An Act to amend the Supplemental Pension Plans Act and other legislative provisions in order to reduce the effects of the financial crisis on plans covered by the Act (“Bill 1”) was adopted by the Government of Quebec on January 15, 2009. Bill 1 was tabled one day earlier by the Minister of Employment and Social Solidarity and Minister Responsible for the Régie des rentes du Québec, Mr. Sam Hamad, and introduces various measures to reduce the effects of the economic crisis on private pension plans in Quebec.
One of the measures introduced by Bill 1 is that pension plan solvency deficiencies will have to be amortized over a period of ten years rather than five years. This new measure is somewhat ironic considering that the amortization period of plan deficits was reduced from ten to five years with the amendment to Supplemental Pension Plans Act (Quebec) (the “Act”) only two years ago, on December 13, 2006.
Furthermore, Quebec is the first province in Canada to take measures which aim to protect members and beneficiaries by taking over pension plans in the event of bankruptcy of the employer to ensure that benefits are paid out to them, even if they will only be receiving reduced benefits.
Essentially, Bill 1 amends the Act and provides that certain members and beneficiaries of a pension plan, whose benefits can only be paid in part following the termination of their plan or the withdrawal of a participating employer, can apply for the payment of their benefits through a pension paid by the Régie des rentes du Québec (the “Régie”) out of the assets of the pension plan. The Act provides that this new measure will apply where the following conditions are met:
- The withdrawal of a participating employer in a multi-employer pension plan by reason of the bankruptcy or insolvency of the employer (technically this is done by way of a plan amendment), or the pension plan is terminated by reason of the bankruptcy of the employer;
- The date of the withdrawal of the employer or the date of termination of the pension plan is subsequent to December 30, 2008 but prior to January 1, 2012; and
- On the date of the withdrawal of the employer or termination of the pension plan, the assets of the pension plan are insufficient to allow the payment in full of the benefits of the members and beneficiaries affected by the withdrawal or termination.
Where the Régie exercises the powers of a pension committee in the above-mentioned circumstances, it will have the same obligations and liability as the plan’s pension committee with respect to the members and beneficiaries. The Régie hopes to manage the assets of these pension plans in a more prudent manner than unsophisticated pension committees of bankrupt companies.
Bill 1 also provides that the new standards of practice in the course of an actuarial valuation adopted by the Canadian Institute of Actuaries, which will come into effect on April 1, 2009, can be applied sooner to the actuarial valuation of pension plans as of December 31, 2008, as long as written instructions to that effect are provided to the pension committee.
Finally, other measures introduced by Bill 1 will be added by regulation. Such measures will include:
- the consolidation of solvency deficits;
- the extension of the amortization period of plan deficits from five to ten years, as mentioned above; and
- the smoothing of the plan assets over a period of five years, which will reduce a plan’s deficit.
Most of the provisions of Bill 1 came into force on December 31, 2008 with some coming into effect on later dates.