On March 12, 2014, the Quebec government released draft regulations (pdf) that are required to complete the new legal framework for the establishment of voluntary retirement savings plans (VRSPs) in Quebec effective July 1, 2014.
The Quebec government adopted Bill 39 (the VRSP Act) last December, which defines the main characteristics of the VRSP design. One particularly important characteristic is that employers with five or more employees who have at least one year of continuous service and who do not have a registered pension plan or a registered retirement savings plan or a tax-free savings account for which payroll deductions could be made will have to automatically enroll those employees in a VRSP (although there is a transition period during which enrolment will remain voluntary).
VRSPs are Quebec’s version of the pooled registered pension plan (PRPP) design developed by the federal government. VRSPs, like PRPPs, function as defined contribution pension plans, but are administered by a financial institution, rather than the employer.
The draft regulations prescribe a number of VRSP requirements, including:
- the registration of VRSPs and amendments thereto;
- the information required to be included in a VRSP and the related participation agreement and member information summary;
- the default contribution rate for VRSP members;
- the types of investment options allowed under the plan;
- transfers of amounts to and from VRSPs; and
- division of benefits between spouses in case of a relationship breakdown.
Most importantly, the draft regulations set out the criteria for determining whether a VRSP is being provided to its members at “low cost” within the meaning of the VRSP Act. According to the draft regulations, the administrator of a VRSP would not be compliant unless the total of the fees charged directly or indirectly to members, including management, administration and trailer fees, is less than or equal to: (i) 1.25% for the default investment option; and (ii) 1.5% for the other options.
In addition, the fees charged in respect of a VRSP could not be higher than the fees charged by the administrator under its PRPP. Under the federal PRPP regime, the fees charged to PRPP members are expected to be at or below those incurred by members of a DC plan that provides investment options to 500 or more members. The same requirement would thus be applicable by reference where an administrator offers both a PRPP and a VRSP.
The draft regulations are open for public comment during a 45-day period. Considering that we are currently in the middle of a provincial election, the exact timing for their adoption remains uncertain.