The Act to amend the Supplemental Pension Plans Act, particularly with respect to the funding and administration of pension plans (Bill 30)LinkedIn
There, in black and white
Bulletin NB Vol. 9 N. 11, December 2006
The Act to amend the Supplemental Pension Plans Act (the "Act"), particularly with respect to the funding and administration of pension plans was assented to on Wednesday, December 13, 2006.
Following the public parliamentary hearing held in the fall of 2006, amendments were made to the initial version of Bill 30, which was tabled at the Quebec National Assembly on June 14, 2006 by Mrs. Michelle Courchesne, Minister of Employment and Social Solidarity and Minister responsible for the Régie des rentes du Québec. The final version of the Act was adopted by the government on Wednesday, December 13, 2006. This bulletin provides information on the final version of the Act by presenting the amendments made to Bill 30 and the provisions presented in our June 2006 bulletin (Vol. 9, No. 4) that remain unchanged.
Amendments to Bill 30
- Application of the equitable treatment requirement with respect to the appropriation of surplus assets to the payment of the value of additional obligations arising from an amendment to the plan: When a sponsor intends to fund an amendment using surplus assets, the pension committee must notify every member and beneficiary of the plan, in writing, of its intention. Members and beneficiaries may then notify the pension committee, in writing, of their opposition to the proposed appropriation of the surplus assets. If 30% or more of the members of a group (active members or non-active members and beneficiaries) are opposed, it is presumed that the requirement has not been satisfied. Should the sponsor decide to use the surplus assets to fund the amendment in spite of the opposition of 30% or more of the members of a group, the sponsor would be required to prove that the amendment is equitable in case of legal proceedings.
- Elimination of amortization payments to amortize a solvency deficiency: The final version of the Act stipulates that amortization payments remaining to be paid in connection with any solvency deficiency can be eliminated if the plan’s assets are greater than its liabilities, even if the provision for adverse deviation is not wholly accumulated, unless these amortization payments are in connection with a deficiency created following an amendment to the plan.
- Rights of new retirees, beginning January 1, 2010, to request that their pension be guaranteed by an insurance company: This provision of Bill 30 has been completely removed from the final version of the Act.
- Selection of delegatees, representatives and service providers: the Act confirms the pension committee’s responsibility with respect to selection and stipulates that, if it so chooses, the pension committee may continue to delegate this responsibility.
- Roles and responsibilities of delegatees, representatives and service providers: The final version of the Act clarifies the responsibilities of the various parties. Only those representatives and service providers who exercise a discretionary power belonging to the committee will have to assume the same duties and responsibilities that the pension committee would have assumed under that same circumstance. A discretionary power corresponds to a decision made without the need for the pension committee’s approval. For instance, an investment manager will exercise a discretionary power when making an investment decision. Conversely, a trustee who makes pension payments to retirees in compliance with the instructions provided by the pension committee does not exercise a discretionary power.
- Internal by-laws of the pension committee: In contrast to the initial version, the Act stipulates that the text of the pension plan will prevail over the internal by-laws with respect to certain aspects pertaining to the operation of the pension committee (appointment of officers, quorums and voting) under the condition that the text of the pension plan expressly provides for it. As regards to the other aspects concerning the operation and governance of the pension committee, the internal by-laws will prevail over the pension plan text. In addition, in cases of discrepancy, the investment policy will prevail over the internal by-laws.
Coming into force
As initially proposed, the measures applicable to pension plan funding will take effect on January 1, 2010; however, there are some exceptions. Some funding provisions concerning the determination of the degree of solvency and payment of members’ benefits will take effect on the date of assent. To better reflect the particularities of pension plan members with a defined contribution component ("DC component"), plans with a DC component must redetermine the plan’s degree of solvency as soon as possible, by excluding contributions for the DC component, voluntary contributions and amounts transferred to the plan based on the results of the last actuarial valuation, and by paying members’ benefits according to the new degree of solvency.
The measures applicable to the administration of pension plans came into effect on the bill’s date of assent, December 13, 2006, with the exception of the provisions pertaining to internal by-laws that will take effect one year after the date of assent, and the provisions concerning the compensation of pension committee members through the pension fund in cases involving lawsuits, which will apply retroactively to June 14, 2006.
You will find below a list of measures included in the final version of the Act which were unchanged from the initial version of Bill 30. Please consult our bulletin issued in June 2006 (Vol. 9, No. 4) for further details.
Measures affecting funding
- Annual actuarial valuation;
- Provision for adverse deviation;
- Amortization of solvency deficiencies over a period not exceeding five years;
- Measures concerning amendments that reduce the degree of solvency below the level of 90%;
- Use of letters of credit;
- Consolidation of actuarial deficits at the time of each actuarial valuation.
Measures affecting the administration of pension plans
- Improved governance structures for pension committees;
- Introduction of internal by-laws;
- Presumption of prudence of committee members;
- Service providers will be unable to limit their liability;
- Liability insurance deductible can be paid from the pension fund.
A Regulation will clarify the application of certain measures established under the Act. We will keep you informed of any developments concerning this Regulation as soon as the information is made available.
Please feel free to contact us for additional information.
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