davidson.
One new aspect is the involvement of Capstone Asset Management, a faith-based private wealth management firm based in Langley, B.C., who functions as the exempt market dealer. They are registered with the securities commission, capable of facilitating the selling of securities between CCMBC Investments and the investor.
“It’s a privilege for Capstone to have been selected by the CCMBC board to partner with them as they walk out their ministry and mission,” says Glenn Murray, president of Capstone. “It’s also an opportunity for Capstone to serve the investors as they steward their wealth and leverage that through their investment in CCMBC ministry.”
“After Sept. 1, 2019, all new or additional money added to investments in CCMBC Investments will require a conversation with Capstone to complete the paperwork for the transaction,” says Stephen Smith, chief compliance officer of Capstone. “To comply with securities regulations, our obligations are to ensure investors are aware of the nature of the investment they are making, determine that it is suitable for their circumstances, verify their receipt of the Offering Memorandum, and confirm that they are eligible to make the investment under a prospectus exemption.”
Once Capstone has completed the necessary paperwork, an investor will send their investment proceeds directly to CCMBC Investments.
After a temporary restriction on accepting new funds, as of Sept. 1, 2019, CCMBC Investments is open to accepting new funds from existing or new investors who should contact Capstone (1-855-437-7103) to initiate the process. Those in the Lower Mainland can visit Capstone’s Langley office or see Capstone staff in Abbotsford (32025 George Ferguson Way, next to the BCMB office) on Friday afternoons from 12:30–3:30 p.m.
Davidson, whose role shifted to CEO of Legacy when Dyck was appointed CFO in 2018, continues on a contract basis to provide consultation and support over the next few months as outstanding items need to be completed. “It has been a joy working with CCMBC,” he says.
This article was originally published by the MB Herald.
On January 1, 2018, CCMBC Legacy Fund Inc. (Legacy) commenced operations to provide support to CCMBC, MB churches, and MB pastors. This is the Resourcing Ministry service of CCMBC, one of the four core ministries that CCMBC has committed to provide. In addition, Legacy will also be responsible for the majority of the administration functions for the Canadian conference.
The first phase of this transition included the establishment of a new general ledger, new bank accounts, and the transition to Legacy of all CCMBC support staff in finance, information technology, infrastructure management, and administration of the mortgage ministry provided to MB churches and active MB pastors. The CCMBC Communications team remains as part of the CCMBC operations. This team supports provincial conferences and national MB boards and events. The executive director, executive assistant, and Centre for MB Studies director round out the staff team continuing under CCMBC.
The structure that is now operational is aligned with the budgets presented at the 2017 AGM and passed by the delegates.
Effective January 1, 2018, Bertha Dyck assumed the role as Chief Financial Officer of Legacy. In this role, she provides financial oversight to CCMBC operations. Churches, pastors, staff, and MB members should not see any difference in how the support services are being delivered.
The second phase of this transition will be the legal transfer of the assets and liabilities that were previously part of the Stewardship operations of CCMBC. The Legacy Board recommended that the CCMBC Executive Board approve the assignment of these assets from CCMBC to Legacy. This motion was approved by the CCMBC Executive Board in December 2017. Our staff is now working with our auditors KPMG and with legal counsel Filmore Riley to finalize the valuation and legal documentation to finalize these transfers.
In early February 2018, we were advised by the Ontario Securities Commission and The Manitoba Securities Commission that our application for exemption from the requirement to file a prospectus and register as a dealer of securities was denied. Our application was based on CCMBC and Legacy being not-for-profit, charitable entities that were not in the business of trading or advising in securities. The commissions did not accept our interpretation of the exemptions, citing that the exemption from the requirement to file a prospectus was not intended to be used at the magnitude of our programs, and citing also that in the commissions’ view, CCMBC and/or Legacy would likely be considered to be in the business of trading in securities.
Although this was disappointing, the commissions provided us with alternatives that we could evaluate and determine the next steps forward. All the alternatives would lead to full compliance with all securities commissions in Canada.
In addition, we have been advised that we should curtail the acceptance of deposits for both the registered and non-registered deposits until we have been brought into full compliance with applicable securities laws. Requests for withdrawals will continue to be acted upon.
The Legacy Board recommended that we now proceed with an evaluation of the registration alternatives available to us. This has been approved by the CCMBC Executive Board. We are now working with our financial, legal, and investment consultants to re-evaluate the alternatives and make a decision as to the issuer model and the mortgage and investment models and to determine whether we will make further applications with the securities commissions. It will be important for Legacy to clearly understand what the costs and benefits are for each of these alternatives.
We are committed to the principle that Legacy be fully compliant with all applicable securities commissions and other applicable laws associated with its ministry operations. We are also committed to supporting the Resourcing Ministry service of CCMBC.
This article was originally published by the MB Herald
Member at Large, Legacy Board
3 year term (ending in 2020)