Bill 80 – A step closer to the introduction of dynamic pensions in Quebec

On November 7, the Quebec government introduced Bill 80 to the National Assembly in order to implement provisions announced in the Budget Speech delivered on March 12, 2024. This bill reaffirms Quebec’s leadership in decumulation by specifying the legislative framework for the implementation of dynamic pension funds, also known as variable payment life annuities (VPLAs).

Bill 80 amends the Supplemental Pension Plans Act (SPP Act) and the Voluntary Retirement Savings Plans Act (VRSP Act). These two Acts were amended in fall 2020 to introduce the concept of dynamic pensions. Bill 80 brings more technical changes that were necessary to allow defined contribution plans and VRSPs to offer this new option for the decumulation of amounts accumulated in these plans at retirement.

Such plans could therefore set up dynamic pension funds whose assets would be segregated from the rest of the fund. At the request of an inactive member, some or all of the amounts accrued in the plan could be transferred to the dynamic pension fund and used to pay a pension to such member.

The amounts transferred to the fund would be converted into a pension payable for the rest of the member’s life. The pension amount may vary annually depending on fund’s experience, which would be impacted by the returns on the fund’s segregated assets and the mortality experience of all members receiving a pension from this fund.

This new option is especially interesting because it allows risk pooling among members upon retirement, which eliminates members’ risk of outliving their savings. Combined with other options offered by defined contribution plans or VRSPs, this approach will offer significant flexibility to optimize decumulation at retirement, thereby increasing the financial security of members.

Although we are still waiting for the regulations governing the application of dynamic pension funds, PL80 sheds light on the following requirements:

• The dynamic pension must be paid under the form of a joint and survivor pension, providing to the spouse a death benefit of at least 60% of the pension amount the member was receiving, unless the spouse renounces this right.
• Dynamic pension funds must offer the option of a pension with a 10-year guarantee.

Finally, Bill 80 amends the VRSP Act to allow any individual to transfer amounts accumulated in a pension plan to a VRSP. This means that everyone would be able to transfer amounts accumulated in their RRSP or RRIF to a VRSP offering a dynamic pension fund, and benefit from this new decumulation option.

Normandin Beaudry’s retirement and savings experts keep a close eye on changes affecting dynamic pension funds and can provide you with a comprehensive analysis of the opportunities this measure presents for your organization. Feel free to call or write to us with any questions you may have regarding Bill 80.