Termination of a defined-contribution plan

Who can terminate a plan?

Changes in a company (merger, reorganization, sale, bankruptcy or closure) can result in the termination of a pension plan. Even if no such events occur, an employer can nevertheless decide to terminate a plan.

An employer cannot terminate a plan if:

• a collective agreement prohibits the employer from terminating it
• the plan is rendered compulsory by an order or decree and no provision gives the employer the right to terminate the plan.

Retraite Québec can also terminate a plan if:

• a plan no longer has any active members
• the employer fails to collect member contributions or to pay employer or member contributions into the pension fund
• the plan administrator, its delegate or any other party to the plan fails to comply with an order issued by Retraite Québec.

How is a plan terminated?

Once the decision to terminate a plan has been made, the plan's members, beneficiaries and administrator are informed. The administrator must then carry out certain tasks within prescribed time limits in order to liquidate the pension fund.

The termination of a plan takes at least 4 months. Some aspects concern the plan's members and beneficiaries in particular.

In the event of bankruptcy

If an employer owes money to the plan, the administrator must take the necessary measures to recover the sums owing. The sums that will not have been recovered, where applicable, will not be paid to the accounts of members and beneficiaries.

If any plan expenses were to be paid by the employer and the employer is bankrupt, those expenses may be deducted from the accounts of the plan's members and beneficiaries.

In the event of the plan's surplus assets

If the plan has surplus assets upon its termination they must be allocated in accordance with the legal or regulatory provisions that apply to the plan.