Sweeping changes to Quebec pension rules

Plan sponsors with members in Quebec and other jurisdictions will have their work cut out for them. The Quebec government recently proposed sweeping changes to Quebec’s Supplemental Pension Plans Act (SPPA).

Not only will this send plan sponsors back to the drawing boards to reconfigure their own plans, but it represents a setback in the quest for standardized legislation across the provinces.

Last March, the Quebec government tabled Bill 102, which proposes changes to 195 sections of the SPPA and 60 additions — by far the largest set of revisions since it came into force in 1990.

The Régie des rentes du Quebec anticipates Bill 102 will be passed by the end of this month. Representations to a parliamentary commission that will study the bill prior to its final passage were by invitation only. Plan sponsors will have until Dec. 31 to file their plan amendments with the Régie, but the amendments must be effective as of

Jan. 1, 2001.

Here are the main changes to Bill 102 (for a detailed discussion of the contribution holiday provisions of Bill 102, please see the article on page G5.)

•Immediate vesting: Quebec currently has two vesting periods. For pre-1990 service, vesting occurs after 10 years’ service or membership and 45 years of age. And for post-1989 service, vesting occurs after two years’ plan membership. Although two-year vesting for post-reform service is currently the Canadian norm, Quebec will require immediate vesting for the entire period of service under the plan. The big question for plans with members in other provinces will be whether to adopt consistent vesting rules across the country or limit enhanced vesting rules to Quebec members.

•Elimination of partial termination: The transition to immediate vesting has eliminated the need for partial terminations. However, there are still provisions to deal with the withdrawal of an employer from a multi-employer plan.

•“Indexation” when active membership ceases: If a member ceases active membership 10 years or more before normal retirement age, the bill will require that the member be paid an “additional benefit” for the years of service accumulated after Jan. 1, 2001. The additional benefit will reflect a partial indexation of the pension to age 55. The additional benefit corresponds to the difference in value, if any, between a normal form pension indexed to 50 per cent of consumer price index (up to a maximum of two per cent per year) from date of cessation of active membership to 10 years prior to normal retirement and the deferred pension in the plan.

•Annual assembly no longer mandatory: A pension committee will be able to propose not to hold an annual meeting if, within six months of the end of the fiscal year, every member and beneficiary is sent a statement of the financial position of the plan and notice indicating that no meeting will be held. This proposal can be overturned if 10 per cent or more of the members or beneficiaries object, or if there is no alternative means of designating pension committee members.

•Transfers: The time limit for a member to exercise his right to transfer pension funds has been shortened from 180 days to within 90 days of receipt of the active membership termination statement. Upon receipt of the member’s request, the pension committee will be required to execute the request within 60 days.

New transfer rights have been granted to members where their defined contribution account is invested in certain guaranteed deposits with an insurance company or bank. Within 90 days of receipt of an annual statement stating that there is more than $60,000 in the account, the member may transfer all or part of the amount in excess of $60,000 into an approved locked-in pension arrangement.

•Death benefits: As of Jan. 1, 2001, the spouse will have priority for all death benefits payable before retirement. This includes the death benefit related to service before 1990 (regular and voluntary employee contributions plus interest), and after 1989 (value of vested rights). The bill will also eliminate the previous ambiguity regarding bridging benefits by stipulating that they must be a joint and survivor benefit, with the survivor portion being payable to the spouse.

It is hard to know, at this point, whether the changes proposed in Bill 102 will position Quebec as a leader in pension regulation but compliance with the many changes will certainly present new challenges for plan sponsors with members in multiple jurisdictions.

Deric Jacklin is a pension lawyer in Watson Wyatt’s Worldwide’s Canadian Research and Information Centre. He can be reached at (416) 943-6083.

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