Mitch Frazer*

On December 10^th, the Pension and Benefits Section held another exciting breakfast program. Following on the heels of our very successful breakfast program on the Supreme Court decision in Kerry, we were fortunate to have Nurez Jiwani and Mathew Ou from FSCO discuss CAPSA's Proposed Multi-Jurisdictional Agreement. One of the our main goals as a section is to provide meaningful and timely programming to our members, and I think that we can all agree that this program certainly falls into those categories. I want to thank the organizers of this program, Anastasia Soldatos, Sonia Mak, Tejash Modi and Deron Waldock for their hard work in putting this event together.

It has been a busy year for our Section so far, and we have many more events planned for the first half of 2010. The Pension and Benefits Program for the Annual Institute, Pensions and Benefits: The Next Generation, is scheduled for February 16th. The Hot Spots CLE program is scheduled for May 10th and our Year-End Dinner will be held in early June. Please mark your calendars accordingly. Our Executive is also hard at work on two other programs, a session with pension regulators (a follow-up to last year's highly successful program) and a joint program with other sections (further details to follow).

Nominations for the second annual OBA Award for Excellence in Pension and Benefits Law will open shortly. Stay tuned for further information.

As always, if you have any questions or ideas on how we can improve delivery of services to the Section, do not hesitate to contact me or any of the other Executive Members.

*Mitch Frazer, Torys LLP
 

Karen DeBortoli, Leanne Hull and Dean Taylor*

In the Matter of an Application by the Administrator of the Hawker Siddeley Canada Inc. Pension Plan for Salaried Employees Ontario Court of Justice, March 27, 2009

The Hawker Siddeley Canada Inc. Pension Plan (Plan) was wound up in 1996. A surplus sharing agreement was approved and the surplus was distributed, with the exception of some surplus funds which were kept in trust for ongoing payments of cost of living adjustments (COLAs). Approximately a decade later, Hawker Siddeley sought to distribute the extra surplus funds to former plan members, however due to the passage of time the sponsor could not locate all former members. Accordingly, the Sponsor sought an order permitting it to pay into court the amount for unlocated members, pursuant to s. 36(4) of the Trustee Act.

The Ontario Court of Justice (Court) allowed the application, permitting the sponsor to pay the fund for unlocated members and beneficiaries into court. The Court stated that the Pension Benefits Act (PBA) was silent on this issue, and accordingly it turned to the principles of trust law to make its determination. Winding-up a pension plan is akin to the passing of accounts, held the Court, and accordingly the provisions of the Trustee Act related to the passing of accounts were applicable. Specifically, the Trustee Act states that upon the passing of accounts, funds for unlocated beneficiaries must be paid into court. The Court ordered that the sponsor file a list of all unlocated members and beneficiaries, along with the amount payable to them, with the accountant of the Court. Upon presenting valid identification, the beneficiary or heir would be entitled to the funds and a release by the accountant.

Bennett v. British Columbia 2009 BCSC 1358

In 2003 the pension fund management and administration for various British Columbia government employees was transferred from the Government to a jointly appointed board of trustees (Board). As a result of the change, retiree benefits were altered to require that retirees pay one third of their MSP benefit, and a deductible under the EHP. A group of retirees initiated a class proceeding, asserting that the changes to the benefits were a breach of fiduciary duty and a breach of contract. 

The representative plaintiff sought a declaration that the Government owed a fiduciary duty to the class members regarding the provision and administration of retiree benefits, and that the Government breached that duty. The retirees further asserted that the Government breached its contractual obligations by increasing fees associated with the benefits and that the Government breached its fiduciary duty by failing to inform the retirees that the benefits were contingent and could be reduced in future years. The Government asserted that it did not intend premium-free coverage to form part of any employment contracts and that it had no duty to inform retirees of speculations regarding the future state of retiree benefits.

The British Columbia Supreme Court (Court) dismissed all retiree contractual and fiduciary duty claims. The Court held that the booklets, pamphlets, information sheets and meeting notes outlining the retirement benefits did not create a contractual obligation to provide the benefits. As well, the statutes and regulations that related to the plans did not guarantee any continuation of benefits, but rather reinforced that the benefits were discretionary at all times. As well, the Court held that it was not reasonable for the plaintiffs to expect the Government’s fiduciary duty to extend to an obligation to provide and fund retiree benefits.

Burke v. Hudson’s Bay Company 2005 CanLII 47086 (ON S.C.), 2008 ONCA 394, leave to appeal granted 10/29/2009 (SCC)

The Hudson’s Bay Company (HBC) operated a contributory defined benefit pension plan (Plan). As part of the sale of a division, a number of employees were transferred to the purchasing employer’s pension plan, as were Plan assets attributable to those employees. HBC did not transfer a pro rata share of surplus assets from the Plan but instead kept the surplus in the Plan. The Plan members and beneficiaries initiated legal proceedings seeking an order requiring HBC to transfer a pro rata share of surplus to the new pension plan. As well, a declaration was sought that HBC improperly paid expenses from the pension fund, and improperly took contribution holidays. 

