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1. Grow your guarantee using resets from Equitable Life
   Did you know that many of Equitable Life®’s segregated funds contracts, including Pivotal Select™ Estate Class and Protection Class, allow for an annual reset of the death benefit guarantee? Now could be a great time to remind clients to lock-in any gains with a death benefit reset; and increase their Death Benefit guarantee to 100% of the current market value. The ability to lock-in market growth using resets is one of the differences between segregated funds and mutual funds.
    
   To complete a reset, submit the applicable investment direction form. If you have Limited Trading Authorization on file, you can sign the request on your client’s behalf*. The Investment Direction Forms are posted on EquiNet®, or can be found here (by product):
    
   • Pivotal Select (form # 693SEL)
   • Personal Investment Portfolio, Pivotal Solutions II or Pivotal Solutions DSC (form # 693ANN)
    
   Be sure to check out the “Growing your Guarantee with Resets” marketing piece which can be shared with your clients. For questions about resets, contact your Regional Investment Sales Manager today.
   
   
    
   *Advisors are required to keep notes of their conversation with their client for audit purposes when completing transactions using Limited Trading Authorization. World Financial Group (WFG) advisors are not permitted to use Limited Trading Authorization as per their agreement with WFG.
   ® and ^TM denote trademarks of The Equitable Life Insurance Company of Canada
    
2. [pdf] Pay Instruction Changes
3. Supporting plan members affected by the British Columbia and Northwest Territories wildfires

   Wildfires across Canada are disrupting the lives of many Canadians. During this difficult time, Equitable Life is providing additional support to help affected clients and plan members.

   Prescription refills

   Plan members who have been evacuated and/or lost their medication due to the wildfires will be able to make early refills until September 17, 2023, through TELUS Health, our pharmacy benefit manager.

   Replacement of medical or dental equipment and appliances

   Plan members who need to replace eligible medical or dental equipment or appliances due to the wildfires should first call 1.800.265.4556 to confirm coverage.

   Disability or other benefit cheques

   Plan members receiving disability benefits or other benefit reimbursements via cheques can visit www.equitable.ca/go/digital for instructions on how to sign up for direct deposit. It just takes a few minutes. Plan members can also call us at 1.800.265.4556 if they need help, a replacement cheque or assistance arranging a different mailing address.

   Mental health support

   Unpredictable, large-scale natural disasters can cause people to experience intense reactions, putting a lot of pressure on their mental health. Having coping mechanisms to deal with the current crisis can be a huge help. Any Equitable Life plan member who needs mental health support can visit Homeweb.ca/equitable to access online resources or contact Homewood at 1.888.707.2115.  

   For plan sponsors who have purchased Homewood Health’s Employee and Family Assistance Program (EFAP), their plan members also have access to confidential counselling services. The EFAP provides plan members with 24/7 access to confidential counselling through a national network of mental health professionals. Whether it’s face-to-face, by phone, email, chat or video, plan members will receive the most appropriate, most timely support for the issue they’re dealing with. 
    

   Plan Administrator support

   We realize that the fires are having a profound impact on regular business operations in B.C. and N.W.T. If you have clients that are unable to carry out day-to-day plan administration, they can call us at 1.800.265.4556. They can also contact their Customer Relationship Specialist for support.
    
   This is a challenging time for advisors, plan sponsors and plan members. We will continue to monitor the situation and provide additional updates as appropriate. 

   Questions?

   If you need more information, contact your Group Account Executive or myFlex Sales Manager.

4. COVID-19 testing: Find the information you need

   This news item has also been posted to the plan administrator and plan member sections of EquitableHealth.ca

   The Ontario government recently announced it has expanded access to COVID-19 testing to include select pharmacies throughout the province. As the pandemic continues, it’s important to know how to access testing if you’re experiencing signs and symptoms of COVID-19 or suspect you have been exposed to the virus.

   Guidelines for who should get tested and how to access testing vary across the country, so it can be difficult to know what applies in your jurisdiction.

   To help make it easier, we’ve provided links to COVID-19 testing resources for each province and territory. The resources include self assessments, guidelines for who should get tested, how to access testing, and testing locations.

