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Normandin Beaudry

Simplified pension plans


There, in black and white

Bulletin NB Vol. 7 N. 4, May 2004

On May 19, 2004, the Régie des rentes du Québec adopted the Regulation amending the Regulation respecting plans exempted from the application of certain provisions of the Supplemental Pension Plans Act ("the Regulation"). This Regulation, which takes effect June 3, 2004, contains important amendments to the provisions that apply to simplified pension plans (SPP). An SPP is a defined contribution pension plan (DC plan) with simplified administrative rules such as no obligation to hold annual meetings and no pension committee.

As a result, administration of an SPP will be even more simplified, and it will become a more attractive alternative to group registered retirement savings plans (RRSP) or RSSP / deferred profit-sharing plans (DPSP).

Two of the changes made warrant special attention: one involves the option of treating basic employee contributions as not locked-in and the other involves the withdrawal of funds that are not locked-in.

Basic employee contributions not locked-in

The adopted Regulation gives employers a choice as to whether basic employee contributions are locked-in or not, whereas previously, they had to be locked-in. Locked-in amounts cannot be withdrawn during employment and must be used for retirement purposes. Furthermore, any voluntary contributions made by employees are no longer locked-in. Please note that these amendments have no retroactive effect on past contributions. In addition, if permitted by the SPP, employees may also determine the amount of voluntary contributions every year, or more often.

Finally, the Regulation introduces the possibility of employers making an additional contribution on top of their regular one. In such a case, a notice which indicates the amount or calculation method, as well as the method of paying the additional contribution, must be sent to the financial institution administering the plan and to employees. Like their regular contributions, additional contributions by employers are locked-in. Supplemental contributions will enable employers to offer flexibility that is comparable to that of a DPSP.

Transfers and reimbursements

The second important change involves fund transfers from an SPP. From now on, all SPPs must have two accounts: one that is locked-in and one that is not. No transfers are permitted between the two accounts. In addition to holding employer and employee contributions, the accounts will make it possible to keep track of whether or not any amounts transferred to the SPP are locked-in. In the past, any amount transferred to the SPP became locked-in, regardless of origin. However, it is important to note that any new amounts coming from a DPSP could no longer be not locked-in if the employer stipulates that they must be transferred to the locked-in account.

Employees can also obtain a refund of their non-locked-in account at any time, even while still employed. Therefore, the amounts deposited in the non-locked-in account can be withdrawn at any time under the Home Buyers’ Plan (HBP) and the Lifelong Learning Plan (LLP) through a prior transfer to an RRSP.

Conversion of a pension plan to an SPP

New provisions in the Regulation make it easier to convert a DC plan to an SPP. The conversion is done by first winding up the DC plan, in the course of which members must be notified of the winding-up and the conversion to an SPP. The Régie des rentes du Québec will also publish a document that contains instructions on how to convert a DC plan to an SPP in order to promote and simplify conversions.

In order to convert a defined benefits plan (DB plan) to an SPP, the employer must first convert it to a DC plan. The DC plan can then be converted to an SPP as described above.

Transfer from one SPP to another

New provisions will also be coming into effect that will allow block transfers of locked-in amounts by employers from one SPP to another, without members ceasing to be active members. As a result, members will no longer be able to have their locked-in account transferred to another retirement savings plan when one SPP is converted to another. However, members retain the option of transferring their non-locked-in savings at any time.

Other administrative changes

The information that employees must be given has been simplified. The obligation to provide every employee with a standard contract has been removed. Henceforth, only a summary describing the plan must be distributed to employees.

Finally, the Regulation no longer requires certain amendments to be registered with the Régie des rentes du Québec, such as a new employer joining the SPP or amendments to the variable clauses such as membership, eligibility, regular or supplemental employer contributions, contribution frequency, and pension committee operating expenses, if applicable.

In short, these new provisions make SPPs more flexible, and simplify their administration.


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