New Retraite Québec guidelines on Act 15

On January 29, 2025, Retraite Québec published guidelines concerning the reinstatement of the automatic pension indexation for members who were retired on December 31, 2013 within the meaning of the Act to foster the financial health and sustainability of municipal defined benefit pension plans (Act 15).

In July 2020, certain sections of Act 15 were ruled unconstitutional by Judge Moulin, meaning that pension indexation should never have been suspended for members who were retired on December 31, 2013 within the meaning of Act 15 (affected retirees). For more background on the challenge to Act 15, see our April 2024 bulletin.

1. Amortization payments related to restructuring:
   • Payments to fund the non-consolidated restructuring deficiency attributable to the affected retirees are no longer required prospectively, as of the date of the actuarial valuation, regardless of whether indexation was suspended;
   • They must no longer be taken into account when calculating surplus assets.
2. Liabilities:
   • The value of the reinstatement of automatic pension indexation for the affected retirees must be included in going concern and solvency liabilities.
3. Assets:
   • The market value of assets must be adjusted to take into account retroactive pension payments from 2017 onwards to be made to affected retirees;
   • The guidelines provide instructions on how to record these pension payments in the annual information statement as at December 31, 2024.
4. Funding:
   • The actuarial loss resulting from elements 2 and 3 is considered a technical loss;
   • The technical deficiency of the prior component to be borne by the employer, if any, will therefore be increased by the amount of this loss, and will be consolidated and amortized over a maximum period of 15 years from the date of the actuarial valuation;
   • Conversely, if gains are recognized in the prior component, the gains will be reduced by the amount of this loss and a smaller amount will be transferred to the reserve. It is therefore possible that the employer will not be required to make an additional amortization payment to fund the reinstatement of the indexation.

• Partition of benefits upon breakdown of a union: The statement produced does not need to be revised if the valuation date for the partition of benefits is prior to April 11, 2024, unless new steps have been taken by one of the concerned individuals to revise the ancillary measures applicable to the partition.
• Death benefit: The amount that should have been paid to an affected retiree prior to their death must be remitted to their estate, even if they had a spouse at the time of death. This amount is taxable to the estate.

If not already done, an amendment to the plan text reflecting the reinstatement of the automatic indexation of affected retirees’ pensions must be registered with Retraite Québec and a notice must be sent to plan members with rights under the previous component.

Detailed guidelines from Retraite Québec are available on its website in the section on the impacts of certain unconstitutional provisions of Act 15 on actuarial valuations (French only).

Retraite Québec may issue new guidelines, particularly with regard to interest and potential additional indemnities to be paid to retirees, based on the upcoming judgment on remedial measures.

Plans affected by the reinstatement of indexation whose valuation was not required as at December 31, 2024 will soon receive a notice from Retraite Québec informing them that a complete actuarial valuation will be required as at December 31, 2024 at the latest, in order to fund the reinstatement of indexation.

We are continuing our discussions with the Ministère des Affaires municipales et de l’Habitation (MAMH) and auditors regarding the treatment of indexation reinstatement in the employer’s financial statements.

For more information on what this means for your plan, contact our consultants who are monitoring this situation closely or email us.