   • Alberta
   • British Columbia
   • Manitoba
   • New Brunswick
   • Newfoundland and Labrador
   • Northwest Territories
   • Nova Scotia
   • Nunavut
   • Ontario
   • Prince Edward Island
   • Québec
   • Saskatchewan
   • Yukon
5. Manage more details within Contract Delivery for New Business applications We are excited to announce further enhancements to our eDelivery process to empower you, the advisor, the ability to manage client details more easily within Contract Delivery.
   
   Effective January 15, 2022, advisors will need to create a Password within Contract Delivery when choosing “eDelivery” as the contract delivery method and provide the password to the client to use as their password:
   
   The Password must be between 4 and 100 alpha/numeric characters, and cannot be the Policy number. For multiple signers the password (and email address) must be unique per each signer.
   
   Advisors can now edit and/or update an email address within Contract Delivery, in the event of a bounce back or email change, to keep the eDelivery process moving and avoid delays in processing time. If a lock out occurs, advisors can trigger a resend of the signing email once they add a new valid email address in Contract Delivery. Simply click the pencil icon beside the Email field to enter the valid email address:
   

   Another new feature- in the event a client has declined, the advisor will get an email from Equitable Life^®. Click through to EquiNet^® within the email to view the message within Contract Delivery that the client provided as the reason for decline under a new “Declined Details” section. This enables you to connect with the client to proceed with the sale by discussing the reasons for decline with them directly.

   Also new for clients with this enhancement, policy owners of a policy created after January 15 will be able to see a PDF copy of their policy within client access. Note: this PDF copy is as the policy was originally issued.
   
   Resources: 

   • eDelivery of a Contract - New Business
   • eDelivery FAQ
6. New internal transfer enhancement available on Equitable’s EZcomplete

   Advisors will now notice a new internal transfer enhancement in EZcomplete®, Equitable’s online application platform — and it’s designed to make life a whole lot easier. With this update, moving a client’s funds from an existing Equitable® segregated fund contract into a new Equitable Guaranteed Investment Funds™ contract is now faster, smoother and far more intuitive. 

   Here’s what you can expect: 

   • A clear, consolidated view of clients’ current contracts. 

   • Key details — like product type, current market value, sales charge and Guaranteed Interest Account terms — displayed right up front. 

   • Options to complete full or partial transfers. 

   • Helpful alerts that guide you through each step and help prevent mistakes. 

   Everything you need to complete an internal transfer is now in one spot — no more digging through old statements or searching for external documents. It’s a more streamlined, transparent experience for both you and clients. 

   You can access the enhancement directly within EZcomplete (Individual Wealth).  
    

                          
    

   If you have questions, speak with your Director, Investment Sales or Advisor Services Team Monday to Friday, 8:30 a.m. – 7:30 p.m. ET at 1.866.884.7427, or email individualwealth@equitable.ca. 

   ® or ™ denotes a trademark of The Equitable Life Insurance Company of Canada. 
    

7. All about the changes to the capital gains inclusion rate Disclaimer: The following content is provided by and is the opinion of Invesco Canada Ltd. Equitable does not guarantee the adequacy, accuracy, timeliness, or completeness of the information. Equitable shall not be liable for any errors or omissions in the information provided by Invesco.
   
   
   What has changed?
   One noteworthy measure to come from Budget 2024 is the proposed change to the capital gains inclusion rate, which was previously held steady at 50% since 2001.
   
   For individuals, capital gains more than $250,000 annually will be subject to an increased 66.67% inclusion rate as of June 25, 2024, while the capital gains up to $250,000 will continue to be subject to the existing 50% inclusion rate. As a transitional measure for 2024, only the capital gains realized by individuals on or after the effective date of June 25 that are above the $250,000 threshold will be subject to the increased inclusion rate.
   
   For trusts and corporations, the inclusion rate on all capital gains will increase from 50% to 66.67% starting on June 25, 2024.
   
   
   
   
    
   Who is affected?
   
