Subdivision 1:
General provisions related to a variable payment life pension fund |
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Minimum and maximum capital
Section 24 | The purpose of section 34.1 is to allow the plan to provide a minimum capital amount that can be converted into a variable payment life pension. The plan text may also provide a maximum cumulative amount per person that could be converted into a pension in the same fund or in all the funds for which the mortality experience is shared. |
Requirement regarding mortality assumptions
Section 24 | Section 34.2 requires, for all the funds for which the mortality experience is shared, identical actuarial assumptions related to mortality for the purchase of pensions. |
Transfer of sums between funds
Section 24 | The purpose of section 34.3 is to provide a framework for the transfer of sums between funds. The transfer of sums is only permitted between funds for which the mortality experience is shared. It must be made based on a pension adjustment report, which will indicate the amount of each transfer to be made and to which fund the sums must be transferred, as provided for in section 12.1. Such a report, prepared by an actuary, is required, in accordance with section 34.4, each time an adjustment is calculated to take into account the mortality experience of the beneficiaries of the fund, where the mortality experience is shared among several funds included in the plan. The sum to be transferred from a fund corresponds to the excess of the fund's assets over its liabilities. The amount must be determined after having made the calculations for the mortality experience (section 34.10) and for changes to the assumptions, if such is the case (section 34.11). Pursuant to the fourth paragraph of section 34.10, the calculations provided for in sections 34.10 and 34.11 must be made by considering all the funds that share the mortality experience. The sum to be transferred must be adjusted based on the return of the fund between the end date of the fiscal year and the date of transfer. The return can be negative, and the sum transferred can be less than the amount determined on the end date of the fiscal year. The sums must be transferred immediately after the pension adjustment report is sent to Retraite Québec. |
Valuation of the variable payment life pension fund
Section 24 | Section 34.4 specifies the circumstances for which the variable payment life pension fund must be the subject of a valuation by an actuary: - at least every three years;
- in the event of changes to the assumptions related to mortality;
- in the event of pension adjustments related to the mortality experience that is shared with other funds;
- where Retraite Québec requires it.
Where a fund is the subject of a valuation by an actuary, the actuary must valuate all the funds included in the plan. A report made after the valuation must be sent to Retraite Québec within six months of the end of the fiscal year. In other circumstances, the administrator may adjust the pensions without the intervention of an actuary and without having to send a pension adjustment report to Retraite Québec. |
Death benefits
Specifications
Section 24 | Section 34.5 provides details about death benefits which can be offered by a variable payment life pension fund. Paragraph 1 provides for the application of a limit where the fund offers a guaranteed capital refund type of death benefit, which corresponds to the excess of the amount transferred to the fund on the total of the pension amounts paid to the beneficiary of a variable payment life pension fund. The limit corresponds to the amount of the capital refund, established by taking into account the return of the fund since the date of transfer of the sums to the fund. The purpose of the measure is to ensure that the fund is sufficient in the case of negative returns on investments. Paragraph 2 indicates the calculation method of the benefit where the option of death benefits chosen by the member includes a guarantee period and the plan provides for payment of the death benefit in a lump sum. |
Definition of an actuary
Section 24 | Section 34.6 defines an actuary for the purposes of the provisions related to a variable payment life pension fund. An actuary is the person referred to in section 3 of the Supplemental Pension Plans Act, which means, any person who is a member of the Canadian Institute of Actuaries having the title of Fellow or a status recognized as equivalent by the Institute. |
Subdivision 2:
Establishment and payment of a variable payment life pension |
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Establishment of the amount of the variable payment life pension
Section 24 | Section 34.7 lists the elements to take into account to establish the initial amount of a variable payment life pension. Therefore, the amount corresponds to the capital amount transferred to the fund divided by a pension factor beginning on the next payment provided for under the plan See Note 1. The pension factor takes into account the person's age and sex on the date of transfer, the assumptions related to mortality sent to Retraite Québec as well as the pension options and reference rate chosen for the pension. Section 34.7 also defines the reference rate. The rate corresponds to the interest rate used to calculate the initial amount of the variable payment life pension and to adjust it thereafter. Where the pension adjustment report establishing new assumptions related to mortality is sent, the amount of a pension purchased before the report is sent must be adjusted according to the method provided for in the plan. Section 34.8 requires that payment of the pensions be made on a monthly basis, unless the plan provides for more frequent payments. |
Subdivision 3:
Adjustment of the amount of the variable payment life pension |
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Adjustment of the variable payment life pension to take into account the return
Section 24 | Section 34.9 specifies the adjustment method of the pension to take into account the return of the variable payment life pension fund during the previous fiscal year. That simple method consists in multiplying the pension amount by (1 + the fund's net rate of return) and dividing it by (1 + the reference rate of the pension). A return on the fund's investments higher than the reference rate will increase the pension. The fund's net rate of return of the fiscal year will be calculated based on the information filed in the audited financial report, in order to ensure consistency, from one fiscal year to another, of the information used, regardless of the professional who makes the calculation. For the very first adjustment of the pension to take into account the return of the variable payment life pension fund, it is mandatory to take into account the return of the fund between the date of transfer of the sums to the fund and the end of the fiscal year, according to the method provided for by the plan. |
