As part of Quebec’s 2012 Provincial Budget, the government announced new measures to help employee’s better save and plan for retirement. One of these measures was the introduction of Voluntary Retirement Saving Plans (VRSPs), a low-cost pension plan, which has officially been introduced as the Voluntary Retirement Savings Plans Act in December 2013. Here are some facts companies should know:
- The implementation of a VRSP is mandatory for companies with 5 employees or more, who are aged 18 and over with one year of uninterrupted service. Companies with less than 5 employees can subscribe on a voluntary basis.
- Companies who already have in place other group retirement savings plans such as a Group RRSP or pension plan are exempt and do not have to implement a VRSP.
- The new rule is in effect as of July 1, 2014, although the government has made the compliance period more flexible by proposing an application sequence based on the number of employees in the company:
- Companies with 20 or more affected employees: obligation by December 31, 2016
- Companies with 10 to 19 affected employees: obligation by December 31, 2017
- Companies with 5 to 9 affected employees: date to be determined by the government, but the obligation will not be prior to January 1, 2018
- No employer contribution is required. The employer is simply obliged to implement the plan, inform the employees and administer it in conjunction with their plan provider. If the employer does decide to contribute, this contribution will generally be locked-in.
- At implementation, all employees must be automatically enrolled; however they can opt out within 60 days.
- Employees can determine their own contribution rate as well as their own investment options. Should they fail to determine their contribution rate within the first 60 days of being enrolled the default rate is 2% of their earnings, which will increase over time. Employees can change the contribution rate or withdraw at any time.
- VRSPs will be administered by licensed insurers, trust companies and investment fund managers.
HR Connection – Spring 2014
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