This Bill is one of the steps that were announced in the
government's action plan on pensions released last December
While Bill 79 is not applicable to the private and university
sectors, it should be remembered that the government is planning on
introducing a second Bill this spring to create a framework for the
restructuring process for private sector and university pension
plans. One can reasonably expect that many features of the
restructuring process for these plans will be fairly similar to
those in the municipal sector.
If adopted, Bill 79 would impose a 50/50 cost-sharing
arrangement between municipalities and their employees. A
municipality's share would thus be limited to 50% of the
plan's normal cost (but it would remain responsible for special
payments unless the employees agree otherwise).
The Bill would eliminate the need to provide terminating
employees in the municipal sector with the "additional pension
benefit" provided for in section 60.1 of the Quebec
Supplemental Pension Plans Act (i.e. a limited form of
mandatory pre-retirement indexing). All municipal sector pension
plans would also have to be amended to eliminate any subsidies for
early retirement before the age of 55.
The Bill would also mandate the establishment of a provision for
adverse deviation to be funded through a 20% increase in the
plan's normal cost. These contributions would be allocated to a
stabilization fund. Such a reserve could be used to fund future
indexation of pensions, to the extent that the reserve remains
sufficient to protect the plan against the risk of adverse
In addition, the Bill provides that two situations would trigger
an obligation for municipalities and their employees to restructure
the defined benefits under their plan:
a funded status below 85% on December 31, 2013; or
the plan offers early retirement subsidies before the age of
A restructuring process could also be initiated at the request
of the parties on a voluntary basis.
The objective is essentially to force the parties to a pension
plan to negotiate measures (including reductions in benefits) that
are necessary to improve the sustainability of their plan in the
The restructuring process would consist of three phases. First,
the representatives of the municipality and the employees would
meet and negotiate the measures that would have to be implemented.
Should the parties fail to agree on a set of measures, the matter
would be referred to a mediator and the parties would have another
6 months to reach an agreement. If the parties still cannot agree
on certain measures after the mediation, then the matter would go
to arbitration before the Quebec Labour Relations Board. The
decision of the Board would be binding and the plan would have to
be amended accordingly.
During the negotiations, the parties could agree to modify or
eliminate ancillary benefits for active members, including
indexation, bridge benefits and early retirement subsidies.
The indexation of pensions in payment could be suspended for a
period of time or the indexation formula could be amended. However,
if a subsequent actuarial valuation establishes the existence of a
surplus, such surplus would have to be used in priority to restore
the indexation of those pensions.
With an election in the works, it is likely that the adoption of
Bill 79 (and any similar Bills applicable to the private sector
and/or universities) will be delayed by a few months and that they
may still undergo material changes before their adoption.
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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