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Normandin Beaudry

The new regulation amending the Quebec Regulation Respecting Supplemental Pension Plans


There, in black and white

Bulletin NB Vol. 7 N. 18

On October 20, 2004, a new regulation amending the Regulation Respecting Supplemental Pension Plans ("Amended Regulation") was published in the Gazette officielle du Québec. This amendment deals with two aspects: payment of additional pension benefit and reference to the new Standard of Practice approved by the Canadian Institute of Actuaries (CIA) for determining pension commuted values. The consultation period for the Amended Regulation ends on December 3, 2004.

Additional pension benefit

The additional pension benefit is determined when active membership ceases. It represents the positive difference between:

  • the value of the pension indexed by 50% of the Consumer Price Index (maximum: 2% per year) from the date active membership ceases to the date ten years before the normal retirement age; and
  • the value of the deferred pension as described in the particular pension plan, payable at the age that maximizes this value.

According to the present Regulation Respecting Supplemental Pension Plans ("SPP Regulation"), the additional pension benefit must be converted into a life annuity that does not exceed the maximum benefits stipulated in the Income Tax Act (ITA) or that limits the conversion to the maximum life annuity that can be set up without involving the establishment of a past service pension adjustment (PSPA). Any portion of the additional benefit that cannot be converted into an annuity must be refunded to the member in a single payment (see  vol. 5, no. 2 for further details).

According to the Amended Regulation, the entire additional pension benefit can be refunded to the member in a single payment, which makes the job of pension plan administrators easier. This amendment also solves the tax problem. The Canada Revenue Agency (CRA) had been reluctant to accept certain amendments to pension plans concerning additional benefits.

Pension plan administrators still have the option of converting the additional pension benefit into a life annuity but they must make sure that the conversion abides by the rules in the ITA. Thus the Amended Regulation does not necessarily require the wording of pension plan text to be further changed. If the plan has already been accepted by the CRA, no amendments are necessary.

It is important to note that the Amended Regulation will apply from the date it comes into force; it will not be applied retroactively. Therefore, plans must continue to comply with the present SPP Regulation for the period from January 1, 2001 until the date on which the Amended Regulation comes into effect.

CIA’s Standard of Practice for Determining Pension Commuted Values

Last June (Vol. 7, No. 10) we informed you that the CIA had approved a new standard of practice for determining the pension commuted values payable under a registered pension plan when active membership ceases and when plan solvency is valuated. This new standard of practice will take effect on February 1, 2005. According to the Amended Regulation, this new standard of practice must be used.

However, if the Amended Regulation does not come into effect on February 1, 2005, there will be a period during which the assumptions that must be used for termination of active membership calculations and solvency valuations will not comply with both the standard of practice in effect and the present SPP Regulation.

During this period, pension plan administrators must comply with the present SPP Regulation and use the standard prescribed therein. However, in the termination of active membership statement and the actuarial valuation report, they must indicate that the calculations were not done according to the CIA’s standards. Although acceptable to the CIA, this disclosure could give rise to questions from members about the value given, in an administrative calculation for example.

Pension plan sponsors also have the option of amending the text of their pension plan so they can start to use the new standard on February 1, 2005. Such an amendment is subject to the approval of the Régie des rentes du Québec and would only be valid for a few months, i.e., until the Amended Regulation comes into effect.

We will inform you when the Amended Regulation comes into force and of any differences between the draft and final version.


Please feel free to contact us for additional information.

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Montreal, Quebec, H3B 1S6