Adjustment of the variable payment life pension to take into account the mortality experience
Section 24 | Section 34.10 specifies the pension adjustment method to take into account the mortality experience See Note 2 of the beneficiaries of the fund, the purpose of which is to calculate the necessary percentage of adjustment to allow the fund's liabilities to be equal to its assets at the end of the fiscal year. The calculation must be made after those provided for in section 34.9. Where the mortality experience is shared by two funds or more in the same plan, the necessary adjustment to take into account the mortality experience is the one that allows the total of the funds' liabilities to be equal to their assets at the end of the fiscal year. This section specifies that the percentage of adjustment must be the same for all the beneficiaries of the fund or funds, except if the plan provides for a special method for the beneficiaries having joined a fund since the end of the last fiscal year for which an adjustment related to the mortality experience has been made. - The adjustment mainly reflects the mortality experience. It will be slightly affected by the estimates made, in particular to include the effect of the frequency of payments, which differs from the one proposed in the calculation approach of the return adjustment. Back to the reference
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Adjustmentof the variable payment life pension to take into account a change to the assumptions related to mortality
Section 24 | Section 34.11 provides that the pension will be adjusted further to the adjustments for the return and for the mortality experience, if the actuary makes changes to the assumptions related to mortality. The adjustment must be of the same percentage for all the beneficiaries of the fund. |
Moment of adjustment of the pension amount
Section 24 | The required calculations for the purpose of adjusting the pension are made as of the end date of the fiscal year of the variable payment life pension fund, whereas the adjustment of the pensions being paid can be effective at a later date. Section 34.12 specifies that the pension amounts being paid must be adjusted not later than during the seventh month following the end of the fiscal year. The content of the plan text must, under section 4, specify when the adjustment becomes effective and the time of year where the pension amounts are adjusted. For example, in a situation where variable payment life pensions are paid on a monthly basis on the 15th of the month, where the text provides that the adjustment becomes effective in January and where the pension amounts are adjusted in July, the payment of 15 July and the following payments must take the adjustment into account. The payment of 15 July would also take into account the amounts owed to the beneficiary or to be recovered given that the adjustment became effective in January. Section 125.1 of the Act applies to the recovered amounts. Where the text provides that the adjustment becomes effective in July, no amount would be owed or recovered. |
Subdivision 4:
Redetermination of the variable payment life pension |
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Redetermination of the pension
Section 24 | Section 34.13 specifies how to redetermine the variable payment life pension to take into account the change in the death benefit where benefits are partitioned or transferred, or where the beneficiary applies for it further to the breakdown of a union. The redetermined variable payment life pension will take into account the death benefit provided for by the plan in such a case, as though it had been chosen on the date on which payment of the pension began. The actuarial value of the redetermined pension must be the same as the one from the variable payment life pension before the new determination. The latter value must be calculated on the date of partition, based on the reduced pension after application of section 48.1, or on the date of the application, taking into account the death benefit that was chosen by the beneficiary. |
Subdivision 5: Termination and winding-up of a variable payment life pension |
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Section 24 adds a subdivision concerning the termination and winding-up of variable payment life pension funds in Division II "VARIABLE PAYMENT LIFE PENSIONS". This subdivision includes the following subdivisions: -
General provisions related to the termination of a variable payment life pension fund (sections 34.14 to 34.18)
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Termination report of the variable payment life pension fund (section 34.19)
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Valuation and statement of the benefits of the beneficiaries of a variable payment life pension fund (sections 34.20 to 34.21)
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Payment of benefits (sections 34.22 to 34.26)
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General provisions related to the termination of a variable payment life pension fund |
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Termination date of a variable payment life pension fund
Section 24 | Section 34.14 defines the termination date of a variable payment life pension fund. At no time can the termination date of the fund be after the 1st of the month following the date of death of the beneficiary which reduces to less than 10 the number of beneficiaries of the fund who receive a life pension. The evaluation of compliance with the criterion of 10 beneficiaries therefore excludes the beneficiaries of the fund who receive a pension paid temporarily under a pension option at the time of death which provides a guarantee period. The termination date of the fund is the date on which the benefits of the beneficiaries of the fund are determined,as provided for in section 34.20. |
Case order of winding-up of a variable payment life pension fund
Section 24 | Section 70.8 of the Act provides that Retraite Québec can order the winding-up of a variable payment life pension fund in cases prescribed by regulation. The order would only affect the variable payment life pension fund, not the plan. Section 34.15 proposes the following cases: - where the administrator fails to comply with an order issued by Retraite Québec;
- where the number of beneficiaries of a variable payment life pension fund who receive a life pension becomes lower than 10. The evaluation of compliance with the criterion of 10 beneficiaries therefore excludes the beneficiaries of the fund who receive a pension paid temporarily under a pension option at the time of death which provides a guarantee period;
- where the Autorité des marchés financiers adds a restriction to the authorization granted to an administrator, preventing the administrator from maintaining the variable payment life pension fund.
