Quebec tabled its 2012-13 budget on March 20. 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 Quebec’s version of pooled registered pension plans. They were first announced last year in Quebec’s 2011-12 budget.
Among other things, the budget announced the following:
1. The Quebec government will introduce VRSPs effective Jan. 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 Jan. 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:
•Two per cent from Jan. 1, 2013 to Dec. 31, 2015
•Three per cent from Jan. 1, 2016 to Dec. 31, 2016
•Four per cent as of Jan. 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.
Randy Bauslaugh is a partner and Mark Firman is an associate with McCarthy Tétrault’s Pensions, Benefits and Executive Compensation group in Toronto. Claire Ezzeddin is an associate in McCarthy Tétrault’s Labour and Employment group and Pensions, Benefits and Executive Compensation group in Montréal.