So You Want to Retire

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

2. 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?

3. 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

4. Key AssumptionsThe 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-op’s current and future employees and to its community.

5. Key AssumptionsFairness 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.

6. Key AssumptionsFairness & 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). • 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.

7. Key AssumptionsSweat 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.

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

9. StrategyRetirees 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.

10. StrategyNew 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).

11. StrategyKnowledge 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

12. StrategyExternal 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

13. StrategyGroup 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

14. StrategyCo-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.