Quebec finetunes Phased Retirement rules
The province of Quebec continues to be on the forefront of Phased Retirement — a way of allowing aging employees to draw partial benefits from employer-sponsored pension plans while still accruing pension benefits for their later full Retirement. The idea is to gradually cut down your hours — to perhaps a four-day week, then three-days — rather than abruptly go from a five-day a week regime to a "full-stop" zero days a week classical retirement.
According to Watson Wyatt Canada — which just issued the following flash advisory — Quebec's Bill 68 received assent on June 20th and it "contains some surprises." Bill 68 is an act that amends the Supplemental Pension Plans Act and the Quebec Pension Plan (Quebec's equivalent of the Canada Pension Plan). Most of the changes will be more of interest to pension industry practitioners than the members of pension plans, although there may be implications for near-retirees. They concern multi-employer plans, letters of credit and other fine points, not all of them directly applicable to Phased Retirement per se.
The biggest amendment I could see is that payment of a Phased Retirement pension to members of Defined Contribution plans is now stated to begin as early as age 55. The maximum annual benefit payable to a DC plan member cannot exceed 60% of the ceiling on the life income the member could receive under a life income fund.
In mid December of 2007, the federal government gave Royal Assent to legislation implementing changes to the Phased Retirement rules that were announced in the 2007 federal budget and economic statement. This legislation was a major step towards introducing Phased Retirement across Canada, although provincial action is still required to allow non federally-regulated employers to take advantage of it.
A survey of senior business leaders conducted by Watson Wyatt and the Conference Board of Canada found more than half of chief financial officers and Human Resource department vice presidents were "very concerned" about attracting and retaining highly skilled high performing employees that are approaching Retirement. A third of the respondents indicated they had implemented or planned to implement Phased Retirement.
Currently, the only provinces that permit phased retirement are Alberta and Quebec. Manitoba has introduced some legislative amendments that have yet to be brought into force. For federally regulated employees, the federal government has taken steps to eliminate obstacles in pension standards to the Phased Retirement provisions of the Income Tax Act.
For more see this backgrounder, entitled A Closer Look at Phased Retirement.
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