A supplemental pension plan, often called a private pension plan or pension fund, is a contract between an employer and participating employees by which both parties are required to contribute to the plan. The contributions paid into the plan, with the accumulated interest, are intended to provide the participants with a retirement income, death benefits and in some cases disability benefits. A supplemental pension plan tops up the basic income received under public plans like the Québec Pension Plan and the Old Age Security Program after workers retire. Generally the plan is set up by the employer, participation is voluntary and it is administered by a pension committee. The plan may also be administered by the employer, an association (e.g. of community groups) or a financial institution. Retraite Québec supervises supplemental pension plans that are subject to the Supplemental Pension Plans Act. This covers the plans of employers in the private, municipal and university sectors, and some in the parapublic sector, whose activities are under provincial jurisdiction. There are 2 main types of supplemental plan:
Defined Contribution Plan In a defined contribution plan, the amount of the contribution paid by the employer and by participating employees is defined in advance. The amount of the pension benefit paid will depend on the amount of capital and interest accumulated in each participant’s account at retirement. A simplified retirement plan is a defined contribution plan administered by a financial institution. Defined Benefit Plan In a defined benefit plan, the amount of the pension is set in advance according to a specific formula. For example, the pension may be based on a certain percentage of the participant’s salary, or a certain amount per year of service under the plan. The employer assumes all of the risks associated with funding the plan. A member-funded pension plan is a defined benefit plan in which the risks associated with the funding of the plan are assumed jointly by the participants. Administration of Supplemental Pension Plans The administrator of a pension plan must provide an annual statement of benefits to the plan’s participants and beneficiaries. The administrator must also convene an annual assembly to report on his or her administration, and when necessary, appoint members of the pension committee. Divorce or Separation and Partition of Pension BenefitsThe benefits accumulated in a supplemental pension plan may be partitioned following a divorce, legal separation or annulment of a marriage or civil union, or when de facto spouses stop living together. End of Active Participation in a Pension Plan When a worker ceases to be an active participant in a plan, for example because he or she no longer works for that employer, the plan administrator must notify the worker with a statement of benefits. Among other things, the statement indicates the nature and value of the benefits to which the worker is entitled. Death of a Pension Plan ParticipantUpon the participant’s death, a death benefit is payable to the spouse. If the participant does not have a spouse or the spouse has renounced the benefit, the benefit is payable to his or her designated beneficiary or heirs.
ClienteleWorkers in the private, municipal and university sectors, and some in the parapublic sector, whose activities are under provincial jurisdiction. RequirementsTo be eligible for participation in a pension plan, the worker must belong to a category covered by the plan (e.g. unionized employees, managers) and meet one of the following conditions:
Note The plan may have more flexible requirements (e.g. participation may be compulsory or voluntary).
If the sums accumulated are not transferred, a pension may be payable, depending on certain conditions. Types of Pension Various types of pension may be paid, depending on the plan, age and situation of the participant. Those offered by defined contribution and defined benefit plans include:
Forms of PensionCertain forms of pension are offered under both defined contribution and defined benefit plans, including one with a 10-year guarantee and one with a 60% joint and survivor clause in the event of the participant’s death. Other forms of pension may also be offered, such as an indexed pension. Retirement income is taxable.
Supplemental Pension Plans Act, CQLR, chapter R-15.1
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