   Impact to individuals
   Budget 2024 proposed to add transitional rules which would specifically identify capital gains and losses realized before the effective date (Period 1) and those realized on or after the effective date (Period 2). The effective date is June 25, 2024. Capital gains realized on or after that date will have an inclusion rate of 50% on the amount up to $250,000, and an inclusion rate of 66.67% on the amount above $250,000. All capital gains realized prior to the effective date will have an inclusion rate of 50%.
   Take Ontario as an example, the proposed higher inclusion rate on capital gains would effectively increase the average federal-provincial marginal tax rate for Ontario residents on capital gains above $250,000 at the top marginal tax rate from 26.76% to 35.69%. A more detailed analysis on the impact of these changes to an individual’s tax rate is discussed below.
   For net capital gains realized in Period 2, the annual $250,000 threshold would be fully available in 2024 (i.e., it would not be prorated) and it would apply only in respect of net capital gains realized in Period 2.
   The $250,000 threshold would effectively apply to capital gains realized by an individual, either directly or indirectly via a partnership or trust, net of any: current-year capital losses, capital losses of other years applied to reduce current-year capital gains, and capital gains in respect of which the Lifetime Capital Gains Exemption, the proposed employee Ownership Trust Exemption or the proposed Canadian Entrepreneurs’ Incentive claimed.
   Two common scenarios of reaching the $250,000 capital gain threshold are the deemed disposition of capital property at death, and the emigration from Canada (i.e., becoming a non-resident for income tax purposes). We have provided additional details on these topics below.
    
    
   Deemed disposition upon death
   When an individual passes away, they are deemed to have sold their capital property (e.g., units or shares of mutual funds, shares of corporations, and real property) at its fair market value (FMV) immediately before their death. If a capital gain arises because of this deemed disposition, that capital gain is reportable on the deceased’s final (terminal) tax return and the taxes owing as a result, if any, would be payable by the estate of the deceased. However, there are provisions that allow taxes to be deferred when the property is transferred to a spouse. For example, if a capital property is transferred to a surviving spouse or common-law partner, subsection 70(6) of the Income Tax Act (Canada) automatically deems the deceased to have disposed of that property and the spouse or common-law partner immediately acquires the same property at the deceased transferor’s adjusted cost base (ACB). This is commonly referred to as the “spousal rollover”. Another potential strategy to manage potential large capital gains taxes at death is life insurance, since the death benefit is typically paid out tax-free.
   Without careful planning, the estate value could be substantially reduced by the changes to the capital gains inclusion rate. Furthermore, it would be prudent to ensure there are liquid assets or cash available in the estate to cover the associated tax liabilities.
   
   Non-resident of Canada – Departure tax
   Residency in Canada for income tax purposes is a question of fact, which primarily depends on the individual’s residential and social ties in Canada. When an individual becomes a non-resident of Canada, they are deemed to have disposed of and immediately reacquired certain types of property at FMV. The tax incurred because of this deemed disposition and reacquisition is also known as the departure tax. Some examples of properties subject to departure tax include securities inside a non-registered investment portfolio, shares of Canadian private corporations, and real estate situated outside of Canada. Note that there are some properties that are exempted from the departure tax, including: pensions and similar rights (including registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), and tax-free savings accounts (TFSAs)) and Canadian real property.
   The departure tax rules coupled with the increased capital gain inclusion rate above the $250,000 threshold may incur additional tax payable for emigrants. However, there is an option to defer the payment of departure tax on income associated with the deemed disposition upon emigration. By making an election, the individual would pay the tax later, without interest, when the property is disposed of. This election can be done by completing CRA Form T1244, “Election Under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property," on or before April 30 of the year following their departure from Canada.
   
   Impact to Entities
   Corporations and trusts will also be impacted by the increased inclusion rate as of June 25, 2024. Unlike individuals, corporations and trusts will not have access to the old inclusion rate on the first $250,000 of capital gains: they will be subject to the new 66.67% inclusion rate from the very first dollar.
   With the above in mind, there will be options available to shelter corporate and trust capital gains from the new inclusion rate.
   
   For corporations:
   The lifetime capital gains exemption (LCGE) can be used to eliminate capital gains taxes on the sale of qualified small business corporation shares (generally, these are shares of a Canadian-controlled private corporation that carries on an active business). The LCGE is also available on the sale of qualified farm or fishing property. The current lifetime limit for the LCGE is $1,016,836. Budget 2024 proposed to increase that limit to $1,250,000 starting on June 25, 2024, so certain business owners will be able to reduce or eliminate their exposure to the new inclusion rate if they are able to make use of the increased LCGE limit.
   
