A number of employers who contribute to multi-employer
pension plans do not know that their financial liability is not
limited to the contribution they undertook to pay in the collective
agreement. The current financial situation of pension plans could
result in a rude awakening.
Multi-employer pension plans are generally set up by a union and
participating employers undertake to contribute to the plan in
their collective agreements with the union. Many of these plans are
both defined benefit and defined contribution plans in the sense
that the plan promises a pension (defined benefit) financed by
contributions payable pursuant to the collective agreements. For
purposes of the Supplemental Pension Plans Act
("SPPA"), this type of plan is treated
as a defined benefit plan.
In many cases, employers were told that their financial
obligations were limited to paying the contribution provided in the
collective agreement. However, this is not true.
In Quebec, the employer is responsible for funding defined
benefit pension plans, and the rules that apply to multi-employer
pension plans are the same as those that apply to single-employer
pension plans. This means that the sum of the employee and employer
contributions must be sufficient to cover the current service cost
and special payments for a given year. If contributions are
insufficient, it is possible to make certain adjustments, such as
reducing pension benefits for future service. However, if the
pension plan situation has significantly deteriorated, serious
consideration must be given to increasing the contributions since,
contrary to the rules in effect in the other Canadian provinces, in
Quebec, members' vested benefits cannot be reduced.
Similarly, if a participating employer withdraws from a
multi-employer pension plan, that is to say, if its participation
in the plan is terminated, the employer must pay its share of any
pension plan deficit, just as an employer must do in the case of
the termination of a single-employer plan.
The situation described above is not new and has existed since
at least 1990, that is to say, since the SPPA came into force.
However, the current financial situation of pension plans being
what it is, plan administrators no longer have any leeway and
employers may face additional disbursements. It is important to
note that the SPPA applies to a group of Quebec members even if the
multi-employer plan is registered outside Quebec.
About Ogilvy Renault
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business, litigation, intellectual property, and employment and
labour. Ogilvy Renault has offices in Montréal, Ottawa,
Québec, Toronto, 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
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