Changes will affect funding, surplus and merger rules for Québec members of registered defined benefit pension plans
On November 26, the Québec legislature adopted Bill 57,
An Act to amend the Supplemental Pension Plans Act, mainly with
respect to the funding of defined benefit pension plans (Bill
57). The changes come into effect on January 1, 2016 and will
impact how benefits are calculated for Québec members of
pension plans registered in provinces outside of Québec.
What You Need To Know
Defined benefit pension plans registered in Québec will
no longer be required to be funded on a solvency basis, and instead
will use a modified going concern calculation. Solvency valuations
will continue to be required, but only to determine the frequency
of actuarial valuations and to determine whether the plan has a
surplus or a deficit.
The provisions of a registered pension plan in effect on
December 31, 2015 dealing with the use of surplus funds in an
ongoing plan or upon plan termination will continue to apply. If
any registered pension plans with Québec members are silent
with respect to surplus or propose to amend their terms with
respect to the permitted uses of a surplus from and after January
1, 2016, then the amendment will only be approved if no more than
30% of plan members in Québec object to the amendment.
Québec members terminating plan membership cannot be
paid out 100% of the commuted value of their pension benefit if the
plan has a funding deficiency, and will only be entitled to a
transfer percentage based on the plan's solvency ratio (subject
to limited exceptions). Pension plans will have to be amended in
order to specifically allow plans to pay out 100% of the commuted
Proposed plan mergers for pension plans with Québec
members must meet certain solvency requirements before the merger
will be approved, such as an 85% solvency ratio in the resulting
plan, or a solvency of no more than 5% less than the solvency of
the merging plans prior to the merger.
The amendments will require the governments of Ontario and
Québec to renegotiate the Agreement Respecting
Multi-Jurisdictional Pension Plans (originally coming into effect
July 1, 2011) to account for the changes approved in Bill 57, and
this process will occur over the coming months.
* With the assistance of Caitlin Morin, articling student.
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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