On March 20th, the Quebec government introduced its 2012-2013
Budget. The Budget included a section on "Retirement", which notes the
"insufficient savings" of some Quebec workers and, in
response, proposes the implementation of Voluntary Retirement
Savings Plans (VRSPs).
VRSPs would include the following features:
Mandatory Participation: Employers with five
or more employees who have at least one year of uninterrupted
service and who do not have a retirement savings plan funded
through payroll deductions will be required to: (i) choose a VRSP
to offer to their employees; (ii) enrol all their employees with
more than one year of uninterrupted service in the plan; and (iii)
withhold their employees' contributions at source. Employers
will have until January 1, 2015 to comply with this
Contributions: Employers will not be required
to contribute to a VRSP. Employer and employee contributions to
VRSPs, combined with other RRSP contributions, will be subject to
the same annual cap as RRSPs (i.e., a maximum of 18% of annual
Auto-Enrolment: Employees will be
automatically enrolled in the plan, but may elect to opt out within
60 days of enrolment. (VRSP participants may also voluntarily
decide to cease to contribute for a certain time and then resume
contributing at a later date.)
Additional Optional Enrolment: Those not
automatically enrolled, such as self-employed workers or individual
savers, may enrol in a VRSP by contacting a plan administrator
Locking-in: While contributions by an employer
to a VRSP will be locked in and may not be withdrawn before age 55,
employees may withdraw their contributions to a VRSP (subject to
income tax deductions).
Investments: There will be a default
investment option based on a "life cycle" approach (i.e.,
the risk level will be adjusted based on the participant's
age.) To limit the complexity of VRSPs, administrators may also
offer a maximum of five other investment options with
varying risk levels.
Administration: VRSPs will be completely
administered by the third parties (e.g., financial institutions or
investment fund managers) who hold a permit issued by the
Autorité des marchés financiers. Each VRSP will also
have to be registered with the Régie des rentes du
Also of note is the fact that VRSPs will be implemented through
separate legislation (not through an amendment to the Québec
Supplemental Pension Plans Act or an exempting
regulation). A bill should be introduced before the National
Assembly within the next few months.
The implementation of VRSPs remains conditional, however, upon
the adoption of certain amendments to the federal Income Tax
An interesting point mentioned in the budget is that "the
main parameters of the [VRSPs] will be harmonized with the new
Canadian plan, the pooled registered pension plan (PRPP)".
It remains to be seen how harmonized this new scheme will really be
once the federal and provincial governments have each adopted their
respective framework for PRPPs / VRSPs. Considering the current
patchwork of pension legislation in Canada, one can only be
cautiously optimistic about the prospect of a truly harmonized
pension scheme in Canada.
Lastly, the Budget reiterates an
earlier announcement regarding the establishment of expert
committees to review target benefit pension plans, municipal
retirement plans, and Québec's retirement system
generally. The recommendations of these committees, which are
expected during 2012, will provide "a basis for proposing
sustainable and realistic solutions to the challenges pension plans
Julien Ranger advises employers, pension fund
administrators and service providers on issues such as plan
mergers, use of surplus assets, contribution holidays,
administration expenses and plan administration and compliance.
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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