Conditions for membership in a defined contribution plan
A pension plan may cover all of a company's employees or only some categories of employees.
Who can be a member?
An employee is eligible for plan membership if he or she is in a category of employees covered by the employer's plan.
An employee can join the plan if, during the preceding year:
- the employer paid the employee an annual income corresponding to at least 35% of the maximum pensionable earnings (MPE) under the Québec Pension Plan (hereinafter "35%
MPE criterion")
or - the employee worked for at least 700 hours for the employer (hereinafter "700-hour criterion").
However, a plan can allow an eligible employee to join the plan at an earlier date.
A helpful example...
An employer offers a plan to his or her unionized employees. In
2023, a person is hired and becomes a member of the union. That person is therefore eligible for membership in the plan. If, in
2023, the employee receives earnings of at least $23 310 (35% of the
MPE for
2023, that is, 35% of $66 600) from the employer, or works at least 700 hours for the employer, the employee will be able to become a member of the plan as of 1 January 2024.
Note that...
In a multi-employer plan, the "35%
MPE criterion" and the "700-hour criterion" apply by adding the income and hours worked for each employer party to a plan, if one of the following two conditions is met:
- the employees eligible for the plan are governed by the same collective agreement
or - the employers are a parent company and its subsidiaries or subsidiaries of the same parent company.
Membership in the plan: compulsory or optional?
The plan may provide that membership is optional, compulsory, or optional according to certain conditions, and compulsory according to other conditions.
An eligible employee
must be a member of a plan as soon as he or she meets the
complusory membership conditions.
An eligible employee
may apply for membership in the plan as soon as he or she meets the
optional membership conditions.
A helpful example...
A plan provides for compulsory membership of unionized employees after 6 months of service with the employer and optional membership when the "35%
MPE criterion" or the "700-hour criterion" is met. A unionized employee hired on 15 August
2023 must therefore become a plan member as of 15 February
2024. However, the same employee may apply for membership in the plan between 1 January and 15 February
2024, if, in
2023, he or she received earnings of at least $23 310 from the employer or worked at least 700 hours for the employer.
Where membership is optional, the eligible employee may apply for membership in the plan where he or she still meets the membership conditions when he or she files an application. A plan cannot provide that an eligible employee who refused to become a member of the plan will no longer be entitled to become a member thereafter.
A helpful example...
A plan provides for optional membership where the "35%
MPE criterion" or the "700-hour criterion" is met. An employee met at least one of the criteria in
2023, but, in January
2024, informed the pension committee that he or she did not want to become a member of the plan. The employee may then change his or her mind and apply for membership in the plan in
2024. If he or she does not do so, the employee will be able to become a member of the plan in
2025 only if he or she has once again met the "35%
MPE criterion" or the "700-hour criterion" in
2024.
Information to be sent to eligible employees
Within 90 days of the date on which the employee becomes eligible for membership in the plan, the administrator must send him or her a plan summary, a brief description of the employee's rights and obligations, as well as a list of the main advantages of membership in the plan.
A helpful example...
An employer offers a plan to his or her unionized employees. A person is hired on 15 August and is unionized. That person is therefore eligible for membership in the plan as soon as he or she is hired. The pension committee has until 13 November to send the employee the plan summary and the description and list even if the employee has not yet met the membership conditions.
Legal references
Sections 33, 34 and 111 of the
Supplemental Pension Plans Act 