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Notice of amendment to the plan for the winding-up of the variable payment life pension fund
Section 24 | Section 3 of the Act requires that the members of the plan be informed where the plan is amended. Section 34.16 provides for a 30-day period following the termination date of the fund to send the notice to the beneficiaries of the fund where the plan is amended to wind up the variable payment life pension fund. The notice must inform them that a statement showing the available payment methods of their benefits will be sent to them at a later time. The notice must also be sent to Retraite Québec within the same 30-day period. |
Information required if Retraite Québec decides to wind up the variable payment life pension fund
Section 24 | Section 34.17 requires the administrator to notify the beneficiaries of the fund as soon as Retraite Québec's decision is received to wind up the fund. The notice must inform them that a statement showing the available payment methods of their benefits will be sent to them at a later time. The administrator must also amend the plan as a result of the decision. The other parties to the plan (members and employers) will be notified through the amendment process. |
Modification of legislative provisions where the plan is terminated and it includes a variable payment life pension fund
Section 24 | Section 34.18 provides that certain requirements of sections 82 to 84 of the Act only apply to the plan's accounts, and not to the variable payment life pension fund. It provides a 30-day period from the termination date of the fund to notify Retraite Québec and the beneficiaries of the fund where the administrator decides to terminate the VRSP. The notice to the beneficiaries must inform them that a statement showing the available payment methods of their benefits will be sent to them at a later time. If the plan's assets are liquidated following a decision rendered by Retraite Québec, the notice must also be sent to the beneficiaries of the fund immediately after having received the decision. |
Termination report of the variable payment life pension fund |
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Requirement of a termination report of the fund (date and content)
Section 24 | Section 34.19 provides that the administrator must send a termination report of the fund to Retraite Québec generally within 90 days following the termination date of the fund. Its purpose is also to identify the elements of the report that are required and the necessary statements of the actuary. |
Valuation and statement of the benefits of the beneficiaries of a variable payment life pension fund |
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Date and valuation method of benefits under a variable payment life pension fund during its wind-up
Section 24 | Section 34.20 prescribes that the benefits of each beneficiary of the fund be valuated on the termination date of the fund and specifies how to determine the value to which each beneficiary of the variable payment life pension fund is entitled under a fund where it is wound up. Each beneficiary is entitled to a share of the assets of the variable payment life pension fund in proportion to the beneficiary's liabilities over the total liabilities of the variable payment life pension fund. The value of the liabilities is determined on the termination date of the variable payment life pension fund. |
Required statement and its content
Section 24 | Section 34.21 determines the content of the statement sent to the beneficiary of the variable payment life pension fund affected by the winding-up. The statement must be sent by the administrator so that the beneficiaries have at least 10 days to indicate their choice and present observations. |
Payment of benefits |
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Payment methods of benefits
Section 24 | Section 34.22 specifies the available payment methods for the beneficiaries of the wound-up variable payment life pension fund. The beneficiary of the fund can choose between: - obtaining an annuity established based on the value of benefits with an insurer chosen by the administrator. The characteristics of the variable payment life pension that was being paid are maintained;
- transferring his or her share of the fund's assets to a pension plan referred to in section 27 of the Regulation or to a locked-in account of the plan where the fund is terminated without the plan being terminated.
Where the beneficiary of the fund dies before payment of his or her benefits is made, the benefit is payable in a lump sum. |
Default choice
Section 24 | Section 34.23 imposes the purchase of an annuity with an insurer by means of the value of benefits where the beneficiary of the variable payment life pension fund does not provide his or her choice. |
Payment of benefits of the variable payment life pension fund (authorization and period) Section 24 | Section 34.24 provides that payment of the benefits of the beneficiaries of the variable payment life pension fund, where a
VRSP is wound up or where the plan is amended to wind up the fund, is subject to Retraite Québec's authorization. The administrator must make the payment during the period that extends from the 30th to the 60th day after the date on which the administrator received Retraite Québec's authorization.
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Accrual between the termination date of the fund and the payment date
Section 24 | In accordance with section 34.25, the amount due on the termination date of the fund must be reduced from the pension amounts paid until the payment date. Interest must be taken into account depending on the return of the fund for that period. |
Adjustment of the time limit to send the wind-up report of the plan
Section 24 | Section 34.26 extends the time limit to send the wind-up report required by section 91 of the Act to 60 days following the later date between the liquidation date of the accounts and the date on which the assets of the variable payment life pension fund are liquidated. It also specifies that the presence of a variable payment life pension fund does not affect the period provided for in section 91 of the Act to provide the new administrator's contact information following the liquidation of the accounts. |
Spouse's waiver
Section 24 | Section 34.27 proposes the content of the statement of the spousal waiver to the death benefit. |