Québec’s 2012-13 Budget: The Next Step Towards Pooled Registered Pension Plans

Yesterday, Québec tabled its 2012-13 Budget (Budget). The Budget and its accompanying paper, Quebecers and Their Retirement: Accessible Plans for All, made a number of announcements regarding the implementation of new "voluntary retirement savings plans" (VRSPs). VRSPs appear to be Québec’s version of pooled registered pension plans. They were first announced last year in Québec’s 2011-12 Budget. (McCarthy Tétrault’s commentary on last year’s budget is available here.)

Among other things, the Budget announced the following:

  1. The Québec government will introduce VRSPs effective January 1, 2013.
  2. Employers with five or more employees (each of whom has had at least one year of uninterrupted service) will have to offer a VRSP by January 1, 2015, unless they already offer all their employees the opportunity to contribute to a retirement savings plan. Employers with fewer than five employees may, but do not have to, offer a VRSP.
  3. Employees with at least one year of uninterrupted service will automatically be enrolled in a VRSP. However, these employees may choose to withdraw from the VRSP within 60 days of their enrollment.
  4. As first proposed in the 2011-12 Budget, VRSPs will also be open to, but not mandatory for, self-employed workers, business owners and "individual savers."
  5. Employer contributions will be voluntary. If made, employer contributions will be exempt from payroll taxes, as is the case with contributions to registered pension plans. VRSP participants may set their own contribution rates and may elect to suspend contributions. The default "employee" contribution rate will be:
    1. 2% from January 1, 2013 to December 31, 2015;
    2. 3% from January 1, 2016 to December 31, 2016; and
    3. 4% as of January 1, 2017
  6. Employer contributions will be locked in; however, participants may withdraw their own contributions at any time, subject to provincial and federal tax on withdrawals.
  7. A VRSP’s default investment option will be based on a "life cycle" approach in which the risk level is adjusted based on the participant’s age. The VRSP may offer up to five other investment options (for a maximum of six investment options in total).
  8. The Commission des normes du travail will be responsible for overseeing employers’ compliance with the VRSP legislation. The Régie des rentes du Québec (Régie) will be responsible for overseeing VRSP administrators.
  9. VRSPs must be administered by a third party, such as a financial institution or investment fund manager. Such an entity must obtain a permit from the Autorité des marchés financiers in order to administer a VRSP.
  10. The VRSP administrator will have to show the Régie that the management fees it charges are comparable to those of institutional pension plans of similar size.

McCarthy Tétrault’s lawyers will continue to monitor the developments that follow the Budget as well as the development of pooled registered pension plans across Canada. In the meantime, if you have any questions about the impact of the Budget, and, in particular, how VRSPs may affect your business, please contact any member of the Pensions, Benefits & Executive Compensation Group or your regular McCarthy Tétrault lawyer.