The Quebec government has regulated that starting on December 31, 2016, all companies with a business establishment in Quebec with at least 5 employees, who have at least 1 year of uninterrupted service, will be required to set up a Voluntary Retirement Savings Plan (VRSP) for its employees. An establishment means office premises located in Quebec and for which activities fall under provincial jurisdiction in Quebec.
What is a VRSP?
A VRSP is Quebec’s version of the federally-endorsed Pooled Registered Pension Plan (PRPP), with some variations specific to Quebec. The objective is to help Quebecers save more for retirement, offer workers a low-cost solution, and to provide all workers access to a private group plan. In summation, the VRSP is a defined contribution pension plan (DCPP) with some differences intended to make it simpler than a typical DCPP plan. Some of the differences include:
- Plan administration and employee enrolment is managed by selected qualified administrators (insurance carriers) and annual reporting is the responsibility of the administrator, not the plan sponsor;
- An employer is not required to contribute to a VRSP;
- No fees for employers, minimal fees for employees;
- Legislation for the VRSP is separate from provincial pension legislation;
- A lifecycle fund will be the default investment option to ease employee investment selection.
Registered Pensions Plans (RPPs), Registered Retirement Savings Plans (RRSPs), and group Tax-Free Savings Accounts (TFSAs) are all considered comparable plans to the VRSP to avoid mandatory participation in the VRSP.
|As of:||An employer with:||Must set up a VRSP and register their eligible employees at the latest by:|
|June 30, 2016||20 or more eligible employees||December 31, 2016|
|June 30, 2017||Between 10 and 19 eligible employees||December 31, 2017|
|A date to be determined by the government||Between 5 and 9 eligible employees||A date after December 31, 2017 to be determined by the government|
Employers with fewer than 5 eligible employees may voluntarily offer employees a VRSP. However, if the employee count of an employer who initially had 5 or more eligible employees falls below the threshold of 5 eligible employees, the employer must continue to offer the VRSP to newly eligible employees or after two years, to those who have opted out.
Employees with at least one year of uninterrupted service must be enrolled into the VRSP. Employees who do not have one year of uninterrupted service with the employer may also chose to join the VRSP.
- Employers must choose VRSP provider (qualified administrator);
- Notify employees within 30 days in advance of the contract being signed, that the VRSP will be established;
- Enrol eligible employees and others that request enrolment and provide employee demographic data;
- Deduct and remit employee contributions on time;
- Notify the administrator if an employee terminates employment, dies or retires;
- If an employee has chosen to opt out or terminate membership in the VRSP, an employer must offer an opportunity to re-join the plan every two years.
Employers are not required to contribute to the VRSP, however may choose to do so. If an employer elects to contribute, those contributions are not subject to payroll taxes and are a deductible expense for the corporation. An employer may change its contribution rate at any time, provided employees and the administrator are notified in writing 30 days prior to the change being made.
- Employees must decide whether they want to participate in the VRSP or opt out.
- Employees are encouraged to make an active investment decision. If the employee does not provide investment instructions, they will be invested in the default fund.
- Employee’s contributions are be set at the following percentage of earnings but can be changed up to twice every 12 months, unless an employer agrees to allow an employee to make changes more frequently:
- 2% of earnings to December 31, 2016
- 3% of earnings to December 31, 2017
- 4% as of January 1, 2018.
Employees will have 60 days to notify the employer of their desire to opt out of the VRSP after they have been automatically enrolled. An employee may terminate their membership or participation in the VRSP at any time.
Vesting and Locking-In
Employer contributions are immediately vested but cannot be withdrawn until the member turns 55. Members can withdraw their contributions and investment income.
The Leslie Group is closely monitoring and will provide updates as they become available in order to assist you with decisions as they pertain to your program.
The Leslie Group can be reached at (416) 510- 8966