Back in the fall of 2011, an expert committee chaired by Alban
D'Amours was mandated by the Quebec government to analyze the
state of the Quebec retirement income system and to make
recommendations on how to improve it in light of the new economic
and demographic realities.
The Committee released a voluminous report on April 17, 2013 entitled
Innovating for a Sustainable Retirement System – A Social
Contract to Strengthen the Financial Security of All Québec
Workers. The 220-page report was published in French only, but
a summary of the report is available in
Some key recommendations of the Committee include:
1. Creation of a new public plan to provide "longevity
The most ambitious proposal of the Committee is certainly the
creation of a new public plan, alongside the Quebec Pension Plan,
that would provide a defined benefit (DB) to retired Quebec workers
once they attain age 75.
Québec workers between the ages of 18 and 74 and their
employers would be required to contribute to the plan. The
Committee recommends an initial contribution rate of 3.3% of
earnings (up to the maximum pensionable earnings) to be shared
equally between workers and employers (i.e., 1.65% each).
The plan would essentially be a career average earnings DB
plan. The annual amount of the longevity pension would be equal to
0.5% of earnings of the worker in each contributory year (up to the
maximum pensionable earnings). Earnings used to calculate the
pension would be indexed until age 75.
Longevity pensions would be payable from a fund administered by
the Régie des rentes du Québec, and the assets would
be managed by the Caisse de dépôt et placement du
2. Measures to improve the viability of registered DB pension
The Committee recommends using a single valuation method for
calculating ongoing DB plan funding. The preferred method, called
"enhanced funding" method, would be somewhat less
stringent than the current solvency approach. In particular, the
discount rate would be determined by reference to market yields on
high quality corporate bonds. The Committee proposes that a deficit
be amortized over 15 years, but also suggests that the amortization
period be eventually reduced to 10 years.
Contribution holidays would only be permissible if the plan is
fully funded on an "enhanced funding" basis and a
solvency basis, and there is a provision for adverse deviation.
Additionally, there would be a cap on the amount of any
The Committee recommends a series of measures to enhance plan
governance, including the mandatory adoption of a funding policy
and the performance of risk assessment analyses at regular
The Committee is of the view that the Supplemental Pension
Plans Act should be amended to allow members to make
contributions in respect of deficits and to allow employers to
recover an amount of surplus equal to the special payments made to
fund a deficit.
The Committee proposes a 5-year "restructuring
period" during which plan sponsors could negotiate reductions
of vested ancillary benefits (e.g., indexing, enhanced early
retirement benefits). In other words, there would be a temporary
exemption to the "void amendment" rule where the parties
can reach an agreement on such a reduction. Unions would negotiate
on behalf of unionized employees while non-unionized employees and
retirees would be deemed to accept a reduction if less than 30% of
them object to the proposal following a consultation.
3. Measures to help Quebec workers save more for their
retirement and provide them with more flexibility with their
The Committee is endorsing the concept of voluntary retirement
savings plans (VRSP), and urges the government to move ahead with
the existing proposal without delay (subject to some minor
The Committee also suggests amending the current legislative
framework so as to make the withdrawal of retirement savings more
The Minister of Labour, Employment and Social Solidarity,
Agnès Maltais, took advantage of the release of the report
to announce that a public consultation on the future of the
retirement income system would likely take place in the fall of
She also announced that the Quebec government would take steps
within the coming months to: (i) extend the solvency funding relief
measures, which are set to expire on December 31, 2013; and (ii)
table a bill to implement its new VRSP.
We will continue our analysis of the Committee's
recommendations in the coming weeks and will write further posts as
Quebec's pension reform continues to progress.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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