So You Want to Retire CWCF AGM Conference

So You Want to Retire CWCF AGM & Conference 2009 By Peter Hough

The Challenge l How can the worker co-op ensure that its founding and long standing members are able to retire with a fair and reasonable retirement income without damaging or threatening the long term viability of the cooperative?

Key Issues l Founding and Long Term Members – Retirement Security – Relinquishing member/ownership and it benefits l Worker Co-operative – New Members – Viability l l Cash Flow Debt Load – Knowledge Transfer

Key Assumptions The Nature of Worker Co-ops l Worker Co-op are designed to outlast their founding members and to provide meaningful employment in a democratic workplace for its employees and members indefinitely into the future ensuring the benefits of the worker co-op structure continue to accrue to the co-op’s current and future employees and to its community.

Key Assumptions Fairness for Retirees l Foundation for retirement fairness is fair wages and profit sharing on an ongoing basis. – Retirees must feel their contribution has been recognized, respected and fairly compensated by the co-op relative to its means and others’ contributions. – Should be compensated on/for giving up their member/ownership in the co-op.

Key Assumptions Fairness & Sweat Equity A crucial issue with founders and perhaps other early members of the co-op is their sweat equity (i. e. uncompensated contributions made during the early development of the co-op when it couldn’t pay fair wages and didn’t have profits to share). l This needs to be addressed to ensure all members are on a level playing field at the time of retirement. l Should to be addressed as soon as possible once the co-op reaches financial viability. l

Key Assumptions Sweat Equity Principle Through some form of financial compensation (cash, shares, member loans etc. ) the founders are compensated for their past contributions. l After this compensation the founders’ status for compensation due to the growth and development of the co-op will be no different than other newer members. l For all members your current wages and profit sharing will be considered your fair and total compensation. l

Options l Fair Wages l Fair Profit Sharing l Buildup and Redemption of the Member’s Co-op Equity Investment l Independent Pension Plans l Group RRSPs l Personal RRSP

Strategy Retirees Security l Organize for members retirement as soon as possible. l Make mandatory provision for retirement savings other than the members’ Co-op investment. l Have a viable members investment redemption process back with sufficient reserves/retained earnings.

Strategy New Members Retiring members will require the introduction of new members into the co-operative. l Maintain a viable dynamic co-op enterprise that can attract new members. l New members through the investment essentially buyout the old members’ interests. l This is accomplished through direct investment retained profit sharing. (see sample spreadsheet). l

Strategy Knowledge Transfer l Identified what key knowledge the retiree has and is need for the success of the co-op. l Succession planning for key positions which includes mentoring. l Initiate member professional development programs

Strategy External Options l Co-operative Superannuation Society Pension Plan – Open to all co-operative employers – Defined contribution plan – Federally registered – Requires mandatory employer/employee contributions – Variety of retirement income options

Strategy Group RRSP l Set up and administered by employer l More flexible than a registered pension plan l Contributions deducted throughout the year at source and remitted to the RRSP l Flexible investment options l No tax withheld at time of the contribution

Strategy Co-op Viability l Understanding an providing for members share redemption on retirement (see spreadsheet). l Create realistic expectations for retirees. l Build reserves/retained earning. – i. e. funds upon which no individual member has a claim.