   For trusts:
   Budget 2024 suggests that capital gains allocated by a trust to its beneficiaries on or after June 25, 2024, will be included in the beneficiaries’ income at the old 50% rate up to the beneficiaries’ first $250,000 of capital gains for the year. While the specifics are not yet available, this opportunity will likely create further planning considerations surrounding the allocation of capital gains from a trust to its beneficiaries to reduce taxes. Capital gains can generally be allocated to a beneficiary for tax purposes when they are actually paid to the beneficiary, or when they are payable to a beneficiary (i.e., the beneficiary hasn’t received it, but has a right to demand payment of the capital gain). The option of making income paid (or payable) to its beneficiaries and allocating such income to be taxed in their hands will largely depend on the trust terms.
   
   Historical reference: capital gains inclusion rate
   Those of us around long enough, understand that this recent change was not the only time the capital gains inclusion rate has deviated from the 50% inclusion rate. Over the years, capital gains tax rate has ranged from nil to as high as 75% as indicated in the table below.  In fact, the first instance of capital gain tax was introduced in 1972!
   
   
    
   Excluding the 2024 tax year, we have given a rough estimate on the percentage of time spent at each of the various capital gains inclusion rates over the last 42 years. As we can see, for most of the time, the capital gains inclusion rate has remained at the 50 % inclusion rate. In fact, for the last 23 consecutive years, the inclusion rate has remained untouched with the last change being back in tax year 2000 with various changes introduced that year.
   
   
   
   Tax impact by province/jurisdiction
   With the increase in the capital gains inclusion rate, we want to demonstrate the potential tax impact of those changes across jurisdictions in Canada. The table below shows the 2024 marginal tax rate for the highest individual income earners in each jurisdiction at both the 50% and 66.67% capital gains inclusion rate, respectively. The average difference is an increase in taxes payable by 8.45%.
   
   
   
   Next, we look at the additional taxes payable because of the inclusion increase, assuming varying capital gains income levels. Of course, this assumes that the capital gains do not otherwise benefit from a reduced inclusion rate or an outright exemption such as eligible in-kind donations of securities to registered charities, or shares that qualify for the lifetime capital gains exemption, to name a few.
   
   
   
   Understanding the tax implications of investing is an essential part of financial planning and reinforces the importance of working with a knowledgeable financial advisor to understand the long-term impact of these changes as it applies to personal situations. No doubt, tax rates influence capital allocation decisions. Canadians who take more inherent risk with their capital have traditionally been afforded preferred taxation rates promoting innovation through capital investment, something the government can do with good tax policy to encourage business growth and spur economic expansion. This is evident in the breakdown of the tax rates depending on the characterization of the income as noted in the table below.
   
   
   
   Clearly the tax rates reflect the added capital risk investors and business owners take. We can clearly see the preferred taxation rates afforded on small business income and at the general corporate tax rates on income over the small business limit, compared to the tax rate on interest income or that of employment income. That tax-preference also extends to investors of “riskier” allocations of capital in marketable securities such as stocks, bonds, mutual funds, and exchange traded funds, to name a few. The tax rates of less-risky investments (such as money market instruments) do not benefit from the capital gains tax-preferred inclusion rates. With the latest move, there is not much difference in earning eligible dividend income from Canadian resident corporations and from dispositions resulting in capital gains.
   Some pundits have declared the move as a disincentive to capital and business investment and may encourage businesses to move into more tax-favoured jurisdictions outside Canada. The Federal government has promoted the change as impacting a very small overall percentage of investors, estimated at 0.13% of Canadian individuals and 12.6% of corporations. Further, the move has been argued by the Liberals as necessary to work towards “intergenerational fairness”.
   
   How to prepare for the changes?
   For now, advisors may want to start educating their clients about the basics of the changes, which starts with comparing the current inclusion rates with the new inclusion rates.
   Individual investors with large unrealized capital gains will also likely ask if they should crystallize their capital gains before June 25th to save money on taxes in the long run. The assumption that selling now will result in overall savings will not be correct in all cases, however. There is an opportunity cost to paying taxes upfront, rather than deferring those taxes to a later year.
   For example, let’s assume an Ontario client owns a $2.5 million non-registered equity portfolio with $2,000,000 in unrealized capital gains. They had no intention of selling those investments for another 5 yeas, but in light of the upcoming changes, they are considering selling immediately, paying the capital gains taxes now, then reinvesting the net amount after taxes back into those same investments for the 5-year investment period. They are currently in the top marginal tax bracket in Ontario (53.53%) and expect to continue to be in 5 years’ time. The assumed average rate of return on their investments is 6% annually over the next 5 years.
   
