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

The Challenge 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 co- operative?

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

Key Assumptions The Nature of Worker Co-ops 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-ops current and future employees and to its community.

Key Assumptions Fairness for Retirees 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 couldnt pay fair wages and didnt have profits to share). This needs to be addressed to ensure all members are on a level playing field at the time of retirement. Should to be addressed as soon as possible once the co-op reaches financial viability.

Key Assumptions Sweat Equity Principle Through some form of financial compensation (cash, shares, member loans etc.) the founders are compensated for their past contributions. 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. For all members your current wages and profit sharing will be considered your fair and total compensation.

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

Strategy Retirees Security Organize for members retirement as soon as possible. Make mandatory provision for retirement savings other than the members Co-op investment. 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. Maintain a viable dynamic co-op enterprise that can attract new members. New members through the investment essentially buyout the old members interests. This is accomplished through direct investment retained profit sharing. (see sample spreadsheet).

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

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

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