Voluntary Retirement Savings Plan: Bill 80 Tabled
On June 12, 2012, Quebec tabled Bill 80, entitled An Act respecting voluntary retirement savings plans.
This bill makes good on announcements made in the March 2011 and 2012 Quebec Budgets. Its objective is to establish a low-cost retirement savings plan that is accessible to all individuals in Quebec.
The bill specifies that employers with five or more employees who have at least one year of continuous service will not be required to offer a VRSP if they let all their Quebec employees contribute to a registered retirement savings plan (RRSP) or a registered pension plan (RPP) through payroll deductions. If an employer has five or more employees (with one year of uninterrupted service) that do not have access to such a plan, then the employer must offer a VRSP to those employees.
The legislation, as proposed, would require an employer that offers a non-contributory defined benefit plan to put in place a VRSP, unless the plan allows for voluntary contributions or the employer also offers an RRSP. Moreover, if an employer provides a contributory plan but more than five employees (with one year of service) do not qualify for membership, a VRSP would need to be offered to those employees. For example, some employees may not qualify for membership in an employer’s defined benefit plan if they do not meet the minimum “hours worked” eligibility requirements, even though they have one year of service. In this case, the employer may need to set up a VRSP.
Employees need to be automatically enrolled in the VRSP, but can opt out thereafter. Default employee contribution rates will be defined in the regulations. (The most recent budget referred to 2% in 2013, 2014 and 2015, 3% in 2016 and 4% thereafter). Employees can change their contribution rate. Employers can contribute if they wish, but are not required to do so.
The bill specifies that the Administrator of a VRSP can be an insurer, trust company or investment fund manager. The Administrator must be licensed by the Autorité des marchés financiers (AMF), which is Quebec’s securities commission.
VRSPs must be registered with the RRQ. The Commission des normes du travail [labour standards board] is charged with ensuring that employers that are required to offer a VRSP to their employees have done so.
The bill specifies the terms and conditions for establishing and administering a VRSP and sets out the functions and the powers conferred on the RRQ, the AMF and the Commission des normes du travail.
Consultations will take place in August and September. If adopted, the bill will come into force on January 1, 2013, and employers would need to comply by December 31, 2014.
What steps should you, as an employer, take now to prepare for the arrival of VRSPs?
- Verify that all employees with one year of continuous service can make contributions, via payroll deduction, to a retirement vehicle (RRSP, RPP).
- Perform a comparative analysis of your retirement programs and the VRSP to decide whether a VRSP should be considered in addition to or in lieu of current programs. If a VRSP is offered in addition to current programs, consider the consequences of tax limits (pension adjustments combined with contributions to VRSPs) and potential governance issues.
- If a VRSP must be offered, select a service provider that best meets your needs and objectives.
Morneau Shepell can provide support with each of the above steps. For organizations that adopt VRSPs, we can also assist you in the transition to a VRSP that best meets your needs and those of your employees.