FAQ and Glossary
Our FAQ
We have compiled some questions that are frequently asked during our presentations of the plan as additional information. The FAQ are followed by a glossary that defines several terms related to retirement and/or the plan, which are sometimes misunderstood.
Comparison with Other Pension Plans
If I contribute to your plan, can I receive a tax refund like with RRSPs?
Yes. Employee contributions and additional voluntary contributions to our plan are tax-deductible as contributions to a registered pension plan, with the same effect as contributing to an RRSP. The savings are applied directly on your paycheck.
Worth noting: the employer contribution to our plan is not added to the employee’s declared income, unlike the employer’s contribution to an employee’s RRSP. As a result, the employee does not have to pay payroll taxes (Employment Insurance, Québec Pension Plan, Québec Parental Insurance Plan) on the employer’s contribution to our plan.
For the employer, the employer contribution to the plan is also not taxable (Employment Insurance, Québec Pension plan, Québec Parental Insurance plan, CSST, CNT, and the health services fund), unlike their contribution to the employee’s RRSP.
How is your plan better than an RRSP?
Our plan ensures income security by paying a guaranteed pension starting at retirement and continuing for the rest of your life. This is called a life annuity. In the case of an RRSP, once the deposited money and accumulated interest have been withdrawn and the account is empty, you receive nothing more. Many experts have determined that, for the same contribution level, a defined benefit group pension plan (like ours) is able to pay significantly higher pensions than an RRSP.
Another major difference is the management of stock market risk. This risk is managed collectively in our plan, protecting our members from said risks; with an RRSP, the risk is always assumed individually (even for a so-called group RRSP).
In a pension plan, the employer must contribute at least the same amount as the employee. In an RRSP, the employer’s contribution is never mandatory. With the employer’s contribution, your pension will grow more quickly.
How is your plan better than a Simplified Pension Plan (SIPP)?
The Simplified Pension Plan (SIPP) is a supplemental defined-contribution pension plan. Despite its name, this type of plan does not offer a life annuity. It is therefore similar to a group RRSP (with the important distinctions that employer contributions are locked in and that you do not have access to the Home Buyers’ Plan (HBP). Our plan is clearly more advantageous than an SIPP, for the same reasons mentioned above for an RRSP.
How is your plan better than a VRSP?
The Voluntary Retirement Savings Plan (VRSP) is essentially a type of RRSP. It is governed by legislation that has been in effect since July 1, 2014. The VRSP is mandatory for all employers who do not offer a pension plan, a retirement savings plan, or a TFSA with deductions at source. The employer is not required to contribute, but they do choose the financial institution where the workers’ funds will be invested. Administrative fees for a VRSP will be lower than those of an RRSP. Amounts held in a VRSP can be transferred into our plan.
Our plan is clearly more advantageous than a VRSP for the same reasons as with an RRSP: higher pension for the same level of contributions and guaranteed income for life, along with greater security since market risk is borne by the plan rather than by the member.
Is it more advantageous to keep my RRSPs or to transfer them into your pension plan? Will the plan’s returns exceed those of my RRSPs?
The first option is to use your RRSPs to buy back a pension for past years of service with your current employer or with a former employer who is now a member of the plan. This would allow you to immediately convert your RRSPs into a guaranteed pension. However, your money would then be locked in.
The second option is to transfer your RRSPs into the plan as voluntary contributions. These contributions would accumulate with interest just like in an RRSP. We can hope that the net return, after fees, of our plan will exceed that of your RRSP, but there is obviously no guarantee. When you retire, these voluntary contributions can be converted into an additional guaranteed pension, used to buy back past service, or transferred to the RRSP of your choice.
You may choose to continue contributing to your RRSP. You will always have the option of transferring it to our plan at any time before retirement in order to convert it to a past service buyback or an additional pension.
Is my pension calculated based on my best years of salary? What is the difference between your plan and the RREGOP?
No. The pension is calculated based on the income from all the years you contributed (every $100 of contributions “buys” an annual pension of $11 at retirement); the RREGOP pension depends on the number of years contributed and is calculated based on the average salary of the best five years.
Our plan also aims to index all years of contributions to the cost of living, both before and after retirement, whereas the RREGOP guarantees a partial indexation once retired, which is less generous than ours.
