Private pension plans are governed by the Supplemental Pension Plans Act ("Pension Act") which establishes rules for the establishment, operation and administration of pension plans, prescribes a set of basic rights granted to plan members and provides for measures of control and supervision of pension plans.
Private pension plans must be administered by a pension committee, which must include plan members or representatives of plan members and an independent third party who is not a plan member.
Where member contributions are required under a defined benefit plan, the employer is required to pay at least 50% of the value of any pension benefit to which the member or beneficiary will eventually be entitled.
Any matter relating to the allocation of a surplus of assets determined upon the total termination of a pension plan must be submitted to arbitration.
Retraite Québec is entrusted with the responsibility to ensure that private pension plans are administered and operated according to law. Retraite Québec has entered into agreements with government agencies in other jurisdictions to determine to what extent the Pension Act applies to a plan where it is governed both by the Pension Act and by an act of a legislative body other than the Québec National Assembly.
Voluntary retirement savings plan
Recently, the Governemnet of Québec adopted the Voluntary Retirement Savings Plan Act, making it mandatory for employers with at least 5 employees to offer a Voluntary retirement savings plan ("VRSP") to its employees when a registered retirement savings plan (RRSP) or tax-free savings account (TFSA) for which source deductions could be made, or a registered pension plan, is not already being offered. Employers must also automatically sign up eligible employees and deduct contributions: 2% of gross salary until the end of 2017, 3% in 2018 and 4% as of 2019.
The deadline to implement such plan differs on the number of employees. It is to be noted that such plan wil be managed by a legal person holding an authorization granted by the Autorité des marchés financiers to act as administrator of a VRSP and the employer does not have the obligation to contribute.
Simplified pension plans
The Pension Act allows for the establishment of simplified pension plans, i.e. a defined contribution pension plan with certain conditions that make it easier to administer. The most significant change from the traditional defined contribution pension plan registered in Québec lies in the responsibility for plan administration, which is entrusted to a financial institution instead of a pension committee.
Phased retirement and enhanced early retirement options
Provisions also exist in Québec allowing for the phased retirement of employees and an enhanced early retirement option under the Pension Act. Phased retirement permits employees close to retirement to reduce their hours of work, to continue to accrue rights under the pension plan at the level of unreduced earnings and to receive a pension benefit to offset the reduction in income. An employee wishing to opt for phased retirement must have a written agreement with his or her employer. It is to be noted that the latter cannot be compelled to introduce phased retirement provisions into the pension plan.
Enhanced early retirement permits plan members retiring before the normal retirement age under the pension plan to receive a temporary pension to age 65 or, in certain circumstances, to receive the commuted value of the entire accrued pension benefit.
For both the phased retirement and the enhanced early retirement provisions, any benefit payable to the individual before age 65 is provided at the expense of lifetime retirement benefits payable after age 65. Consequently, such provisions are cost-neutral to the employer and do not provide additional benefits to the employee beyond the existing accrued benefits.
Certain terms of savings plans for retirement purposes also exist (e.g. group Registered retirement Saving Plan "RRSP"), but are not covered by the Pension Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
