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Plan termination report

The termination report is used particularly to determine the amounts to which members and beneficiaries are entitled and the method by which benefits can be paid.

Prescribed time limit

Within 90 days of receiving the written notice of termination from the employer (or the decision of Retraite Québec), the plan administrator must:

  • have the termination report prepared
  • send the termination report to the employer (and the union, if any)
  • send statements of benefits to plan members and beneficiaries
  • publish a notice in a daily newspaper.

Upon expiry of the 90-day period, the administrator must send the termination report to Retraite Québec (with any corrections).

Preparing the report

Defined-contribution plan

The administrator can prepare the termination report or transfer the duty to a key administrative player.

Defined-benefit plan

The termination report must be prepared by an actuary.

Contents of the report

All the information about the termination report along with how to determine that information is spelled out in:

Some of the information you will find there:

  • the nature and value of the benefits of the affected members and beneficiaries
  • a valuation of the pension plan's assets and liabilities
  • the distribution of assets and liabilities between employers party to the plan
  • contributions that have not been paid into the pension fund
  • the amount of the employer's debt if the plan has a deficit, with a few exceptions
  • the allocation of surplus assets, if applicable
  • the methods of payment for benefits to members and beneficiaries.

Specific aspects to consider

  • Annuity contracts purchased from an insurer must be used for retirees and beneficiaries' pensions that were already in payment on the plan's termination date. Members who have applied for payment of their pensions, but who have not yet received them, are not affected by this rule.

  • The benefits for all other members and beneficiaries must be paid by transferring the value of those benefits to an authorized vehicle (for example: LIRAs, LIFs).

    A helpful example...

    A member has accumulated a pension of $1000 a month. That pension has a value of $50 000 (according to the applicable actuarial assumptions). That amount, with interest, will be transferred to an authorized vehicle chosen by the member.

  • If the plan has more than one employer, the termination report must specify the amount of assets associated with each employer.

If the plan has a deficit

If the plan has a deficit, the termination report must determine the amount of the employer's debt to the pension fund.

If a plan has more than one employer

The termination report must specify the amount of debt associated with each employer (using a specific method).

Employer's responsibilities

Plan termination does not eliminate the employer's obligation to fund the plan.

The employer is responsible for paying the plan's deficit as well as any interest on that amount, with a few exceptions.

Administrator's responsibilities

The plan administrator must undertake the procedures necessary to recover amounts owed to the pension fund, with interest.

Employer's bankruptcy

If the employer is unable to pay, because of bankruptcy, for example, the plan administrator will have to reduce the benefits paid to members and beneficiaries, under the supervision of Retraite Québec.

Payment option in case of insufficient assets

Three payment options are offered to a person whose pension in payment has been reduced following the termination of his or her plan or during the withdrawal of the employer from the plan, because the employer is insolvent. The person may:

  1. have his or her reduced pension purchased from an insurance company
  2. have his or her reduced pension temporarily administered by Retraite Québec, which will later purchase it from an insurance company
  3. choose to transfer the value of the reduced pension into another locked-in retirement vehicle, such as a life income fund (LIF).

Exceptions to the obligation to pay the debt for 2 types of plans

In the special case of a negotiated-contribution multi-employer plan or a member-funded pension plan, the employer is not responsible for the debt. Therefore, the employer is not required to cover the shortfall in assets upon termination. However, the employer must pay the contributions that were required until the termination date. The benefits of members and beneficiaries will therefore be reduced. In addition, special rules may apply to the payment offered to a person whose pension in payment has been reduced following the termination of his or her plan.

In the case of the plan's surplus assets

If there is an allocation of surplus assets, the termination report must specify the required information according to the legislative framework that applies to the plan.

Legal references

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