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Voluntary Retirement Savings Plans (VRSP): what are your obligations?

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Voluntary Retirement Savings Plans (VRSP): what are your obligations?

The Voluntary Retirement Savings Plans (VRSP) Act comes into force on July 1 2014, creating a retirement savings tool for small and medium business employees. According to the Government’s announcement, this savings plan will be simple and inexpensive to administer, with affordable management costs for contributors.

Companies with five or more employees aged 18 or over who have at least one year of uninterrupted service will be required to offer a VRSP and to automatically enrol their staff. However, they will not have to contribute to the plan and their staff will be able to pull out of the VRSP if they wish. Moreover, the obligations for employers come into effect on different dates, depending on the size of their company. Consult the section below entitled “Your obligations as an employer covered by the Act” for further details.

Voluntary Retirement Savings Plans VRSP

Voluntary Retirement Savings Plans VRSP

VRSP your obligations ?

Finally, these new plans will make it easier for small business owners to offer their employees an attractive retirement savings plan mechanism. It should be pointed out that employers will be free to contribute and that these contributions, unlike those made to an RRSP or a TFSA, for instance, will be exempt from payroll taxes.

Obligations to offer a VRSP

The following employers will be required to offer a VRSP to their employees: 

  • those with at least five employees aged 18 or over who have a minimum of one year of uninterrupted service, as defined in the Act Respecting Labour Standards; and

  • those who do not offer a registered retirement savings plan (RRSP) or tax-free savings account (TFSA) for which source deductions could be made, or a registered pension plan.

Please note that employers not covered by the Act may still choose to offer a VRSP on a voluntary basis.

Your obligations as an employer covered by the Act

As an employer covered by the Act, you will have to choose a VRSP offered by an authorized administrator (insurance company, financial institution, etc.) and inform your employees to this effect. You will also have to sign up your eligible employees, deduct their contributions and send these contributions to the VRSP administrator.

The obligations for companies come into effect gradually, based on staff size, as indicated below:

Number of company employees

Deadline for meeting obligations

20 or more eligible employees
(on June 30, 2016)

December 31, 2016

10 to 19 eligible employees 
(on June 30, 2017)

December 31, 2017

5 to 9 eligible employees

Not before January 1, 2018

Exact date to be determined later by the Government

Notes:
The calculation to determine the number of eligible employees takes into consideration only those staff who are at least 18 years of age and have a minimum of one year of uninterrupted service, as defined in the Act Respecting Labour Standards. Note that temporary foreign workers in agriculture are considered employees as defined in the Act Respecting Labour Standards and would be eligible for voluntary retirement savings plan (VRSP).

Companies are not required to wait for the prescribed deadlines before offering a VRSP and may do so as soon as the Act comes into effect, i.e., as of July 1, 2014.

Other obligations for employers

Although the administrative burden on employers should be minimal, there are some obligations that will be imposed which include, but are not limited to, the following:

  • At least 30 days prior to ratifying a VRSP, employers must inform their employees in writing of their intention to offer a VRSP. They must also disclose certain other factors, such as: any business relationship they maintain with the insurance company or financial institution they wish to contract with for the VRSP; the contribution rate choice that employees will have; and the fact that ineligible employees wishing to participate are required to inform employers to this effect.

  • Automatically sign up all eligible employees (who are at least 18 years of age and have one year of uninterrupted service, as defined in the Act Respecting Labour Standards), as well as employees who apply to participate.

  • Keep proof of each employee’s notice of waiver for the entire duration of his/her employment.

  • Ask all employees who have declined to participate in the VRSP and those who have set their contribution at 0% to contribute again. This must be done in December, every two years following the date of an employee’s waiver or the date on which the employee set his/her contribution at 0%.

  • For more information about your obligations, please consult the VRSP section on the web site of the Régie des rentes du Québec; you may also call one of our Business Counsellors at 1-888-234-2232 or send an email to samque@fcei.ca.

Self-employed workers

The VRSP is also available for self-employed workers.

Shop around for your VRSP

You need to talk with an administrator authorized by the Régie des rentes du Québec before implementing a VRSP. The list of authorized administrators who have registered a VRSP with the Régie will be available as of July 1, 2014.

Only those banks, credit unions, insurance companies, etc., appearing on this list of authorized administrators will be able to offer a VRSP as of July 1, 2014.

We urge you to examine very carefully any offers made by these VRSP administrators.

For more information

Please feel free to call one of our Business Counsellors at 1-888-234-2232 or you may send an email to samque@fcei.ca.

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