CAIS Program – How it works
Just to be clear, CAIS is not the new NISA and it doesn't replace crop insurance. It is much different than any of the previous income stabilization programs offered by federal and provincial governments because it takes into account each producer's production costs no matter where he or she farms in Canada. However, the CAIS program is complex so producers are advised to speak with their accountants, farm finance specialists or bank account managers to be sure they meet deadlines for application.
CHECK YOUR MAILBOX
At the beginning of each year, each producer who has filed a tax return will receive an Options Notice in the mail from the federal government that shows the level of coverage he or she can choose. Farmers then have until March 31 to select the level of coverage they would like to have for the upcoming year.
CAIS differs from NISA because now the producer annually selects the level of protection – 70% to 100% – desired by making a deposit based on a pre-determined reference margin. The reference margin is based on an average production margin (production expenses and income) from the previous five years' tax returns.
If taxes were filed using the cash method of accounting, the program year margin will be adjusted for changes in inventories, accounts payable and receivable and purchased inputs.
The production margin focuses specifically on expense items directly related to primary production such as feed, fuel, fertilizer and pesticides. By limiting the number of expenses, the production margin more accurately reflects increased production costs making both the margin and level of support higher.
Producers will need to open a CAIS account at their local RBC Royal Bank® and then make a deposit based on their level of protection. The deposit, which is not a premium, is fully refundable. For the minimum 70% protection, a producer's share of the cost with the government is 20% which is equal to 14 per cent of the farmer's reference margin. If producers want more coverage, it is available at a greater cost share.
If income drops below the assigned reference production margin, the producer can withdraw some or all of the funds on account depending on the size of loss. A government payout would be issued to help bring the producer back as close as possible to the reference margin. If there wasn't a decline, the deposit stays in place to secure next year's protection. The amount of protection for the following year could be increased or decreased by adjusting the deposit on account.
Beginning farmers can take advantage of a Discount Deposit Option that allows producers to put one-third of their required cost-share on deposit for their first two years of participation or in the two years immediately following a serious margin decline. It wouldn't be until the third year that the producer would be expected to have the entire deposit on account.
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