EMPLOYER ACTION CODE: MONITOR
On November 2, 2017, the Quebec Finance Minister introduced Bill 149 — an act to enhance the Quebec Pension Plan (QPP) and to amend various retirement-related legislative provisions — into parliament. The QPP is the earnings-related pension program within the Canadian social security system covering workers in Quebec. Bill 149 will add a supplemental component to the QPP, increasing both benefits and employer/employee contributions gradually over a seven-year period starting January 1, 2019. It will also provide for a few amendments to the Supplemental Pension Plans Act (SPPA), which is applicable to employer-provided plans registered in Quebec.
The proposed enhancements mirror those enacted by the federal government in December 2016 for the Canada Pension Plan (CPP), which applies to workers in the other Canadian provinces. The similarity of the changes will facilitate the communication and administration of these plans for companies employing workers in more than one province.
Bill 149 would introduce the following enhancements to the QPP:
- From 2019 to 2023, the income-replacement rate at retirement for a Quebec worker will increase in stages from 25% to 33.33% of pay, up to the year’s maximum pensionable earnings (YMPE).
- From 2019 to 2023, a 2% increase in contributions (1% by employers and 1% by workers) up to the YMPE will be phased in to fund the above benefit enhancements.
- Covered earnings for determining benefits and contributions under the QPP will be extended by 7% of the YMPE in each of 2024 and 2025, resulting in a final ceiling of 114% of the YMPE. The resulting increased benefits will be funded, from 2025, by an 8% contribution (4% by employers and 4% by workers) on pay above the YMPE.
Our Client Advisory provides further detail and a discussion of QPP benefits and contributions before and after the Bill 149 enhancement.
Bill 149 would also enact changes to the SPPA, affecting employer-provided pension plans registered in Quebec, notably the following:
- Contributions made to reduce a letter of credit will be accounted for in the employee reserve maintained by the employer.
- The appropriation and allocation of surplus assets during the life of a pension plan would become increasingly flexible, according to rules that differ from the current default provided under the SPPA.
- The deadline for filing a notice on a plan’s financial situation will change from April 30 to September 30.
- The deadline for providing members with a notice of convocation to the annual assembly will change from June 30 to September 30.
Now that the proposed QPP enhancements are known, employers and pension plan sponsors will be able to analyze how these changes impact costs, their labor forces’ retirement preparations and the goals they set for their pension programs. Quebec Bill 149 was recently introduced, receiving its first reading on November 2, 2017; however, with the planned changes to the CPP coming into effect in 2019, it is expected that the QPP will be amended to follow suit.
Inasmuch as these amendments would begin to come into effect in 2019, employers would need to take action in 2018. Employers sponsoring pension plans that factor the amounts payable to the QPP/CPP into the pension calculation would also need to determine whether plan amendments are necessary.