The Régie has always believed that the Supplemental Pension Plans Act (SPPA) required Québec employers to fund a deficit on withdrawal or plan termination—even for MEPPs! This stance differs from all other provinces where, on withdrawal or plan termination under a MEPP, accrued benefits are reduced and the employer’s obligation is limited to the negotiated contributions.

Even the Québec Court of Appeal decision in the Multi-Marques Distribution Inc. v. Régie des rentes du Québec seemed to side with the rest of the country on this issue. The court overturned previous court and administrative decisions and ruled that the employer was not responsible for funding the deficit. As a result, the court ruled that benefits could be reduced consistent with the terms of the plan. Furthermore, they felt the terms of the plan did not violate the SPPA.

However, the Régie was not to be outmaneuvered. While the Québec Court of Appeal was deciding in favour of MEPP employers with Québec employees, the Régie had language included in Bill 68 (the bill revising Québec ’s phased retirement rules) to explicitly prevent a reduction to accrued benefits in certain situations. Bill 68 subsequently received assent on June 20, 2008 and is now law.

Even though the Régie may have lost the battle with Multi-Marques Distribution Inc., it would appear that they have won the war with MEPP employers with Québec employees. And if the Supreme Court of Canada does overturn the lower court’s decision on Multi-Marques Distribution Inc., the Régie will have a clean sweep!

This is bad news for MEPPs with Québec-based employees. It is not clear at this time that the enforcement of deficit funding on withdrawal or plan termination will only apply to accrued benefits earned beginning on June 20, 2008. It is doubtful that the Régie will be that “kind”.

Who is affected?

Contrary to the protocols set out in the reciprocal agreement between provinces (which govern the regulation of multi-jurisdictional pension plans), the Régie takes the view that MEPPs with Québec employees will be subject to Québec ’s funding rules regardless of the plan’s province of registration. However, the rights of Ontario employees, for example, who participate in a Québec registered MEPP will not be subject to Québec ’s funding rules.

What is the impact?

The Régie’s changes clearly place the responsibility of providing full funding to Québec employees on the plan itself, even to the possible detriment of non-Québec employees.

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Boards of Trustees will have to grapple with how to handle the potential inter-provincial inequities that this will create, and they may want to obtain new agreements with employers of Québec employees. This will be no small task and may be the beginning of the end of MEPP participation for employers with Québec employees. The 2001 pension changes that Québec implemented through Bill 102—increasing minimum benefits—caused enough headaches for MEPPs at that time. This resulted in either improved benefits for all plan members (for plans that could afford it), reduced basic benefits for Québec employees, increased contributions on behalf of Québec employees, or inequity between Québec and the other provinces.

What should MEPPs be doing now?

Trustees of a MEPP with participating employees working in Québec should consider taking some or all of the following actions:

  • Review and amend the plan’s documentation to prevent inter-provincial inequities.
  • Identify participating employers with Québec employees.
  • Review the wind up position of the following:
    • The plan as a whole;
    • All Québec employees as if they were a separate plan; and
    • Participating employers and especially those with Québec employees.
  • Establish a separate MEPP for Québec employees, or a separate division within an overall multi-jurisdictional MEPP.
  • Wind up the current MEPP for Québec employees and services accrued to June 19, 2008 and settle those benefits.
  • For contributions beginning June 20, 2008:
    • Establish single-employer defined benefit plans for employers of Québec employees;
    • Establish a separate MEPP for Québec employees; or
    • Create a separate division within a multi-jurisdictional MEPP for Québec employees.
  • Review benefit levels and, depending the funding situation, consider converting the MEPP to a defined contribution plan for Québec employees thus avoiding any future funding deficit requirement.

David Blundell, FLMI, is a pension and benefits consultant in Buck Consultants’ research & compliance group.

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