In this section
Member Rewards
Carpathia's Member Equity Plan - is a financial program that pays a portion of Carpathia's Credit Union's net earnings to the membership based on their patronage.
What is the purpose of the Plan?
The purpose of the Member Equity Plan is to provide each member with an opportunity to share in the earnings of the Credit Union while maintaining Carpathia's strong equity position. As a member owned and controlled financial cooperative, Carpathia's profits are used for the financial betterment of you, our member. The earnings are used to build reserves which provide stability for the future and finance our core operating costs. As sufficient reserves are built, Carpathia Credit Union is able to provide a direct financial reward to members based on their patronage of our deposit and loan services.
How does the Plan work?
At the end of each year, after meeting reserve requirements, the Board of Directors determines an appropriate patronage refund allocation. All members paying or receiving interest in a sufficient amount to warrant an allocation of $1.00 or more receive Surplus Shares in Carpathia's Member Equity Plan. This ensures a strong equity base for the future of Carpathia Credit Union and provides the members with a benefit in relation to their patronage of credit union deposit and loan services. The following is an example of how the Member Equity Plan Works:
| Eligible interest paid to you during the year | $3,000 |
| Loan interest paid by you during the year | 5,000 |
| Total of all eligible interest | 8,000 |
| Patronage refund rate | 5% |
| Surplus Share allocation | $ 400 |
What is the eligible interest and why is RRSP, RRIF, and LIRA interest not included in the calculation?
Eligible interest includes all interest paid to you on chequing accounts, savings accounts, term deposits, as well as interest paid by you on all loans. Eligible interest excludes all interest paid to you on RRSP, RRIF, and LIRA deposits due to the complexities of the federal legislation which governs these accounts.
What are Surplus Shares?
Surplus shares are additional member investments in Carpathia Credit Union, paid for by patronage refunds. These shares, along with the $5 member share and all of Carpathia's prior years retained earnings form our total equity. The surplus shares allow Carpathia to continue building our equity while allocating a portion of our earnings for distribution to those whose patronage enabled the profit to occur.
Does the Member Equity Plan earn interest?
There is no interest paid on the Member Equity Plan. However, the Board of Directors can allocate cash dividend payments on the existing Surplus Shares that make up the Member Equity Plan on an annual basis, depending on the level of earnings achieved by the credit union. For example, in 1996 Carpathia paid cash divident of 8.66% on all Surplus Shares of the previous year:
| Surplus Share Account balance (As at the close of business Jan. 25/96) | $400 |
| 1996 cash dividend payment rate | 8.66% |
| Cash payment to deposit account | $34.64 |
How are Surplus Shares redeemed?
The Surplus shares which make up the Member Equity Plan, like the $5 member share are your vested interest in the operation of Carpathia Credit Union. At this time, Surplus Shares are not redeemable by any active member prior to reaching age 65. The Board of Directors is able to declare redemption under the following circumstances:
- upon reaching 65 years of age, members would be able to apply for redemption of all or part of their surplus shares
- upon moving and establishing permanent residence outside the Province of Manitoba and closing the Carpathia Credit Union account
- death of a member, bankruptcy, or dissolution of a company or organization
If a member requests surplus share redemption between Oct. 1st and March 31st the redemption will be made annually prior to June 30th. If a member requests surplus share redemption between April 1st and Sept. 30th the redemption will be made annually prior to Dec. 31st.
When a member closes their account with excess of $50.00 in surplus shares for reasons other than noted above the surplus share redemption will be paid in equal amounts over a 5 year period. The surplus shares being redeemed will not be eligible for any dividends.
How are members advised of their benefits from the Plan?
After declaration of Surplus Share allocation and, if applicable, cash dividend payments, this information is itemized on individual member statements.
What are the tax implications?
An allocation to a Surplus Share Account from interest earned and a cash dividend payment is taxable and will be included on the T5 income tax slip issued by Carpathia. An allocation based on interest paid by you is taxable only if the loan was for a tax deductible expense, as in the case of a business loan. It is the responsibility of the member to determine whether the allocation would be taxable and to report if necessary on your income tax return.
Why not just charge less on loans and/or pay more on deposits?
Carpathia Credit Union operates in a constantly changin financial environment and is affected by interest rate changes to income and expenses. Therefore, it is essential that the Credit Union build a margin of safety to handle these fluctuations.
The Member Equity Plan helps maintain a strong equity position while allowing members to share in Carpathia's earnings
Are Surplus Shares guaranteed?
Because Surplus Shares represent equity, they are considered risk capital and therefore are not guaranteed. It is unlikely the Surplus Shares would lose their value because of the very strong level of reserves built up in the form of retained earnings.
How can I maximize my benefit from the Member Equity Plan?
There are two ways in which you can increase your benefit:
- By increasing your utilization of Carpathia's loan and deposit services, you increase your level of participation;
- By introducing qualifying friends, family and business associates to the benefits of membership at Carpathia, you strengthen and enhance our ability to increase the amounts allocated to the Member Equity Plan.