   
   
   
   
   As can be seen in this example, at 6% annual compound growth rate, the option to realize much of the capital gains now resulted in a higher overall return in the amount of $61,992.66 over the 5-year period due to the lower inclusion rate. Alternatively stated, if the investor does not crystallize the gains today, the equivalent rate of return needed to have the exact net after tax amount at the end of the 5-year period (the “breakeven return”) would be a 6.60% compound annual return. While this certainly will not be true in all cases, this is the sort of analysis that will have to be conducted when assessing whether it makes sense to realize capital gains in 2024. The rate of return on investment and the investment horizon, among other things, are important determining factors.
    
   Although we used securities investment in our example, a similar analysis can be done for other kinds of property held, such as a vacation property that is unlikely to benefit from the principal residence exemption. In addition, taxes often take a back seat to other planning considerations. These conversations should be had with the primary goals of the client in mind, which may supersede tax planning considerations.
    
   For corporate investors, it will be important to emphasize the impact the capital gains inclusion increase will have on small business owners. As a refresher, a corporation is a separate legal entity from the shareholders who own it and is subject to tax on the income it generates. Income is first taxed within the corporation before it can be passed to the shareholders in the form of dividends out of its retained earnings. To avoid double tax on income that passes through a corporation to shareholders (and to prevent any unintended tax advantages), a dividend gross-up and tax credit model is applied at the individual level, along with a tax refund mechanism to the corporation on passive investment income. This is designed to integrate the tax system between the two entities: individual and corporation. Ideally, perfect integration is achieved when after-tax income is equal, whether it is earned individually or through a corporation. In reality, depending on the province and type of income earned, there could be a tax cost in earning passive investment income through a corporation, including earning passive investment capital gains income. Currently there is a tax cost of earning capital gains income through a corporation across all Canadian provinces/jurisdictions.
    
   The latest change further increases the cost of earning passive investment income inside a corporation, though we do not yet know what changes will be made to the corporate tax refund mechanisms. As noted in the table below, the increase averages approximately 8.43% and closely equates the rate on eligible dividends. This rate reflects the initial tax rate on passive investment income earned within an active business.
   
   
   
   For many small businesses, and perhaps to long-term individual investors, this increase in the tax rate will feel unfair as the accumulation of earning a pool of assets for retirement is often done within their small business corporation, and in many cases the sole source of retirement funds.
   If an immediate crystallization of accumulated capital gains is not desired, what should investors consider in the longer run? Although many details of the new proposed rules are yet to be clarified, here are some general considerations.
   For individuals, it may be helpful to plan the timing of future dispositions to stay below the annual $250,000 threshold. Also, it may seem obvious but maximizing investments within registered plans, including the new first home savings plan (FHSA) where eligible, can reduce exposure to future capital gains tax. Moreover, estate planning becomes even more important as the potential tax payable on the deemed disposition of capital property at death rises. On that front, strategies to reduce capital gains at death could be considered, such as inter-vivos gifting, charitable donation, spousal rollover, and acquiring life insurance to provide sufficient liquidity to the estate.
   For business owners, some strategies to limit future capital gain exposure may include contributing to an individual pension plan (IPP), conducting an estate freeze to pass on future capital gains to succession owners, and ensuring the small business shares qualify for the LCGE. The suitable strategies are highly dependent on the business needs and personal situation of the business owner.  
   
   Acting too soon or not fast enough?
   Finally, there is what many in the industry have been calling a “change of law” risk. That is, within the next year and a half, a federal election is scheduled, and this capital gains inclusion tax policy will surely be a primary election issue. As part of that election platform, parties may promise to repeal it outright or alter its scope and application. Consider also that any changes in the capital gains inclusion rate could be retroactive or simply not apply in all cases.
    
   The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Invesco Canada is not providing advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.  Please read the simplified prospectus before investing. Copies are available from your advisor or from Invesco Canada Ltd
   
   Date posted: May 23, 2024
8. [pdf] Equitable GIF Advisor FAQ
9. Updates
10. COVID-19 Group Benefits Updates