The VRSP framework
The following is a summary of the VRSP framework based on information known to date. For details on the VRSP, visit the Régie des rentes Quebec website.
Is the VRSP mandatory?
As of July 1, 2014, Quebec employers who do not already offer a registered retirement savings plan or a tax-free savings account through payroll deductions or a registered pension plan to their eligible employees – and who have five or more eligible employees who are 18 years of age or over with a year or more of continuous service – must offer a VRSP by January 2018, at the latest.
The deadline depends on the number of eligible employees as follows:
- December 31, 2016 - for employers with 20 or more employees on June 30, 2016
- December 31, 2017 - for employers with 10 to 19 employees on June 30, 2017
- On a date set by the government, but not prior to January 1, 2018 - for employers with 5 to 9 employees
Can employers with fewer than 5 eligible employees participate in a VRSP?
A Quebec employer 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.
What is an employer's responsibility in a VRSP?
Employers must choose a VRSP provider (i.e. a licensed financial institution), enrol their employees and remit contributions. With a Sun Life Financial plan, we will take care of virtually all of the additional administration.
Who can sell a VRSP?
Group insurance representatives authorized to distribute group annuities can sell a VRSP. Also until January 1, 2018, group insurance representatives only authorized to provide group insurance plans and representatives in insurance of persons are permitted to sell a VRSP.
Is participation by employees in a VRSP mandatory?
No. While eligible employees will be automatically enrolled in the plan chosen by their employer, they can opt out within 60 days of the notice of membership being sent by the administrator to them.
Who is eligible to participate in a VRSP?
Employees who work in Quebec, who work both in Quebec and outside of Quebec for a Quebec employer or who reside in Quebec and work for a Quebec employer outside Quebec. If these employees are 18 years of age or older, with at least one year of continuous service, they must be enrolled in the VRSP, unless they already have the opportunity to make contributions via payroll deductions to a registered retirement savings plan or tax-free savings account or are a member of a registered pension plan provided by their employer. Any employee who requests to be enrolled in the plan may also participate in the plan.
How are employee contributions made?
Employee contributions to the VRSP are by automatic payroll deductions starting at a minimum required level and potentially increasing over time. The regulation establishes the default contribution rate and contribution increase schedule. Employees may choose within 60 days after the notice of membership is sent to set their own contribution rate, but the default will apply if they don't make a choice.
Are employer contributions mandatory?
How are contributions taxed?
Employer contributions, if any, are deductible as a salary expense and not subject to payroll taxes.
Employee contributions are deductible from income by the employee.
The total of employer and employee contributions to a VRSP is counted against the employee's RRSP contribution limit and reduces a member's RRSP contribution room.
Are contributions locked in?
Any employer contributions to a VRSP will be locked in but employee contributions will not be locked-in. Employees may not withdraw employer contributions except in certain situations which include shortened life expectancy, mental or physical disability, or non-residency. Upon termination, employees are entitled to the full value of their contributions, the employer's contributions and all investment earnings. The locked-in portion of the member's account may be transferred to a pension plan determined by regulation and chosen by them.
When can the employee start to receive VRSP retirement benefits?
At age 55 a plan member has the option to transfer their locked-in VRSP account to a pension plan determined by regulation and chosen by the member.
Retirement income must begin no later than the end of the year in which the member turns 71.
What are the investment options?
For the VRSP, the default investment option is based on a lifecycle approach. The administrator must also offer from three to five additional investment options.
Sun Life Financial will offer a menu of investment options that combine varying degrees of risk and expected return.
Is the VRSP portable?
Do the CAP guidelines apply to the VRSP?