Allocation of surplus assets following plan termination
If the termination report indicates surplus assets, it is necessary to:
Determine who will receive the surplus assets
A pension plan's surplus assets can be allocated to:
- members and beneficiaries only
- the employer only
- members and beneficiaries as well as the employer.
For the purposes of allocating surplus assets, members and beneficiaries are:
- the members and beneficiaries affected by the plan's termination
- members whose active plan membership has ceased during the 3 years prior to the termination date, even of their benefits have already been paid
- This measure is aimed at cessations of active membership occurring since 1 January 2001 only.
- members and beneficiaries affected by some partial terminations to a pension plan (for more details, see sections 308.2 and 308.3 of the Supplemental Pension Plans Act)
- Members and beneficiaries affected by a partial termination that dates back 7 years or more from the termination date qualify as members and beneficiaries for the purposes of allocating surplus assets if they present a claim to the administrator.
- members and beneficiaries whose benefits were paid before 1 January 1990 by means of an annuity contract from an insurer (for more details, see section 310.1 of the Supplemental Pension Plans Act).
- Those persons qualify as members and beneficiaries for the purposes of allocating surplus assets if they present a claim to the plan administrator.
The employer has 150 days to reach an agreement on the means by which surplus assets will be allocated and to take appropriate measures.
The 150-day time limit starts on the day the plan administrator receives the written notice of termination from the employer or Retraite Québec's decision to terminate the plan
Those means could be:
- a decision by the employer to allocate the surplus assets in their entirety to plan members and beneficiaries, in proportion to the value of their benefits
- a draft agreement from the employer to the members and beneficiaries
- an agreement between the employer and the union for plans established by collective agreement
- That agreement affects only those members who are part of the union. A draft agreement must be submitted to other members and beneficiaries.
- arbitration if the employer as well as the members and beneficiaries affected agree to it
- For plans established by collective agreement, consent from the union is deemed to be consent from the members that it represents.
If the employer has not acted before the 150-day deadline is up:
- Where the plan was not established by collective agreement, the employer is considered to have renounced any entitlement to the surplus assets. Therefore, those assets will be allocated to members and beneficiaries and distributed in proportion to the value of their benefits.
- Where the plan was established by collective agreement, arbitration is the only recourse available to determine the allocation of surplus assets between members and beneficiaries, including those who are not covered by the collective agreement.
Multi-employer pension plans
The termination report specifies the amount of surplus assets that are associated with each employer; each employer must make its own arrangements for its share of surplus assets.
If some members and beneficiaries worked for an employer who is no longer party to the plan as of the termination date, the share of surplus assets associated with this employer is allocated to those members and beneficiaries in its entirety, in proportion to the value of their benefits.
Produce a supplement to the termination report and send it to Retraite Québec
As soon as the question of the allocation of surplus assets is settled, a supplement to the termination report must be produced.
- In the case of a defined contribution pension plan, the plan administrator must prepare the supplemental report or transfer the duty to a key administrative player.
- In the case of a defined benefit plan, the supplemental report must be prepared by an actuary.
The contents of the supplement to the termination report are set out in section 207.5 of the Supplemental Pension Plans Act and section 66 of the Regulation respecting supplemental pension plans.
The supplement to the termination report must be sent to Retraite Québec within 30 days of settling the question of allocating surplus assets. The supplement must be accompanied by payment of the appropriate fees (see Retraite Québec's fee schedulen).
Distribution of surplus assets
The plan administrator must distribute the surplus assets between 10 and 30 days after the deadline for sending the supplemental report to Retraite Québec expires, unless Retraite Québec grants an extension.
If a share of the surplus assets is to be allocated to members and beneficiaries, the administrator must follow their instructions as to how to pay their share.
Note: Although Retraite Québec no longer revokes a pension plan's registration after its termination, we appreciate being informed of your progress, especially with respect to pension fund liquidation and its completion.
Other steps in the termination process
Simplified pension plan (SIPP) termination
The contents of this page are not pertinent to SIPPs. Please consult the page that deals with the steps to terminate an SIPP.