The Supplemental Pension Plans Act does not indicate who may set up a target-benefit pension plan. It can be an employer or an accredited association, such as a union. As for all supplemental pension plans, the person who sets up a target-benefit pension plan must be authorized to do so by laws governing it.
As for any other supplemental pension plan, the employer party to the target-benefit pension plan or all employers, if it is a multi-employer plan, must consent to the obligations incumbent upon it.
The workers eligible to participate in the target-benefit pension plan must also consent to its set up. If an accredited association, such as a union, represents the eligible employees, it can consent on their behalf. Those that are not represented by such an association must be consulted individually. In that case, the set up of the plan, as far as they are concerned, will only be possible if less than 30% of the workers oppose to it.
In addition to the elements usually required (makeup of a pension committee, the conditions for membership and withdrawal of an employer, normal retirement age, etc.), the provisions of a target‑benefit pension plan must provide for:
The provisions of a plan must be written so that no decision needs to be rendered in the event of insufficient contributions or if the conditions requiring a restoration of benefits or the use of surplus assets are met. For example, if contributions are insufficient, the provisions of the plan must specify the recovery measures applicable to the group of active members and to the group of non‑active members and beneficiaries, as well as the extent of each of the measures.
The provisions of the plan must provide for the recovery measures applicable when contributions are insufficient to cover the cost of the obligations related to future service and the measures applicable when contributions are insufficient to cover the cost of the obligations related to past service (service credited as at the actuarial valuation date).
The provisions of the plan must indicate which measure or measures in the following list apply in the event of insufficient contributions to cover the current service contributions, which include the current service stabilization contributions:
The recovery measures must have the same impact for all active members.
The provisions of the plan must also provide for the application of one or more of the following measures or a combination of them in the event of insufficient contributions to cover the required amortization payments:
The measures must comply with the following requirements:
If the provisions of a target-benefit pension plan provide for an increase in employer contributions when there is an insufficiency of contributions, they must also provide for the two following upper limits:
The provisions of the plan must provide for the objective of the recovery measures. However, the Supplemental Pension Plans Act prevents the application of recovery measures from increasing the funding level of the plan beyond 100%, in addition to the target percentage of the stabilization provision.
For example, the plan's provisions could provide that, in the event of insufficient contributions related to past service, the benefits related to that service must be reduced in order to reach a funding level of 105%, without exceeding a funding level of 100%, in addition to the target percentage of the stabilization provision, which is determined in the actuarial valuation of the plan.
The Supplemental Pension Plans Act allows for the restoration of benefits to their target when, based on the funding basis, the assets are greater than both of the following values:
The plan's provisions must, however, provide for the conditions allowing the administrator to restore the benefits to their target, as well as the procedure for restoring them. A stricter condition than the one provided for by the Supplemental Pensions Plans Act may be provided.
The terms and conditions to provide for must specify how the benefits must be restored. For example, the pensions may be restored by respecting the chronological order in which the reductions occurred.
The Supplemental Pension Plans Act allows the use of surplus assets in a target‑benefit pension plan only if:
The plan's provisions must indicate the conditions allowing the administrator to start the process of using the surplus assets. They could provide for a funding level greater than the threshold provided for under the Supplemental Pension Plans Act, as described in the second bullet above.
They must also specify how to use the surplus assets. It must only be used for a member contribution holiday or for an improvement in benefits.
The order in which to apply these measures, as well as the way they are distributed between the group of active members and the group of non-active members and beneficiaries must also be indicated, in compliance with the following requirements:
The plan's provisions must indicate at which moment the recovery measures, the restoration of benefits and the measures applicable take effect when using the surplus assets.This can be from the day following the date of the actuarial valuation in which insufficient contributions are shown or the condition allowing for a restoration of benefits or the use of surplus assets, but at the latest one year after the day following the date of the valuation.
The application of recovery measures cannot have an impact on amounts that are already paid on the date on which the actuarial valuation report is sent to Retraite Québec. This restriction applies to pension amounts that have already been paid to retirees and beneficiaries, as well as the transfer of benefits that have already been made on that date.
The person who applies for the registration of a plan must use the Application for Registration of a Target-Benefit Pension Plan to register the target-benefit pension plan with Retraite Québec. This form can facilitate his or her duties and insure that he or she includes all the documents and information required under the Supplemental Pension Plans Act.
