Quebec modifies funding rules for multi-jurisdictional defined benefit pension plans
Effective December 31, 2020, the Regulation Respecting the Funding of Multi-jurisdictional Defined Benefit Pension Plans (the Regulation) was amended. The amended Regulation eliminates the requirement that defined benefit (DB) pension plans that are registered with Retraite Québec and that are governed both by the Supplemental Pension Plans Act and by another jurisdiction besides Québec be funded on a solvency basis.
Under the amended Regulation, solvency amortization payments have been eliminated immediately.
The Regulation was originally passed in 2018, following the adoption of the 2016 Agreement Respecting Multi-Jurisdictional Pension Plans (the MJPP Agreement). As discussed in the January 2019 News & Views, because it was felt that the 2016 MJPP Agreement did not fully protect Quebec members’ benefits, the Regulation added solvency funding requirements to ensure that plan assets were allocated fairly between members in different provinces in the event of a plan split or wind up.
Since then, the revised 2020 MJPP Agreement (which was discussed in the June 2020 News & Views) has eliminated provisions that would give a higher priority to members in provinces where such additional funding requirements apply. This removes the rationale for the earlier changes to the Regulation.
The removal of the solvency funding requirements for multi-jurisdictional DB pension plans registered in Quebec will reduce the funding burden of affected businesses. The funding obligations on such plans will be similar to that of other Quebec DB pension plans.