BILL 39 – Voluntary Retirement Savings Plans Act
On May 8, 2013, the Government of Québec tabled Bill 39, Voluntary Retirement Savings Plans Act (Bill). On April 17, 2013, an expert committee on the future of the Québec retirement system had published the D’Amours Report, recommending that the Government promptly implement voluntary retirement savings plans. The D’Amours Report produced a profile of the Québec retirement system and proposed a set of recommendations to ensure its viability, while considering the new economic and demographic realities.
The Bill addresses many of the D’Amours Report’s recommendations. It establishes a new type of retirement plan, the Voluntary Retirement Savings Plan (VRSP) that is accessible, to the extent that fiscal rules allow it, to all individuals, including self-employed workers and workers whose employer has not subscribed to such a plan. It is intended to encourage retirement savings by Québec workers.
To summarize, the Bill requires that the VRSPs be administered by insurers, trust companies or investment fund managers, who must hold an authorization granted for that purpose by the Autorité des marchés financiers. The plans must be registered with the Régie des rentes du Québec.
The Bill also provides that without any obligation to do so, any individual may contribute to a VRSP, as may any employer on behalf of its employees. However, employers having five eligible employees or more who are credited with one year of uninterrupted service within the meaning of the Act respecting labour standards and who do not have a registered retirement savings plan (RRSP) or a tax–free savings account (TFSA) for which payroll deductions could be made or a registered pension plan (RPP) must automatically enroll these employees in a plan. Such employees, however, have the right to renounce membership in the plan.
The Bill also states that each plan member may determine his or her own rate of contribution to the plan. Where the administrator offers investment options in addition to the default investment option, a plan member may also determine the investment option that will apply in his or her case. The member may also discontinue contributions to the plan at any time or, under certain conditions, set his or her rate of contribution at 0%.
The Bill determines the other terms and conditions that apply to the establishment and administration of these voluntary plans, and the functions and powers conferred on the Régie des rentes du Québec, the Autorité des marchés financiers and the Commission des normes du travail.
If the Bill is adopted, the Act will come into force on January 1, 2014. However, the employers subject to the Bill will have two years, from January 1, 2014, to comply with the obligations set out in the Act.
In this article, we will provide an overview of the main obligations that must be fulfilled by the employers subject to the Bill, if it is adopted.
1. Which employers and employees are affected by the Bill?
Every employer having an establishment in Québec may offer a VRSP to its employees. However, any employer who, on December 31 of a given year, employs five eligible employees or more must, in the year that follows, subscribe to a VRSP and automatically enroll those employees in the plan. However, it should be noted that employers who, on December 31, 2013, have five eligible employees or more, will have two years from January 1, 2014 to comply with their obligations.
The eligible employees are employees within the meaning of the Act respecting labour standards who carry out work in Québec (or employees who are referred to in paragraph 1 or 2 of section 2 of that Act), who are credited with one year of uninterrupted service and do not have an RRSP or a TFSA in the employer’s enterprise for which payroll deductions may be made, or an RPP within the meaning of the Income Tax Act, to which that employer is party (Eligible Employees).
2. What are the main obligations of the subject employers?
At least 30 days before subscribing to a VRSP with the administrator of such a plan, an employer must notify each employee in writing. This notice must inform the employees (i) of the employer’s intention to subscribe to the plan, (ii) of any existing business relationship the employer has with that administrator, (iii) of the fact that eligible employees are automatically enrolled in the plan and that they will have the opportunity to opt out of the plan, (iv) of the fact that the employer will provide the administrator with the personal information determined by regulation concerning the Eligible Employees and any other employee who has requested to be enrolled in the plan, (v) of the requirement for an employee who is not an eligible employee and who wishes to become a member of the plan to inform the employer, (vi) of the fact that the employee may determine his or her own contribution rate, (vii) of any contribution the employer agrees to pay into the plan or the method of calculating it, and (viii) of any other information determined by regulation.
An employer who has subscribed to a VRSP has 30 days to automatically enroll any Eligible Employee or any employee who so requests in the plan.
Employers must also offer the plan to any Eligible Employee who has opted out of the plan and offer any Eligible Employee who has discontinued contributions to the plan the possibility of resuming contributions to the plan.
The rules set out in the last two paragraphs apply even if the number of Eligible Employees falls under five, unless, as long as the number of Eligible Employees remains under five, all Eligible Employees opted out of the plan or discontinued contributions to the plan.
Employers may change VRSP, but they must then pay the costs related to the transfer of their employee accounts.
An employer is not liable for the acts and omissions of the plan administrator. However, an employer must provide the plan administrator with the documents and information the plan administrator requires. An employer must also notify the plan administrator that employment of an employee who is a member of the plan is terminated or that an employee has discontinued contributions to the plan within 30 days after the date of termination of employment or the date the notice to this effect is received.
Furthermore, on penalty of a fine, an employer must refuse any inducement that an administrator might offer, with a view to entering into a contract with the administrator that would allow the administrator to offer a retirement plan to the employees.
Employers are not required to contribute to the plan on behalf of their employees. If they decide to contribute to the plan, they may change the contribution by sending a written notice to the plan administrator and the employees concerned. The change cannot take effect until the thirtieth day following the date on which the notice is sent if it means the employer contribution is reduced.
From the sixty-first day after the notice is sent by the administrator, employers must deduct the members’ contributions for each pay period from their salary. A member establishes the rate of his or her contribution to the VRSP within 60 days after the notice sent by the administrator, failing which, the rate set by regulation applies.
An employer must remit member contributions to the plan on or before the last day of the month that follows the day on which they are collected, along with the contributions the employer agreed to pay on behalf of the members, if applicable. If an employer fails to pay the contributions to the plan within this time limit, the employer must pay interest on the contributions due.
4. Plan administration
A VRSP must be administered by an administrator holding an authorization granted by the Autorité des marchés financiers. A VRSP must be registered with the Régie des rentes du Québec and the administrator is responsible for applying for registration of the plan and its amendments.
5. Oversight of VRSPs and administration of the Bill
(a) Régie des rentes du Québec
The Régie des rentes du Québec will oversee the VRSPs to ensure that they are administered and operated in conformity with the Act. To exercise its functions, the Régie des rentes du Québec may provide instructions regarding the administration of the Act, carry out inspections regarding the plans, and require the employers or their administrator to provide documents or information necessary for the administration of the Act. The Régie des rentes du Québec may also make an order directing a plan administrator or an employer to take any remedial measure in specific situations.
(b) Autorité des marchés financiers
The Autorité des marchés financiers will be responsible for granting, suspending, revoking, cancelling or withdrawing an authorization to act as a VRSP administrator in the cases set out in the Bill. It will also keep a register of authorized administrators.
(c) Commission des normes du travail
The Commission des normes du travail will have the same power of inquiry conferred on it under the Act respecting labour standards to ensure that the employers comply with their obligations set out in the Bill.
2. (1) to the employee who performs work both in Québec and outside Québec for an employer whose residence, domicile, undertaking, head office or office is in Québec;
(2) to the employee domiciled or resident in Québec who performs work outside Québec for an employer contemplated in subparagraph 1;
4 Act respecting labour standards, Chapter N-1.1:
1. (12) "uninterrupted service" means the uninterrupted period during which the employee is bound to the employer by a contract of employment, even if the performance of work has been interrupted without cancellation of the contract, and the period during which fixed term contracts succeed one another without an interruption that would, in the circumstances, give cause to conclude that the contract was not renewed.
5 R.S.C. (1985), c. 1.
6 Chapter N-1.1.