Canadian Payroll Reporter

3 Canadian HR Reporter, a Thomson Reuters business 2014 News CPR | July 2014 CPR | July 2014 ers with five to nine employ- ees would have to enroll, only saying it would not be before Jan. 1, 2018. VRSPs are similar to pooled registered pension plans (PRPPs). They are both defined contribution-style retirement savings plans designed for em- ployees and self-employed workers who lack access to the types of plans mentioned earlier. The plans work on the premise that by pooling many individu- als' assets, they can offer invest- ments and savings opportunities with lower administration costs. Unlike registered pension plans, employers do not have to administer VRSPs or PRPPs. In- stead, authorized financial insti- tutions — such as insurers, trust companies or investment fund managers — will run them. Employers will be required to choose a plan, communicate with employees about the plan, automatically register employ- ees, deduct employees' contri- butions from their earnings and remit them to the administrator by the deadline. They will also have to provide administrators with any documents or infor- mation needed to fulfill their obligations, including employee terminations. VRSPs follow the introduc- tion of PRPPs at the federal level, allowing plan administrators to offer PRPPs to those in federally regulated industries and to busi- nesses and self-employed indi- viduals in the three territories. Before plan administrators can offer PRPPs to other employ- ers and individuals, provincial governments must pass legisla- tion allowing for them. To date, Alberta, British Columbia and Saskatchewan have done so — but none have implemented the laws yet. Ontario is expected to table PRPP legislation in the fall. What sets Quebec apart is the mandatory nature of the VRSP for employers. So far, it is the only jurisdiction in Canada to make it mandatory for employ- ers to enrol in such a plan. Although VRSPs will be mandatory for employers, em- ployees will not be obligated to participate. Employers will au- tomatically enroll employees, but workers will have the right to withdraw, opt out, suspend their participation or change their contribution rate. If employees leave their job, they will not lose their contributions. First steps Quebec employers should deter- mine whether they need to enroll in a VRSP. Since most large firms tend to have pension plans, group RRSPs or combined RRSPs/de- ferred profit-sharing plans, VR- SPs will generally be for small and mid-size employers, says Jean- Daniel Côté, a partner at the HR, pension and benefits consulting firm Mercer in Montreal. The next step is to choose a plan administrator. Côté says he expects all of the plans offered in Quebec to be similar, "off-the- shelf " products. When it comes to choosing a plan provider, em- ployers may want to opt for a company they already work with for group insurance, he says. "We would expect from an HR perspective or a payroll perspec- tive that if you already have a re- lationship with a company that provides PRPPs or VRSPs, that might be where you want to go," Côté says. "You already have that payroll bridge with the insurer to forward the premiums." There should not be a lot of administrative work for payroll or HR departments to set up a VRSP or a PRPP, he says. "Every provider we have talk- ed to will have a dedicated team that all they do is implement PRPPs or VRSPs. From the mo- ment where you made your deci- sion as an employer that 'I want to offer this,' you have to select which provider and then they will take it over." Côté says most of the adminis- tration will be done online or over the phone. Employers will have to change their payroll systems to incor- porate the VRSP/PRPP deduc- tion and remittance. Payroll will deduct contributions from em- ployees' gross earnings for the pay period and remit them to the plan administrator. Contribu- tions will be subject to the em- ployee's annual available RRSP contribution limit. Payroll systems may also have to incorporate employer contri- butions. While not mandatory, employers may opt to contribute to the plan. If they make direct contributions, the amount they contribute will not be a taxable benefit to the employee. Payroll providers Employers with payroll ser- vice providers will have to work with them to ensure things run smoothly. Jean-François Pel- letier, regional vice-president, group retirement services in Quebec for Sun Life Financial, says this will involve setting up deduction codes for the VRSP/ PRPP contribution and working out a process to ensure the em- ployer receives each employee's deduction amounts so it can re- mit them to plan administrators. Côté says he expects the pay- roll system changes to be fairly simple, especially for employers that use payroll service providers. "Those who will find it a little more difficult are those who have in-house systems that they may have built or they may have had for years and years and nev- er really upgraded to something more modern and flexible. This might be a little bit of an issue, but we don't foresee that it's go- ing to be much of a problem." As for year-end reporting, there will be no PRPP/VRSP reporting on T4 tax slips, says Élyse Lemay, vice-president and associate general counsel for Sun Life Financial, a VRSP provider. "Contributions made by the member and employer will be reported to the member on a PRPP/VRSP contribution re- ceipt, and withdrawals will be re- ported to the member on a T4A tax slip (and RL-2 if the member is a Quebec resident)," she says. Long-term impact Côté says the introduction of VRSPs provides employers with an opportunity to take a new look at employee benefits and ask themselves, "Do I just do the minimum required by law here or do I take the opportunity to step back and say, well, maybe this is an opportunity for me to improve on my overall benefit offering for employees." With VRSPs in their infancy and PRPPs not yet rolled out in all parts of Canada, Côté notes it is too soon to determine how suc- cessful they will be. The manda- tory component for employers may help VRSPs succeed, but without mandatory employee participation, it may be hard to get more people to save more. "(Quebec's plan is) one step ahead but, really, if you want people to save for retirement, you have to force them. When you look at the fantastic results of the (defined benefit) plans over time, the real reason why they have been working well is that the vast majority were mandatory and employees were forced to contribute," he says. "You can have the best design in the world but if your employ- ees are not forced to participate, what are you going to do?" Looking to the future, Côté says once the economy improves there may be more interest in mandatory VRSP/PRPP contri- butions or in enhancements to the Canada Pension Plan. "It's not the best of times to introduce mandatory contributions but I think that maybe, 10 or 15 years from now, we will see mandatory contributions in some form." Pelletier, however, says VR- SPs/PRPPs are the best way to meaningfully address the con- cerns of the five million working Canadians who do not have re- tirement savings plans at work. "We believe the rest of Canada is watching to see what happens in Quebec. After a year or two, once the improved coverage experience in Quebec becomes noticeable — which we fully ex- pect to happen — other parts of Canada may adopt this model." VRSP payroll changes should be fairly simple from VRSp on page 1 WORkERS WILL HAVE THE RIgHT TO WITHDRAW, OPT OUT, SUSPEND THEIR PARTICIPATION OR CHANgE THEIR CONTRIBUTION RATE.

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