Substitution of employer
In most cases, the notion of substitution of employer refers to the sale of assets or part of an enterprise's assets, after which a new employer is accountable for the former employer's obligations under a pension plan and takes over the rights of the former employer. Therefore, in order for there to be a substitution of employer, the new employer must ensure that the plan of its predecessor continues. Furthermore, the employer who intends to be substituted for the former employer must have become the new employer of all or part of the active members related to the former employer. Otherwise, it cannot be considered a substitution of employer.
As mentioned above, a substitution of employer occurs when a new employer is accountable for the obligations the former employer had under the pension plan. A change of administration within the enterprise or the sale of enterprise shares will not result in a substitution of employer: the enterprise will always be the employer responsible for the obligations arising from the plan, even if the administrators or shareholders of the said enterprise have changed.
By replacing the former employer, the new employer takes charge of both the plan's past and future. For example, in a defined-contribution plan, the new employer becomes responsible, if applicable:
- for the payment of employer contributions that were not paid by the former employer
- for the payment of member contributions that would have been collected, but not paid into the pension fund by the former employer
- for the regularization of errors, corrections or other adjustments related to the services carried out before the substitution date.
The new employer is responsible for the pension plan's obligations. If an inconsistency is brought to its knowledge after the substitution, it must regularize it. If applicable, it will exercise recourses to obtain compensation.
In a defined-benefit plan, the new employer must fulfill the former employer's obligations. It is responsible for the pension plan's deficits. Therefore, the new employer must pay the amortization payments and special contributions. Furthermore, the new employer is responsible for the debt if the plan is terminated. Similarly, if the plan has surplus assets, the new employer can use them, where permitted under the plan and in accordance with the Supplemental Pension Plans Act.
The Supplemental Pension Plans Act contains no provision that requires a new employer to be substituted for the former employer and, as a result, to fulfill the obligations resulting from the application of the pension plan provisions. To be bound by contract under the plan, an employer must consent to the obligations incumbent upon it.
The plan must be amended by the person or body empowered to amend the plan in the manner provided for in the Supplemental Pension Plans Act to reflect the substitution of employer. The amendment is subject to the authorization of Retraite Québec under section 22 of the Supplemental Pension Plans Act 
.
If Retraite Québec cannot authorize the substitution of an employer, its refusal can have consequences on the plan. For example:
Members and beneficiaries outside Québec
The requirements related to the authorization of an amendment the purpose of which is to substitute an employer only apply with respect to the members and beneficiaries subject to the Supplemental Pension Plans Act. If, among the members and beneficiaries covered by the change in employers, certain are subject to another act respecting pension plans (for example, the Ontario Pension Benefits Act), the requirements provided for in that Act, if applicable, apply to the amendment that was made.
Documents and information to be provided to Retraite Québec
In addition to the documents normally included in the Application for Registration of an Amendment to a Pension Plan, certain documents or information are generally requested to allow Retraite Québec to authorize the amendment respecting the substitution of employer and ensure proper supervision of the plan.
- The names of the former employer and of the new employer corresponding to those entered in the record of the Registraire des entreprises or with other authorities.
- Retraite Québec expects that the name of the new employer mentioned in the amendment corresponds to the name entered in the record of the Registraire des entreprises or with other authorities. In the case of a multi-employer pension plan, even not considered as such, the amendment must clearly indicate the name of the former employer and of the new employer covered by the substitution.
The documents submitted with the application for registration of an amendment must show that the former employer has transferred its rights and obligations under the plan to the new employer and that the new employer has accepted them.
The adoption of the amendment by the former employer will generally be considered as a transfer of rights under the plan to the new employer. If the amendment is made by the new employer, the documents submitted must show that the former employer transferred its rights to the new employer. In all cases, Retraite Québec requires that the new employer certify that it consents to the obligations under the plan with respect to past and future services.
Consult the new employer's attestation proposed for a defined-contribution plan.
- If the members and beneficiaries covered by the substitution of employer are not all subject to the Supplemental Pension Plans Act, the application for registration must mention the title of the acts concerned.
- The pension plan administrator's representative or his or her mandatary must indicate whether required contributions from the former employer have not yet been paid on the date on which the application for registration was sent and, if such is the case, that the new employer will take responsibility for those contributions.
- If the plan has a flexible component that is exempt from the application of certain provisions of the Supplemental Pension Plans Act, the application for registration must include the new employer's undertaking provided for under section 32 of the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act .
New employer's attestation for a defined‑contribution plan
In the case of a defined-contribution plan where there are no surplus assets, an attestation similar to the one on the form entitled Substitution of an Employer Under a Defined-Contribution Plan would be considered adequate and sufficient by Retraite Québec to authorize a substitution of employer under section 22 of the Supplemental Pension Plans Act . Please note that Retraite Québec reserves the right to request additional information, if necessary.
Important!
In the case of any other type of plan, additional information is required in order for Retraite Québec to authorize a substitution of employer. That example of attestation is not appropriate for those plans.
Legal references
Forms and other reference