Quebec Budget 2012
On March 20, 2012, the Quebec government introduced its 2012-13 Budget. As expected, the government is moving forward with the joint federal-provincial initiative to provide small business owners and their employees with access to large-scale, low-cost, professionally administered pension plans. Accordingly, the Budget introduces Voluntary Retirement Savings Plans (“VRSPs”), mandatory group pension plans that all employers in Quebec employing at least five employees will be required to implement, if they do not already provide a retirement savings plan for employees.
The VRSPs are the Quebec version of the federal Pooled Registered Pension Plans ("PRPPs"). VRSP rules are therefore similar to those outlined in Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts with respect to PRPPs and the proposed income tax rules released on December 14, 2011, except for the mandatory nature of the Quebec model. The following highlights are particularly noteworthy:
- Employees with more than one year of uninterrupted service will be automatically enrolled in a VRSP unless they elect to opt out of the plan within 60 days of enrolment.
- Employer contributions to the VRSP will not be mandatory, but any employer contributions will be exempt from Quebec payroll taxes, and tax-deductible. Participant contributions to a VRSP will be tax-deductible and will share the same annual maximum contribution amounts as RRSPs.
- The government is proposing to establish the following default employee contributions rates: 2% from January 1, 2013 to December 31, 2015; 3% from January 1, 2016 to December 31, 2016; and, 4% as of January 1, 2017.
- A participant may change contribution rates or take contribution holidays, and may continue contributing to the same VRSP after changing employers.
- A participant may withdraw his or her contributions, less deductions, prior to retirement; any employer contributions to a VRSP may only be withdrawn as of age 55.
- Persons not automatically enrolled (e.g. self-employed workers and individuals) may enroll in a VRSP by contacting a plan administrator directly.
Enabling legislation is expected to be introduced in the next few months, with a view to meeting a targeted implementation date of January 1, 2013. Businesses that are required to implement VRSPs would be required to achieve compliance by January 1, 2015. Subsequently, employers required to offer a VRSP would have one year to comply.
Other Budget highlights include:
- An employer incentive to retain workers over the age of 65 by reducing private-sector employer contributions to the Health Services Fund. This new measure, which will take the form of a reimbursement starting in 2013, will provide $400 in 2013 per employee and increase to $1,000 per employee after 2015.
- Amendments to Quebec tax legislation relating to the treatment of inter-municipal public transportation services organized by employers for groups of employees, and creating a favourable tax deduction for those employers.
- Employees who continue working past age 65 will receive a $1500 tax credit per year starting in 2016. This is an increase from the current $450 credit.
More information about the PRPP legislation is available in our FTR Now of November 23, 2011, “Pooled Registered Pension Plan Framework Introduced.”