It should also be noted that the RREGOP requires the same employer and employee contribution rates for all employers, whereas our approach allows each group to determine its own levels of employer and employee contributions.
When can I transfer my assets from the Fonds de solidarity FTQ or Fondaction into your plan? What happens to the additional tax credit I already received?
Three months before you retire, or after age 65, you may transfer your assets from these funds into our plan, EXCEPT for the amounts contributed within the last two years. The tax credit stays in your pocket.
Membership
I already have a pension plan elsewhere (for example. I work at the CLSC two days a week), do I have to join your plan?
Yes, if you meet the eligibility criteria for our plan. You will accumulate two separate pensions. If you leave your other job, it may be possible to transfer the pension funds from that plan into our plan, if allowed by that plan. Conversely, if you leave the job covered by our plan, you may request a refund (if the amount is small enough) or a transfer; if your new plan allows it, you can also transfer the money into that plan.
Can volunteers join?
No. Membership in our plan is limited to salaried employees.
If an eligible salaried employee does not want to join while others do, can they opt out of your plan?
No. All individuals who meet the eligibility criteria must contribute to our plan. This is why the law provides that 30% of eligible staff may block the adoption of the plan. Once the plan is in place, all newly eligible individuals must contribute.
A person over age 60 does not want to contribute because they are close to retirement. Is it possible to make an exception for them?
No. However, when the accumulated amount is very small, our plan can pay a single lump-sum amount instead of a microscopic lifetime pension. This person will recover their money as soon as they retire: thus, given the method used to calculate the refund, they will generally receive more than the total of their employee and employer contributions with interest. It is, for them, a way of saving with the help of their employer.
Contributions
Can I decide to suspend my contributions for an indefinite period?
No, except for voluntary contributions or during periods of absence from work.
Can I withdraw the money I have contributed to your Plan at any time?
No. As long as you are contributing to our plan, your contributions must remain there. When you leave your job, you may withdraw or transfer your money under certain conditions and in accordance with tax rules.
Voluntary contributions, however, can be withdrawn at any time.
Can the employer contribution vary for each employee?
No. From an equity perspective, our plan provides for a single rate to be applicable to all employees working for the same employer. The flexibility granted to each group is limited to the eligibility criteria for our plan, within clearly defined rules. The employer may also choose to make a payment to purchase a pension for past years of service or to make voluntary contributions.
Is the employer contribution mandatory?
Yes. The employer is required to contribute an amount equal to or greater than the employee’s contribution.
Can the employer and employee contributions be changed?
Yes, at any time. However, these changes cannot be retroactive and must be communicated in advance to the participants and the pension committee. If it is an increase, there must be a posting and consultation period, and 30% of employees can object. Contributions can increase or decrease while respecting the following rule: the employer contribution must be equal to or greater than the employee contribution.
What happens if my work schedule varies? For example, I am a regular employee working 7 hours per week but occasionally work 21 hours in a week. Should the pension be calculated based on the paid salary or on the normal 7-hour salary?
You will contribute based on the hours actually worked; therefore, there will be weeks at 7 hours and weeks at 21 hours. The accumulation of your pension is proportional to the hours worked. According to the current wording of our plan, “pensionable salary” includes “all regular salary or base pay” and excludes “overtime pay.”
End of a group’s activities
We read in the newspapers of horror stories where employers seize surpluses and staff end up with a reduced pension. Could an employer or its creditor access our funds to pay the employer’s debts? Will we be protected in this regard?
Yes. Unlike private-sector plans, the regulations adopted by the government for member-funded pension plans like ours clearly state that the plan’s surpluses belong solely to the participants. Consequently, the employer has no rights to the surpluses, and even less so an employer’s creditor.
What happens if I leave Canada?
Legally, the pension can be paid to a person residing in any country. Also, according to section 66.1 of the Supplemental Pension plans Act, “a member who has ceased to be an active member, whose period of continuous employment has ceased and who has not been residing in Canada for at least two years is entitled to a refund of the value of the benefits accrued to the member.” It is therefore possible to receive the accumulated pension value in a lump sum.
What happens if, for temporary financial reasons, a group can no longer contribute to your plan?
