New in Québec: VRSPs
Does your employer offer a group retirement savings plan? If not, the new voluntary retirement savings plan (VRSP) will address this deficiency, which affects 50% of workers in Québec.
VRSPs mainly concern employees age 18 or over who do not have access to a group retirement savings plan and who have at least one year of continuous service. VRSPs are complementary to and work in parallel with the Québec Pension Plan.
Eligible employees will be automatically signed up for a VRSP set up by their employer. Employers, however, are not required to contribute to employees' VRSPs. A set of default options have been selected to limit the number of decisions that employees will have to make. However, employees can choose:
- to interrupt or suspend their contributions;
- to increase or decrease their rate of contribution.
When is your employer required to offer you a VRSP?
Employers who wish to offer a VRSP can do so as of 1 July 2014. Employers will be obligated to automatically sign up their employees at the latest by:
- 31 December 2016, if they have 20 or more eligible employees;
- 31 December 2017, if they have 10 to 19 eligible employees;
- the date determined by the government, which cannot be prior to 1 January 2018, if they have 5 to 9 eligible employees.
Employers with 4 employees or fewer can offer a VRSP on a voluntary basis.
The Commission des normes du travail (CNT) will enforce employer obligations, especially the obligation to offer a VRSP to employees. However, employees will have the responsibility of deciding whether to remain signed up for a VRSP.
The Régie estimates that over 90 000 employers do not currently offer their employees a retirement savings plan. For those employers, setting up a VRSP could be a good strategy for the recruitment and retention of workers.
Contributions to a VRSP are tax deductible, like RRSPs. Since contributions are deducted from the employees’ pay, the employees benefit from tax savings immediately.
The employee contribution rate is set at 2% of gross salary from 1 July 2014 to 31 December 2017, at 3% in 2018, and at 4% as of January 2019.
Like RRSPs, accumulated amounts (capital and interest) are not subject to income tax until they are withdrawn.
If you change employers, you can leave the amounts accrued in the plan or transfer them to another plan.
Administration of VRSPs
VRSPs will be administrated by a third party, for example, a financial institution. The Régie will oversee the plans and ensure compliance with the Voluntary Retirement Savings Plans Act, especially concerning the low costs associated with VRSPs.
By encouraging significant accumulations of savings, VRSPs will result in reduced member fees, which will mean better returns and higher retirement income. That's the objective—helping workers save for retirement!
For more information, consult our new VRSP section .