Legal developments - Quebec

  • October 31, 2016
  • François Parent

1. An Act respecting the restructuring of university-sector defined benefit pension plans and amending various legislative provisions

In our April 19, 2016 New Legal Developments – Quebec, we mentioned that on November 11, 2015, the Quebec government introduced Bill 75, An Act respecting the restructuring of university-sector defined benefit pension plans and amending various legislative provisions. Bill 75 was passed on June 8, 2016, and came into force that same day.

Bill 75 essentially provides that all university-sector DB plans must be restructured no later than December 31, 2017, in accordance with the rules and processes provided therein in order to improve risk management and to help redress the financial situation of certain plans to ensure their sustainability.

Some of the key elements of Bill 75 can be summarized as follows:

  • Mandatory actuarial valuation as of December 31, 2015.
  • Plans whose cost determined as of December 31, 2015 exceeds 21 per centFootnote1 of the overall payroll of the active members are subject to special restructuring measures aimed at reducing their cost, at that date, to a percentage equal to or less than 21 per cent.
  • Universities and unions must engage in negotiations to reach an agreement regarding the amendments of the pension plans so as to bring them in line with the above-mentioned requirement (i.e. to reduce their cost to a percentage equal to or less than 21 per cent). The legislation requires that an agreement must be reached no later than March 31, 2017. Should the parties fail to reach an agreement within the specified time frame, the dispute will be settled by an arbitrator.
  • With respect to post-December 31, 2015 service, Bill 75 requires that a stabilization contribution, which represents 10 per cent of current service contribution, be paid to the plan from January 1, 2018.Footnote2 It also provides for equal sharing of the total contributions (i.e. current service contributions, amortization payments and stabilization contributions), beginning on January 1, 2018Footnote3, between the university and the active members. However, the parties can agree that the active members will assume a smaller percentage of the contributions, to a minimum of 45 per cent.Footnote4

Bill 75 also introduced certain amendments to the Regulation respecting the funding of pension plans of the municipal and university sectorsFootnote5 and to the Supplemental Pension Plans Act.Footnote6

2. Regulation to amend the Regulation respecting supplemental pension plans

In our April 19, 2016 New Legal Developments – Quebec, we summarized some of the principal changes made to the SPPA by Bill 57Footnote7 (which mainly affects private sector defined benefit pension plans), including the following :

  • A stabilization provision (reserve account) must be established on a going-concern basis in accordance with pending regulations
  • Notice of the financial position of the plan must be filed within four months after the end of each plan’s fiscal year for which a complete actuarial valuation is not required

On July 13, 2016, the Regulation to amend the Regulation respecting supplemental pension plans was published. This regulation essentially sets out:

  • The rules to determine the target level of the stabilization provision
  • The information to be provided in the notice of the financial position of the plan

François Parent is a partner with Lavery de Billy in Montreal.