Termination of a pension plan

As the employer, you will find in this section some basic information that you will need to terminate your pension plan in accordance with the Supplemental Pension Plans Act and the rights of the members and beneficiaries.

This section covers the termination of defined contribution plans and defined benefit plans.

See the procedures for converting a defined contribution plan into an SIPP and the procedures for procedures for terminating an SIPP.

The right to terminate a pension plan

The Supplemental Pension Plans Act gives the employer and, in certain circumstances, the our agency the power to terminate a pension plan.

Situations in which the employer cannot terminate a plan

  • The existence of an agreement The employer cannot terminate a pension plan if prevented by any type of agreement, for example, a collective agreement that provides for continuation of the plan while the agreement is in effect.
  • The plan has been made compulsory by an order or decree If the pension plan has been made compulsory by an order or decree, the employer cannot terminate it unless the provisions of the plan provide otherwise.

Multi-employer plans

If the plan has more than one employer, the decision to terminate the plan must be made jointly by all the employers.

If one employer withdraws from the plan

If the plan has more than one employer and only one of them withdraws from the plan, the plan is not terminated but there is simply the withdrawal of an employer.

Where an employer withdraws, an application for registration of an amendment must be submitted to our agency to confirm the withdrawal.

 

Obligations of the employer

If the employer decides to terminate a plan, he must:

Plans with less than 26 members and beneficiaries

If the employer acts as the plan administrator, it must likewise carry out the obligations of a plan administrator.

In the event we decide to terminate a plan

We are required to inform the employer if our agency decides to terminate a plan.

In the event of a plan deficit

  • If the plan's assets are insufficient to pay the benefits of all the members and beneficiaries, the employer will have to pay the debt, with interest.
  • If the employer is unable to pay the debt because, for example, of a bankruptcy, the plan administrator will be required to reduce the members' and beneficiaries' benefits.

In the event of surplus assets

If the termination report shows surplus assets, they can be allocated to:

  • the members and beneficiaries only
  • the employer only
  • both the members and beneficiaries and the employer

The employer has 150 days to reach an agreement on the manner in which the surplus will be allocated and to take the necessary measures to carry out the allocation

Important

The 150-day period begins on the date on which the plan administrator receives the written notice of termination sent by the employer or the decision of our agency to terminate the plan.


Means at the employer's disposal for dealing with the allocation of surplus assets

  • A decision to allocate all the surplus assets to the members and beneficiaries pro rata to the value of their benefits.
  • draft agreement submitted to the members and beneficiaries.
  • An agreement with the union in the case of a plan established under a collective agreement.
    • Such an agreement covers only the plan members who are members of the union concerned. A draft agreement must be submitted to the other members and beneficiaries.
  • Arbitration, if the employer, the members and the beneficiaries affected by the termination have agreed to it.
  • Where the plan was established under a collective agreement, the consent of the union replaces the consent of the members that it represents.

If the employer does not act before expiry of the 150-day period:

  • Where the plan was not established under a collective agreement, the employer is deemed to have renounced any right to the surplus assets. The surplus will be allocated in its entirety to the members and beneficiaries and will be distributed pro rata to the benefits of each of them.
  • Where the plan was established under a collective agreement, the matter will be sent to arbitration to determine the manner in which the surplus will be allocated among the members and beneficiaries, including those who are not covered by the collective agreement.

In the case of a multi-employer plan

The termination report must show the amount of surplus assets related to each employer. Each employer will then have to act individually to apply the allocation rules to its portion of the surplus.

If the members and beneficiaries are connected to an employer who, on the termination date, is no longer a party to the plan, the portion of the surplus assets related to the former employer will be allocated in its entirety to those members and beneficiaries, pro  rata to the value of their benefits.

To find out more...

The Gouvernement du Québec publishes its Web pages in French. Consistent with the Charter of the French Language and to inform stakeholders outside Québec, this page is also published in English.
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