The VRSP Act: what are your obligations as an employer?
The Voluntary Retirement Savings Plan Act (VRSP) places certain obligations on Québec employers. What does the law say? What are your responsibilities?
By Fonds de solidarité FTQ
One out of two employees. According to Retraite Québec, that's the proportion of Québecers that do not have a group retirement savings plan with their employer, for whom, as a result, it is more difficult to save for retirement. Faced with this reality, the Québec government created the Voluntary Retirement Savings Plan (VRSP), an easy way to help employees save for retirement by setting aside 4% of their salaries at each pay so they can look forward to a more comfortable future.
It's incumbent on all companies to comply with the Voluntary Retirement Savings Plan Act and it's the job of the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST) to oversee compliance with this Act.
What does the law say?
Since December 31, 2017, every company with 10 or more employees has to provide its employees with some means of saving for retirement. Each employer can choose which product best meets its needs in this regard and may seek counselling to assist with setting up the chosen solution, whether it's a VRSP, a pension plan, a group RRSP or a group TFSA via payroll deductions.
The dates for compliance with the law are as follows:
- Companies with 20 employees or more, December 31, 2016
- Companies with 10 employees or more, December 31, 2017
The deadline has not yet been established for companies with 5 to 9 employees. Eventually, all companies with 5 or more employees will have to comply with the law while those with 4 or fewer staff members can do so on a voluntary basis. If your activities are subject to federal authority, you are not bound by this provincial legislation.
In case of doubt, Retraite Québec offers an easy-to-use interactive tool (in French) that lets you determine if you need to institute a VRSP or other retirement savings solution that meets the requirements of the law.
Which employees are concerned?
Workers that need to be recognized under the law are those 18 years of age or over with more than one year of service, either full- or part-time.
What are your responsibilities?
As an employer, if you need to comply with the law on VRSPs, you need to start by choosing a VRSP offered by an authorized administrator or a retirement savings solution that meets the law's requirements, then inform your employees of your plans.
If you elect to go with a VRSP, you need to register all eligible staff, deduct their contributions from their pay and remit it to the VRSP administrator. Employee contributions are set at a default 4% of salary and may be cancelled or modified upon request by the employee, subject to certain administrative formalities.
How to set up a VRSP
Setting up a VRSP is a process that takes place over a minimum 91 days and which includes:
- Choosing an administrator and presenting your choice to staff;
- Sending a written notice to staff stating the company's intention to set up a VRSP and detailing the process and the conditions of registration;
- Registering all targeted staff and collecting all contributions.
The administrator selected can assist you with the program set-up, following the steps detailed on the Retraite Québec Web site.
Who is responsible for managing the VRSP?
The chosen administrator, authorized by the Autorité des marchés financiers (AMF), will take over management of the investments and administration of the plan.
Do you need to contribute to your staff's VRSP?
Employers are not obligated to contribute to their employees' VRSP. If they do, the amounts contributed are deductible from the company's taxable income, both federal and provincial.
A simple solution that replaces a VRSP: the RRSP+ via payroll deductions
Instead of offering a VRSP, employers can choose to offer an RRSP or a TFSA in which the contributions are deducted from each pay. The Fonds de solidarité FTQ RRSP+ via payroll deductions is an excellent alternative. This turnkey solution is quick and easy to set up. In just a few working days, your staff can enroll online and determine the amount of their contribution. Learn more about this law-compliant solution now!
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