It is possible to temporarily reduce the contribution to a very low level until the financial situation improves; in such a case, contact the plan’s secretariat.
What happens if the group I work for ceases operations or withdraws from your plan?
The law governs what must be done in such an event. The actuary must produce a statement of benefits, just as in the case of termination of employment. Individuals over 55 and retirees of that organization have the option to retain the pension accrued in the plan. Others must transfer their assets according to the provisions set out by the applicable tax rules.
However, if, before the end of the calendar year following the year in which the group withdrew from the plan, a participant is hired by another group that is a member of our plan, they continue their participation.
Plan Funding
In the event of a deficit in the plan and if participants are required to contribute an additional amount, is there a mechanism to limit or prevent a mass withdrawal of groups to avoid the termination of the plan?
Every effort is made to prevent a deficit. The actuarial valuation is carried out periodically to ensure the plan’s financial health. When faced with signs of potential difficulties, the pension committee implements corrective measures based on the size of the deficit.
When a group withdraws while the plan is in deficit, employees are entitled to the present value of the accrued pension multiplied by the plan’s solvency ratio at the last valuation. Thus, each group withdraws with its share of surplus or deficit; those remaining do not have to cover the deficit of those who have left the plan. By withdrawing, participants give up the guarantee of an accrued pension in exchange for a capital with uncertain returns, placing them at even greater risk than if they had remained in the plan.
Is there a risk that I could lose money?
Governance
How much time per year is required to participate in the pension committee? Are the related expenses covered by the plan or by the group that authorizes the person to sit on the committee?
Expect there to be an average of 5 to 6 meetings per year. Expenses (e.g., travel and accommodation costs) are covered by the plan. There is no reimbursement for hours worked, nor are attendance fees provided.
How can we ensure that the pension fund will be well managed?
Our risk management practices are at the core of our approach, and our reserve for indexing far exceeds the reserves of many pension plans, assuming they even have one. The key lies in democratic governance, adapted to the environment and values of community and women’s groups. Additionally, several documents (such as the funding and investment policies) guide pension committee members in their decision-making.
The retirement plan’s annual meeting provides additional protection: the committee must report on its administration, answer members’ questions, and any member or employer representative may be nominated as a candidate for the pension committee to participate in decisions about the management of the plan.
Are there minimum competency requirements for members of the pension committee? What ensures that they will be competent?
No. The law requires that a pension plan be administered by a pension committee made up of members representing active and retired participants, and does not set minimum competency requirements or prerequisites to become a committee member. It is up to the participants and the groups present at the annual meeting to elect members who, individually and collectively, appear best able to act as trustees of the plan.
This fiduciary responsibility is assumed collectively by the pension committee. Moreover, each committee member is individually and jointly responsible in this regard; they must act, in accordance with the law, for the benefit of active and retired participants. The person serving as an independent expert has, among other roles, the responsibility to ensure the ongoing training of pension committee members.
Quebec law has been amended to strengthen the incentive for pension committee members to consult external experts in the absence of internal expertise. One of the first experts the committee was called on to choose was an actuarial firm. Its professional responsibility is precisely to serve as the strategic advisor to the pension committee on a range of assigned mandates; the firm is also responsible for implementing the administration system where each participant’s rights are recorded (contributions made, credited service, granted indexations, transfers, acquired pension, etc.). Following a formal call for tenders in 2008, the firm PBI Actuarial Consultants Ltd. was selected.
If we disagree with the way the plan is managed, what can we do?
According to the law, the pension committee administers the plan. During the annual meeting, the committee reports on its administration and answers members’ questions. Members have the opportunity to intervene and vote for candidates for the committee, or even submit their own candidacy. You can also communicate in writing with the pension committee to express disagreement or provide suggestions: these will be forwarded to all committee members. We aim to listen to our members’ concerns and we respond to letters received.
Glossary
Share
Assets
All the items belonging to the pension fund (shares, bonds, other investments, amounts receivable from the employer, etc.).
