Fact Sheet - Terminal Funding

Originally posted on Jun 02, 2012
Share on:
WhatsApp
Twitter
Facebook
LinkedIn
Fact Sheet - Terminal Funding

When a business owner is selling the business or about to retire, transferring assets can trigger tax consequences. Personal Pension Plans (PPPs) do offer a retiring plan member with a one-­‐time opportunity to upgrade the basic pension promised under the plan with additional benefits. The most common ancillary benefits include:

 

·         Early unreduced pension benefits

·         CPP bridge payments

·         Indexing to Consumer Price Index

 

These benefits must be funded by the corporation sponsoring the PPP, assuming it has additional cash on hand.  When a corporate sponsor of a PPP makes a one-­‐time contribution to the PPP to settle the cost of the ancillary benefits, it can claim a supplemental tax deduction against its corporate income.

 

This process is known as “terminal funding”. It can occur when the member retires, or if the plan itself is terminated prior to retirement.

ppp101 Personal Pension Planning For Corporate Owner-Managers

In light of the new tax rules that penalize passive investments within CCPCs, advisors must understand how pension legislation can become a powerful tool to deal with wealth succession, business succession, and tax optimization within a corporate environment.

Learn more about the ppp101 course
Online Course

You can receive more posts like this directly in your inbox by subscribing to our mailing list below.

Join the mailing list

Rest assure we won't send any spam.
Only high qualify posts about the Pension space and updates with regards to INTEGRIS