Recent legislative changes to pension plans in QuebecLinkedIn
There, in black and white
NB Bulletin Vol. 13 N. 17, December 2010
In light of the financial crisis of 2008, the Quebec government has amended certain legislative provisions to mitigate the effects of this crisis. The Act to amend the Supplemental Pension Plans Act and other legislative provisions in order to reduce the effects of the financial crisis on plans covered by the Act (Bill 1) came into effect on January 15, 2009.
Among the new provisions of Bill 1 is the option for certain members and beneficiaries to apply for payment of their benefits through a pension paid by the Régie des rentes du Québec (Régie) out of plan assets. Eligible members and beneficiaries are those whose benefits were reduced following the termination of their plan resulting from the bankruptcy of their employer between December 31, 2008 and December 31, 2011. The Régie would thus act as the benefits administrator and would have a maximum of five years to exercise this role, after which the members' pensions would be guaranteed by an insurance company.
Bill 1 Regulation
The Regulation was published in the Gazette officielle du Québec on November 3, 2010, and offers clarification on the application of Bill 1 provisions.
The Regulation provides a framework for the settlement of the benefits of members and beneficiaries when a pension plan is terminated as a result of the employer's bankruptcy. It details each of the key steps to follow in the termination process, which include:
1. Divide the pension fund into two separate accounts:
2. Produce and send to the Régie the termination report.
3. Invite members and beneficiaries to an information session on the proposed payment methods and the option of having the Régie administer pensions.
4. Produce and send to the Régie a report presenting information on the payment of benefits for each member and beneficiary.
The Regulation also offers clarifications concerning pension administration by the Régie. The Régie will send an annual statement to each member and beneficiary who opts to have the Régie administer their benefits, and will hold an annual information meeting. The Régie will be required to prepare an actuarial valuation and a financial report annually. If applicable, any surplus assets will be used to pay a lump sum amount to members and beneficiaries concerned.
Adoption of Bill 129
There were many reactions to the provisions contained in Bill 1. Pressure was applied to extend the application of plan administration by the Régie, which led to the tabling of Bill 129 on November 9, 2010 at the National Assembly. This bill was adopted by the National Assembly on December 10, 2010. The main provisions of the bill took effect on this date.
Among other things, Bill 129 proposes extending the application of plan administration by the Régie to employers subject to an order or judgement under the Companies' Creditors Arrangement Act, Part III of the Bankruptcy and Insolvency Act or the Winding-up and Restructuring Act.
The maximum period granted to the Régie as the pension administrator could also be extended from 5 to 10 years if the Régie deems this to be appropriate.
Use of letters of credit for multi-employer plans
Finally, Bill 129 contains a provision that allows employers party to multi-employer plans to use letters of credit for plan funding purposes, as provided for in the Supplemental Pension Plans Act for other plan types.
Please feel free to contact us for additional information.
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6