Capitalization
(funding ratio)
Ratio calculated by an actuary comparing a plan’s assets to its guaranteed liabilities, assuming that the plan continues indefinitely. The actuary must choose assumptions that reflect their best estimate of what should happen, but with a safety margin agreed upon with the pension committee. A ratio of 100% or more indicates that a plan is fully funded, while a lower ratio indicates a deficit, which would trigger the payment of special contributions to gradually eliminate that deficit.
Tax-Free Savings Account (TFSA)
Locked-In Retirement Account (LIRA)
Tax deduction
Actuarial deficit
Pension fund
(pension plan)
Registered Retirement Income Fund (RRIF)
Fund established with an issuer (bank, broker, etc.) registered with the tax authorities, into which amounts from other registered retirement plans (such as an RRSP) have been transferred, and from which the issuer pays out retirement income. Your RRSPs must be converted into a RRIF when you reach age 71.
Life Income Fund (LIF)
Fund into which amounts held in a Locked-In Retirement Account (LIRA) are transferred in order to begin withdrawing a pension. It is a RRIF with specific constraints provided for in the Regulation respecting supplemental pension plans (e.g., limits on annual withdrawals so as to ensure income throughout retirement, survivor-spouse protection).
Cost-of-living adjustment
Consumer Price Index (CPI)
Index, published monthly by Statistics Canada, measuring the change in the price of a basket of goods and services consumed by a typical Canadian consumer compared to the price of the same basket in the base year.
Interest
Maximum pensionable earnings (MPE)
Bond
Liability
Value of the pension amounts or payments promised by the pension plan to participating members and beneficiaries, which are therefore owed by the fund to each one of them.
Old Age Security (OAS)
Placement
(investment)
An investment is a security or contract, generally transferable and negotiable, which may generate income and/or a capital gain for its holder in exchange for taking on a certain level of risk.
Funding policy (or provisioning policy)
Retraite Québec (RQ)
Québec government organization responsible for administering the Québec Pension Plan, for applying the Supplemental Pension Plans Act, and for a number of other government programs.
Defined contribution plan (DC)
Target benefit plan (TBP)
Defined benefit plan (DB)
Supplemental pension plan in which the amount of the retirement pension, or at least the formula used to calculate it, is known and guaranteed in advance. The contribution amount to be paid varies over time based on estimates made to: ensure that the assets in the fund are sufficient to pay the liabilities for past years of service; that the total contribution for the current year is at least equal to the normal cost of the plan.
Supplemental pension plan (SPP)
“A pension plan is a contract under which the participant receives a retirement benefit under certain conditions and starting from a given age, whose funding is provided by contributions paid either by the employer alone or by both the employer and the participant.” (Supplemental Pension Plans Act, s. 6). Such a plan is called “supplemental” because its benefits supplement, during the retirement years, those provided by public pension plans.
Pension plan
Registered Pension Plan (RPP)
See Supplemental Pension Plan. This term is used specifically by the Canada Revenue Agency.
Canada Pension Plan (CPP)
Québec Pension Plan (QPP)
Member-funded pension plan
Defined-benefit supplemental pension plan in effect since March 15, 2007, which has the participants collectively assume the risk. The employer’s obligation is limited to a fixed contribution. The establishment of an indexation reserve is the central tool to ensure the security of benefits and the stability of contributions in the long term; it allows for indexing the benefits accrued for all active and retired participants when the financial situation of the plan is sound.
Registered Retirement Savings Plan (RRSP)
Individual registered retirement savings plan recorded with the Canada Revenue Agency; it allows contributions to be deducted from income and to not include investment income in the current year’s income for tax purposes. A group RRSP is the side-by-side juxtaposition of individual RRSPs in order to benefit from economies of scale in fees, while making each individual bear the market and longevity risk of their RRSP account.
Locked-in Registered Retirement Savings Plan
See Locked-In Retirement Account (LIRA). Term often used for a former participant of a plan under federal jurisdiction or in a province other than Québec.
Pension
A pension is, for a person, a sum fixed in advance received periodically, for a duration fixed in advance or, eventually, for the rest of their life, coming from that individual’s assets.
Life annuity
Deferred annuity
Early retirement
Early retirement with reduction
Solvency
Guaranteed Income Supplement (GIS)
Retirement income security program administered by the federal government and providing, for persons over 65 who do not have sufficient income, an assistance benefit that decreases based on other income received.
