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 Jan. 15, 2009. Bill 1 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!
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.
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 out of the assets of the pension plan.
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 for actuarial valuations adopted by the Canadian Institute of Actuaries—which came into effect on April 1, 2009—can be applied sooner to the actuarial valuation of pension plans as of Dec. 31, 2008, as long as written instructions to that effect are provided to the pension committee.
Moreover, on April 1, 2009, the Government of Quebec tabled a draft regulation entitled the Regulation to Amend the Regulation Respecting Supplemental Pension Plans which stipulates among other measures, the rules for funding of defined benefit plans, the requirements for actuarial valuations and clarifications of the rules for letters of credit.
Comments on the draft regulation can be made in writing to the Régie before May 15, 2009.
Rosie Dikeakos is an associate with Borden Ladner Gervais LLP in Montreal.
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