Implementation of target benefit pension plans proposed in Quebec

TBP provisions

TBPs will be available in union or nonunion environments, on a single employer or multiemployer pension plan basis, but may not cover employees outside Québec, except under exceptions to be proclaimed by regulations.
Contributions will be predictable and fixed for both employers and members. Funding will be on a going concern basis and will include a stabilization provision.
Monthly life pensions, without being guaranteed, may be estimated in advance according to a predetermined formula. The pension amount may increase or decrease depending on the plan’s financial strength.
Benefits cannot be based on an ‘average of the last’ or highest salaries, cannot provide for early retirement subsidies depending on years of service, and cannot provide for guaranteed indexation after retirement.
Investment and longevity risks will be pooled among all active and retired members.
DB-type provisions will not be permitted in TBPs, such as for service prior to the implementation date of the TBP. In addition, a DB pension plan cannot be converted to a TBP for past service. However, it will be possible to convert a defined contribution pension plan or a multiemployer negotiated contribution pension plan to a TBP, subject to the provisions to be prescribed by regulation.

Bill 68 includes other proposed changes to the Québec Supplemental Pension Plans Act, including:

Pension plans that include defined contribution provisions and voluntary retirement savings plans will be allowed to offer variable payment life pensions.
DB or TBP plans will be allowed to determine the degree of solvency for the purposes of the payment of commuted values at intervals shorter than the plan’s fiscal year.
Retraite Québec will have the power, by regulation, to prescribe certain measures to mitigate the consequences of the state of emergency related to the COVID-19 pandemic.

by F. Hubert Tremblay

Principal, Mercer’s Wealth

by Stephanie Rosseau

Principal, Mercer’s Law & Policy Group

by Fiona Webster

Principal, Mercer’s Law & Policy Group

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