Canada: Pension and Benefits Law in Quebec

Last Updated: April 13 2011
Article by Martin Rochette and Evan Howard

1. Employer's Acknowledgment of Obligations under a Pension Plan Amendment

Section 24 of the Supplemental Pension Plans Act provides that every application for registration of an amendment to a pension plan must be accompanied with the employer's written acknowledgment of the obligations incumbent on the employer under the amendment or an attestation by the pension committee that it has obtained such an acknowledgment from the employer and that the acknowledgment may, on request, be filed with the Régie des rentes. In the case of a single-employer pension plan, where the employer itself is the one amending the text of the plan, such acknowledgment is self-evident. However, for multi-employer pension plans, where it is usually the pension committee or the board of trustees that amends a plan text, experience has shown that employers are not always notified of amendments and do not expressly consent to them. Since in Quebec, the employers of a multi-employer pension plan are responsible for the plan's solvency and since their financial obligations extend beyond the negotiated contribution, it can happen that an additional financial burden that the employers are called upon to discharge results from amendments they did not consent to.

In a recent decision,1 the Administrative Tribunal of Quebec ("ATQ") confirmed that an employer can successfully challenge the registration of an amendment that has an impact on its obligations and that it did not consent to. This case involved a rather special situation where, after dividing and converting a defined benefit plan into a defined contribution plan, the employer had transferred responsibility for the plan, including the power to amend it, to the union. Over the years, the union had improved the benefits of the defined benefit members, thus contributing to the creation of a deficit. While the ATQ acknowledged that the fact that the employer had not consented to the obligations under the amendments would have been sufficient to warrant cancelling the registration of the amendments, the employer, the union and the pension committee, while the case was going on, indicated that they were willing to engage in discussions with a view to making the necessary adjustments given the perverse and undesirable effects that the outright cancellation of the amendments would have on the defined benefit members. Leaving aside the unusual circumstances of this case, the lesson to be learned is that an employer participating in a multi-employer pension plan may, with a reasonable chance of success, challenge the imposition of financial obligations resulting from an amendment that it did not consent to.

2. Measures affecting Federally Regulated Pension Plans

Since the beginning of the year, the Office of the Superintendent of Financial Institutions Canada ("OSFI") has published a Guide to Intervention for Federally Regulated Private Pension Plans and a Draft Stress Testing Guideline for Plans with Defined Benefit Provisions.

The Guide's objective is to promote awareness and enhance transparency of the intervention process used by OSFI for federally regulated private pension plans. It outlines the types of involvement that a federally regulated plan administrator and employer can expect from OSFI and summarizes the circumstances under which certain intervention measures may be taken.

The Draft Guideline sets out OSFI's expectations on the use of stress testing by administrators for their plans. OSFI describes stress testing as a key risk management tool for plan administrators, which makes them aware of possible adverse events that could impact their pension plans and can lead to decisions that may be required to minimize or avoid unfavourable outcomes. It can also assist employers in determining what may be required in order to ensure that the current benefits provided by a plan can continue to be supported. Although there is no regulatory requirement for employers to conduct stress testing on their pension plans, it is viewed as a positive way to identify and manage risks.

While the Guideline does not target provincially regulated pension plans directly, they might do well to draw inspiration from it.

3. Risk Associated with Defined Contribution Plans

Whether it be the pooled registered pension plans recently proposed by the federal Finance Minister or the voluntary retirement savings plans announced in the last Quebec budget, governments seem to have opted for employer-linked defined contribution mechanisms in a drive to increase retirement savings levels among Canadians.

Defined contribution mechanisms have the advantage of eliminating financial risk for employers, but can add significantly to their legal risk. There is no shortage of potential sources of discontent associated with defined contribution mechanisms: disclosure of risk, sufficiency of investment options, fees, communications with employees and employee expectations, whether justified or not, are among the areas where employee dissatisfaction can result in legal proceedings.

In recent years, regulatory bodies have put out guidelines or other notices relating to the governance of pension plans, and more specifically, of capital accumulation plans.2 We remind you of the importance of implementing the measures described in these guidelines, as good governance practices contribute to preventing claims and make it easier to mount a defence should proceedings be launched.

4. CAPSA Guidelines3

CAPSA has just made public a Draft Guideline on Pension Plan Prudent Investment Practices and Self-Assessment Questionnaire, and a Draft Guideline on Pension Plan Funding Policy. The Draft Pension Plan Prudent Investment Practices Guideline and Self-Assessment Questionnaire on Prudent Investment Practices are intended to help plan administrators demonstrate the application of prudence to the investment of pension plan assets, while the Draft Pension Plan Funding Policy Guideline is intended to provide guidance on the development and adoption of funding policies.

These are consultation documents and stakeholders are invited to review and comment on them by June 1, 2011.

It can be anticipated that CAPSA will adopt these guidelines, with or without changes. On reading them, you will see that their effect will be to increase the burden on pension plan administrators and require an integrated approach to be taken on all matters related to pension plan governance.

CAPSA has also published the final version of Guideline No. 5 on Fund Holder Arrangements, along with a table showing the requirements for each jurisdiction.

5. Government of Ontario Budget - March 29, 2011

In the recent budget brought down by the Government of Ontario, various pension-related matters are addressed. Of note are the following:

  • The government remains committed to updating Ontario's pension investment rules to reflect federal changes;
  • The government proposes that plan administrators file their Statements of Investment Policies and Procedures(SIPPs) with the Financial Services Commission of Ontario and disclose whether or not their SIPPs address environmental, social and governance factors (currently SIPPs are not required to be filed with the regulator; however, there is a requirement for administrators to review their SIPPs annually and update as necessary);
  • The government has also confirmed that it remains committed to reviewing the funding requirements for target benefit multi-employer pension plans with members outside Ontario, as well as to signing a multi-lateral agreement on the regulation of multi-jurisdictional pension plans;
  • The government is proposing to explore options for the treatment of the benefits of unlocated members of terminated plans so that wind-ups of these plans may be completed;
  • Ontario has also said that it will continue to work closely with other provinces and the federal government on the implementation details for the proposed pooled registered pension plans; however, the government notes that such plans must provide a low-cost option that is simple for smaller employers and the self-employed to access and that it is critical that plan members' interests be protected;
  • The budget also notes that Ontario is exploring with principal stakeholders the feasibility, design and implementation of jointly governed single-employer target benefit plans.


1 Casavant Frères, s.e.c. c. Régie des rentes du Québec et al, 2011 QCTAQ 1795

2 CAPSA Guideline No. 3

3 Canadian Association of Pension Supervisory Authorities

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Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at

Ogilvy Renault joins Norton Rose Group on June 1, 2011.

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.

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