The purpose of the Member Rewards Plan is to provide each member with an opportunity to share in earnings while maintaining the credit union in a strong equity position.
The amount any member receives is based on utilization of Credit Union deposit and loan services, since this is primarily what makes the earnings possible.
1. How does the Member Rewards Plan work?
After satisfying requirements for reserves, the Board of Directors may set aside a portion of earnings for members who have borrowed and saved at the Credit Union.
Members can benefit from two components of the Member Rewards Plan- patronage and share allocation.
Patronage and share allocations are distributed to members in the form of Surplus Shares. This ensures a strong equity base for the future of Crosstown Civic Credit Union and also ensures that the members benefit in relation to their utilization of Credit Union services.
2. What type of accounts qualify for Patronage Allocations?
We are pleased to extend participation in the Member Rewards Plan to all borrowing and saving members. For loans, all interest paid on personal loans, mortgages, business loans, and lines of credit qualifies for the calculation of the patronage allocation. For deposits, all interest earned on non-registered deposits qualifies.
3. How much will each member be allocated?
Saving and borrowing members are allocated a percentage of the interest they earned and the interest they paid during the year. The balance of the patronage allocation will be credited in the form of Surplus Shares to their individual Member Rewards Plans. The allocation rate may vary from year to year as it depends on the amount of earnings achieved. The following examples illustrate a patronage allocation rate of 5% on both deposits and loans:
|Lending and Borrowing||Member A||Member B||Member C|
|Interest paid on mortgages, personal loans and lines of credit:||$6,400||NIL||$650|
|Interest earned on savings and term deposits:||$1,100||$4,000||$1,050|
|Total interest paid and received:||$7,500||$4,000||$1,700|
|An allocation of 5% results in a credit to the individual Member Rewards Plan(s) of:||$375||$200||$85|
4. Will allocations be made each year?
The Board of Directors will decide each year whether earnings warrant an allocation. Both founding partners of Crosstown Civic Credit Union had a long history of profit sharing. Civic Credit Union introduced the Member Rewards Plan in 1992. Crosstown Credit Union commenced patronage allocations in 1993. Since then allocations were disbursed to the members of both credit unions every year.
5. Will Surplus Shares earn a return?
The Board of Directors may declare a share allocation on the existing Surplus Shares (including RRSP Surplus Shares) of active members on an annual basis, depending on the level of earnings achieved by the Credit Union. Since inception, Civic declared a share allocation every year. Share allocations are new for former Crosstown members.
6. Can a member hold Surplus Shares in a Crosstown Civic Credit Union RRSP?
Yes! Any active member in good standing with over $500 in the Member Rewards Plan can apply to transfer their Surplus Shares to a Crosstown Civic Credit Union RRSP. Upon approval, an RRSP income tax receipt will be issued for the amount of the transfer.
Surplus Shares held in your RRSP are known as “RRSP Surplus Shares”. Any share allocations paid on RRSP Surplus Shares are tax sheltered while in your RRSP.
7. Can a member redeem their Surplus Shares?
Generally, Surplus Shares cannot be fully redeemed by a member. Like the $5 membership share, the Member Rewards Plan is your vested interest in the operation of the Credit Union. Every year the Board may declare a block redemption of Surplus Shares. This way all members receive the same percentage of their Surplus Shares redeemed to their accounts. Due to tax implications block redemptions will not be processed on RRSP Surplus Shares. Since inception of the Crosstown plan, block redemptions have been processed every year. Block redemptions are new for former Civic members.
8. Under what circumstances can a member apply to redeem Surplus Shares?
There are special circumstances under which consideration will be given to a complete redemption of Surplus Shares:
a) Death, bankruptcy, or dissolution of a company or organization;
b) Upon closing all accounts, and repaying any outstanding loans to Crosstown Civic Credit Union.
c) Members who have transferred Surplus Shares to RRSP Surplus Shares may apply for redemption of all or part of their RRSP Surplus Shares upon reaching 65 years of age.
All redemptions are subject to subparagraphs 7. 8 and 7.10 of the Articles of Amalgamation of Crosstown Civic Credit Union Limited.
9. What type of statements will be issued?
All active members who receive paper statements will receive notice annually advising them of the details of the allocation of Surplus Shares. The Member Equity Plan and RRSP Surplus Shares also show on the regular consolidated statements of account.
10. Are Surplus Shares guaranteed?
Because Surplus Shares represent true equity, they are considered capital and therefore are not guaranteed. However, it is unlikely that Surplus Shares would ever have to be called upon because Crosstown Civic Credit Union has a very strong level of reserves built up in the form of retained earnings, and these reserves would have to be depleted first.
11. Do all members participate in the program?
All members paying or receiving interest in a sufficient amount to warrant an allocation of one dollar or more will be allocated Surplus Shares to their Member Rewards Plans.
12. What about income tax?
An allocation to Member Rewards Plans based on interest earned on savings or term deposits is taxable as interest income in the year received, as is any share allocation paid on existing Member Rewards Plans. Both are included in the T5 income tax slip issued by Crosstown Civic Credit Union. Share allocations on RRSP Surplus Shares are tax sheltered.
An allocation based on interest paid on a loan is taxable only if the loan interest was tax deductible, as in the case of a business loan. It is the responsibility of the member to determine if the allocation is taxable and to report it if necessary on their income tax return.
13. How can I increase the amount that I receive each year?
By increasing your use of Credit Union loan and deposit services, you increase your participation in the Member Rewards Plan!
PAY YOURSELF FIRST!