Quebec: Funding and restructuring of multi-employer pension plans
Bill 34, An Act to amend the Supplemental Pension Plans Act with respect to the funding and restructuring of certain multi-employer pension plans, was adopted on April 2, 2015 by the Quebec National Assembly. Almost all of its provisions take effect as of December 31, 2014. In addition, the regulations have been changed to include temporary funding relief measures for certain multi-employer pension plans.
The final version of the bill also clarifies certain aspects of the Act to foster the financial health and sustainability of municipal defined benefit pension plans.
The bill’s revised provisions are similar to those tabled on February 18, 2015, which were summarized in our News & Views - February 2015.
Changes to the final version of the bill include the following:
- If an employer stops participating in or withdraws from a plan, the value of the members’ benefits is paid in proportion to the plan’s last solvency ratio. If the plan’s solvency ratio is higher than 100%, the value of members’ benefits may be paid out at 100% (lower than the solvency ratio) if the plan is amended to allow such payout.
- When an employer withdraws from a plan, or the plan is terminated, within three years after the date benefits are paid to certain members, those members shall be considered members only for the purpose of the allocation of surplus assets.
- The provisions of the new law do not apply to a pension plan whose members stopped accruing benefits before December 31, 2014, or to an employer who has withdrawn from a plan if all the employer’s plan members stopped accruing benefits before December 31, 2014 and a notice of amendment with respect to the employer’s withdrawal was issued before February 18, 2015.
Funding relief measures that apply to certain multi-employer pension plans
The Regulation to amend the Regulation respecting the exemption of certain pension plans from the application of provisions of the Supplemental Pension Plans Act, which comes into force on May 14, 2015, provides temporary funding relief measures that apply to certain multi-employer plans referred to in the regulation.
For the plan’s actuarial valuation at December 31, 2012 and subsequent complete actuarial valuations, the plans can take advantage of the following measures for three years: asset smoothing, extension of the amortization period and elimination of the former amortization payments.
Those who wish to take advantage of these new measures must submit a revised report at December 31, 2012 and at December 31, 2013 by July 28, 2015.
Clarifications with respect to the municipal sector
Certain aspects of the Act to foster the financial health and sustainability of municipal defined benefit pension plans have been clarified. For membership terminations and deaths that occurred between January 1, 2014 and June 12, 2014, amounts to be transferred or paid out are determined without taking into account any amendments made to the plan under the restructuring process required by this Act. For more information about the Act, please see our two Special Communiqués in October 2014 (English) and June 2014 (French only).
With the adoption of this bill, Quebec’s legislation is now more similar to legislation in other parts of Canada with respect to multi-employer defined-benefit negotiated contribution pension plans, namely by permitting the retroactive reduction of accrued benefits when the plan’s financial position requires it.
The provisions of this new law should be studied carefully to determine how it will apply and the impact it will have on each plan affected by it.