Canadian Payroll Reporter

6 Canadian HR Reporter, a Thomson Reuters business 2017 News February 2017 | CPR federal jurisdiction and for those in the territories (including the self-employed). Last year, governments in British Columbia, Nova Scotia, Ontario and Saskatchewan en- acted PRPP laws. Alberta has passed, but not yet brought into effect, its PRPP legislation. In Manitoba, a PRPP bill is before the provincial legislature. PRPPs are defined contribu- tion pension plans that are ad- ministered by a third party (such as a financial institution) instead of an employer. They provide a way of saving for retirement for individuals whose employer does not have a registered pen- sion plan or for those who are self-employed. "There was a lot of work done to identify all of the normal re- sponsibilities of a (pension plan) sponsor and move as many of them as possible into the hands of a financial services provider," says Tom Reid, senior vice-president of Group Retirement Services at Sun Life Financial Canada. PRPPs are voluntary, mean- ing that it is up to employers to determine whether they want to sign up for one. If they do, em- ployees are automatically en- rolled, but can opt out. Quebec has its own version of the PRPP, called the VRSP. Unlike PRPPs, Quebec is making VRSPs mandatory for employers who do not have an RPP or offer employ- ees payroll deductions for a des- ignated RRSP or tax-free savings account. Employers with at least five employees with a minimum of one year of uninterrupted ser- vice will have to offer a VRSP. The deadline for offering a plan depends on the employer's size. Employers with 20 or more eligible employees as of June 30, 2016 had to sign up for a plan by the end of 2016. Employers with 10 or more eligible employees as of June 30 this year will have until the end of 2017 to offer a VRSP. The government has not yet set a date for when employers with five to nine employees must comply. "There has been a tremendous amount of activity around VRSP in Quebec," Reid says. "As it got closer to the end of (2016), the number of phone calls we got from either advisors or employ- ers escalated pretty dramatical- ly," he adds. Reid also notes that PRPPs are new and interest in them may grow over time. "If you look back to when RRSPs were created by legislation in the 1950s, they did not take off until the late '70s and into the '80s when the mu- tual fund industry dramatically evolved and there were more useful vehicles to contribute to an RRSP. These things can take a long time to take root and get traction," he says. While it is too soon to know how popular PRPPs could be- come, payroll professionals who want to stay on top of legislative developments should become familiar with PRPPs and VRSPs in case their employer chooses to offer one or, in the case of Que- bec, is required to have a plan. Even though it is the plan pro- vider rather than the employer who is responsible for adminis- tering a PRPP/VRSP, employers will have some administrative duties that could affect payroll/ HR, including: Selecting a plan: Employers will need to do some homework to find a licensed PRPP/VRSP provider that best meets their needs. The provider can then work with them to set up a plan. Plans can be an "off-the-shelf " package or be customized for the workplace. Plan providers will offer investment options for the employees. Communication: Employ- ers must give employees at least 30 days' advance notice before they sign a contract. The notice must include information on any business relationship that the employer has with the plan administrator and the right em- ployees have to object to the plan for religious reasons. The notice must also inform employees that they will be en- rolled automatically in the plan, but may opt out (and explain how they do that). Once the con- tract is signed, the employer or the plan provider must notify employees of investment op- tions, contribution rates, fees, and other information. Membership/Enrolment : For PRPPs, employers can choose which classes of employees they will sign up. Full-time employees in those classes will be enrolled automatically. Employers must enrol part-time workers after they have completed 24 months of continuous employment, al- though they can choose to do it earlier. Employers covered by the mandatory VRSP requirement must enrol all eligible employees, as well as those who request to be signed up. Eligible employees are those who are at least 18 years old, are considered an employee under the Act respecting labour standards and have at least one year of uninterrupted service (de- fined under labour standards). Employees who do not wish to take part in the plan can opt out by giving their employer notice within 60 days of the date the employer informs them of its intention to sign a PRPP/VRSP contract. Employers can send enrol- ment information to the plan provider themselves or set up an arrangement to have their pay- roll service provider do it. "The way it is working most efficiently in Quebec is that the payroll providers are providing information directly (to plan providers)," Reid says. "In terms of getting the demographic in- formation — the names and ad- dress, etc. — of new employees or employees who leave that em- ployer, the payroll provider is ac- tually well set up to provide that information, so you can kind of take the employer out of the loop to a large extent." Contributions: Employers are responsible for deducting PRPP/VRSP contributions from employees. The plan provider can work with the employer to set contribution rates. In Quebec, the government has set a default rate for employ- ees who do not choose one. Until the end of 2017, the rate is two per cent of gross salary. It will rise to three per cent in 2018 and to four per cent as of 2019. "That was a unique feature that Quebec implemented because they wanted to get to a larger con- tribution rate," Reid says. "It's one of the things that we tried to advocate for in all of the other provincial jurisdictions because we think there are pock- ets of under saving across Cana- da, not just in Quebec, and there is a need for low-cost workplace savings plans across Canada," he adds. "Even at four per cent, you could argue, you don't get to the retirement outcomes that you need for middle-income Cana- dians." Employer contributions are optional. If they choose to con- tribute to a PRPP/VRSP, employ- er contributions will not result in a taxable benefit for the employ- ees, but will affect an employee's RRSP contribution room for that year. Remittances: Employers are responsible for remitting em- ployee (and any employer) con- tributions to the plan provider. By law, employers have to send in remittances at least monthly. Reid says it is easiest to base re- mittances on an employer's pay- roll cycle. "We don't alter the schedule. If it's biweekly, then that's fine. If it's monthly, that's fine too. We are set up to do it anyway that the employer does it," says Reid. Employers who use payroll service providers can set up a system whereby the payroll pro- vider deducts and remits the contributions, similar to the way it handles statutory source de- ductions. C h a n g e s / Te r m i n a t i o n s : Employers must notify the plan provider of new hires joining the plan and of employees whose employment terminates. Em- ployees leaving their job can choose to keep their money in the plan or transfer it to an- other retirement savings plan. All PRPP contributions are locked-in. For VRSPs, only em- ployer contributions are locked- in. Plan providers generally allow employees who want to change their contribution rate, opt out or make other changes, to do so themselves through on- line access to the provider's web- site or by calling them, says Reid. "The goal for ourselves, and I think every provider, was to make it as easy as possible for the payroll functions within employers and we will continue to evolve until everyone agrees that that is exactly what we have done." Popularity of pooled plans growing in Canada from PRPPs, VRSPs on page 1

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