Payment of target benefits
Certain specific rules apply when a person's benefits are paid after his or her active membership in a target‑benefit pension plan ends.
In the case of a target-benefit pension plan, payment of the value of benefits is made in proportion to the degree of solvency of the plan, even if it is higher than 100%. When the degree used is less than 100%, the balance of the value of the benefits that could not be paid does not have to be paid.
A payment of benefits is usually made at the member's request, or the beneficiary's. The administrator can decide to refund a person that has ended their active membership, pursuant to section 66 of the Supplemental Pension Plans Act , in the case where he or she meets the two following conditions:
- the value of his or her benefits is less than 20% of the Maximum Pensionable Earnings
- the value of his or her benefits adjusted to take into account the degree of solvency is equal to or greater than the value of the target benefit.
Value of the benefits
Despite what is provided for by the Canadian Institute of Actuaries (CIA) regarding the method and assumptions used to establish the value of the benefits for members of a target-benefit pension plan, subsection 3570 of the CIA's Standards of Practice does not apply to Québec members. The assumptions to use in order to establish the value are those described in section 67.4 of the Regulation respecting supplemental pension plans , under the transitional provisions of the Act allowing the establishment of a target-benefit pension plan.
If the target-benefit pension plan offers early retirement benefits or the indexation of the pension before retirement, the value of the benefits must take these benefits into account, as all persons ending their active membership must benefit from them.
The calculation of the minimum employer contribution (section 60 of the Supplemental Pensions Plans Act ) is not required by the Act.
The value of the benefits must be based on the adjusted accrued benefits to take into account the applications of recovery measures, restoration of benefits and the uses of the surplus assets indicated in the actuarial valuation report sent to Retraite Québec on the date on which the value was established or before that date. For example, a calculation made as at a date after the actuarial valuation was sent must take into consideration the decrease in benefits resulting from the application of recovery measures indicated in the report, even if the benefit reduction effective date is after the date of the calculation.
A plan is subject to a periodic actuarial valuation as at 31 December 2024. Recovery measures are applied due to insufficient contributions noted in the actuarial valuation. According to these measures, the life pension for the credited service as at 31 December 2024 for all members and beneficiaries, is reduced by 10%, effective on 1 January 2026. The most recent degree of solvency of the plan established, which takes into account the application of recovery measures, is 90%.
Michelle ends her membership in the plan on 30 September 2025. Her adjusted accrued pension as at 31 December 2024 is of $10 000. The adjusted accrued pension used to establish the value of her benefits as at 30 September 2025 is of $9000, to which the pension regarding the service accrued in 2025 is added.
The value of Michelle's benefits is $100 000. If Michelle requests payment of her benefits, only an amount equal to 90% of the value, that is, $90 000, could be transferred to a locked-in retirement account (LIRA), a life income fund (LIF), a annuity contract, or, if possible, another plan.
The rules mentioned above also apply in other circumstances such as the partition of benefits between spouses following a separation and the withdrawal of an employer from a pension plan.
The same way that, in the case of a defined-benefit plan, when paying the benefits to a person after their active membership in a plan has ended, the amount transferred or refunded cannot be less than the total of the accrued contributions paid by the person, with interest.