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.
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.
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.
If the employer decides to terminate a plan, he must:
- set the plan's termination date
- send a written notice of termination to:
- pay the required contributions up to the plan's termination date
- pay the outstanding debt if the plan has a deficit
- deal with the allocation of surplus assets if the termination report shows a surplus.
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
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.
- A 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.
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