Allocation of surplus assets upon plan termination

If the termination report indicates surplus assets, it is necessary to allocate and distribute the surplus assets.

Allocating surplus assets

Any surplus assets of a terminated pension plan are first allocated concurrently to the employer and to the members and beneficiaries with benefits under defined-benefit provisions, up to the amounts recorded under section 42.2 of the Supplemental Pension Plans Act This link will open in a new window. (commonly called banker's clause).

If the amount of the surplus assets is less than the total of the amounts recorded under the banker's clause, they must be allocated proportionately to the amounts recorded, respectively, for the employer and for members and beneficiaries.

Any remaining surplus assets, where applicable, must be allocated in accordance with the conditions and procedure set out in the plan. If a portion is allocated to the members and beneficiaries, it must be apportioned among them proportionately to the value of their accrued benefits, unless another method is set out in the plan.

The termination report must provide, in particular:

  • a summary of the provisions of the plan that concern the allocation of surplus assets upon plan termination
  • surplus assets as at the termination date and as at the most recent date on which its value is known
  • a description of the allocation of surplus assets
  • the amounts recorded under the banker's clause
  • if applicable, the portion payable to each member and beneficiary.

Members and beneficiaries for the allocation of surplus assets

If the surplus assets are allocated, in whole or in part, to members and beneficiaries, the following persons are also considered as members or beneficiaries:

  • members and beneficiaries whose benefits were paid in accordance with the plan's annuity purchasing policy within 3 years prior to the termination date
  • members whose active plan membership has ceased within 3 years prior to the termination date, and whose benefits have already been paid.
Note that...
  • The statement of benefits sent to the members and beneficiaries affected by the termination of the plan must provide, in particular:
    • a summary of the provisions of the plan that concern the allocation of surplus assets upon plan termination
    • surplus assets as at the termination date and as at the most recent date on which their value is known
    • a description of the allocation of surplus assets
    • if applicable, the portion payable to each member and beneficiary.
  • If the employer has decided to allocate all or part of the surplus assets to the members and beneficiaries owed to it, the termination report can reflect the employer's decision.

 Legal references

Distributing surplus assets

As for the members' and beneficiaries' basic benefits, the plan administrator must distribute the surplus assets between the 30th and 60th day after receiving the termination report sent by Retraite Québec.

We wish to point out that the surplus assets to be distributed are those available after full payment of the members' and beneficiaries' basic benefits, including interest.

Under the circumstances, the surplus assets to which the employer is entitled may not be allocated before all the members' and beneficiaries' basic benefits have been paid in full.

Legal reference

Negotiated-contribution multi-employer plans

Special rules apply for allocating surplus assets upon termination of a negotiated-contribution multi-employer plan. They are indicated in sections 146.42 and 146.43 of the Supplemental Pension Plans Act This link will open in a new window..

Plans affected by an exemption regulation

Special rules apply for allocating surplus assets upon termination of pension plans affected by an exemption regulation, such as pension plans of the municipal and university sectors or member-funded pension plans.


 

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