In 2005 the Ontario Superior Court of Justice rejected the Plan member claims over the contribution holidays and payment of expenses, but found in favour of Plan members on the surplus transfer issue. In 2008 the Ontario Court of Appeal allowed the employer’s appeal and found that no surplus transfer was required. The Plan members applied for leave to appeal to the Supreme Court of Canada and on October 29, 2009 the SCC granted the Plan members’ application for leave to appeal. The SCC will hear the matter likely within the next year, with a decision anticipated a further six months later.

CKY-TV v. Communications, Energy and Paperworkers Union of Canada, Local 816, 2009 MBQB 252 (CanLII)

A CKY-TV employee was terminated at the age of 65 pursuant to a mandatory retirement clause in his collective agreement. His union alleged that the mandatory retirement clause was discriminatory based on age and initiated a grievance. The arbitrator concluded that mandatory retirement at age 65 constituted a discriminatory practice contrary to subsection 15(1) of the Charter of Rights and Freedoms (Charter). The arbitrator further ruled that the CHRA provision that permits termination of employment at the “normal age of retirement” was of no force and effect as it was discriminatory and could not be justified under the Charter. 

The employer sought judicial review of the arbitrator’s decision and the Manitoba Court of Queen’s Bench (Court) upheld the arbitrator’s decision on all grounds. The Court held that the arbitrator correctly determined that the provision of the CHRA permitting terminations at the “normal retirement age” was discriminatory and could not be justified. The Court agreed with the arbitrator that the present wording of subsection 15(1)(c) of the CHRA is a blanket approval for mandatory retirement, and that such blanket approval is discriminatory and cannot be justified under the Charter.

The Governing Council of the University of Toronto and the University of Toronto Faculty Association, unreported arbitration decision August 17, 2009 

One of the University of Toronto pension plans is a contributory, defined benefit (DB) plan (Plan) that includes members of the University of Toronto Faculty Association (Faculty Association) and the librarians. The Faculty Association and librarians sought involvement in the Plan’s administration and governance, and requested a new, independent pension administrator to replace the existing administrator, the Governing Council of the University of Toronto. The Governing Council asserted that it should remain the Plan’s administrator, although it was willing to delegate the administrative authority to a pension committee of which it would appoint the majority of members. The parties established a joint working group to consider the governance issues, but were unable to successfully resolve the differences and the matter was referred to arbitration.

The arbitrator found in favour of the Governing Council, and addressed a number of governance issues. The arbitrator found that the Governing Council should continue as the administrator, but should establish a pension committee and delegate administration to that committee. The committee would not require equal representation of plan members and sponsors, found the arbitrator, because there was no basis for equal representation when one party bears the financial risk. While the arbitrator acknowledged that plan members are theoretically at risk in the event of a default, he stated that this was a “doomsday scenario” that warranted little consideration. 

Sutherland v. HBC et al. 2009 CanLII 43661

In 2007 the Ontario Superior Court of Justice held that HBC was permitted to open one of its pension plans (the Dumai Plan) to add new members from other divisions (Zellers and Kmart members) and use the Dumai Plan defined benefit (DB) surplus to fund the defined contribution (DC) component of the Plan. The Court also held that HBC was not a beneficiary of the Dumai Plan trust, and that it would not be entitled to share in any surplus existing on the wind-up of the Dumai Plan. The Dumai Plan members appealed, and HBC cross-appealed, but a settlement was reached between the parties before either appeal was heard. The settlement motion was heard on the same day that the decision in Kerry was released, and the judge sought further written submissions from the parties, after reading the Kerry decision. The judgment approving the settlement was signed on September 16, 2009 by Justice Cullity. The settlement is subject to obtaining regulatory consent and requires HBC to distribute $8.5 million of Dumai Plan assets to the class members, their estates and their lawyers.

Rogers Communications Inc. v. Buschau 2009 FCA 258 (CanLII)

A legal dispute between Rogers Communications Inc. (Rogers) and its defined benefit (DB) pension plan (Plan) members has been before courts and tribunals for the past decade. Most recently, Rogers appealed to the Federal Court of Appeal (FCA) from a decision of the Federal Court of Canada (FCC), which had overturned a decision of the Superintendent of Financial Institutions (Superintendent). The FCA rendered the most recent decision on September 9, 2009, finding in favour of Rogers, and restored the findings of the Superintendent. The FCA held that the standard of review of the Superintendent’s decisions was reasonableness, and that the Superintendent’s findings were reasonable. The FCA also considered the previous decisions in this matter, to determine whether or not the continued litigation was barred by res judicata. The FCA held that prior courts in this matter had considered the merger, but only as it pertained to the trust issues in those disputes. In the present case, though, the FCA held that the question of re-opening the plan remained an open question and was not barred by the previous litigation.

CRA Technical Interpretation on Top-up Life Insurance and Disability Payments

The CRA has released Technical Interpretation DocNum 2008-026561E5 dealing with the top-up of life insurance and disability payments. The CRA was asked to provide information on the tax implications for employees arising from the terms of a collective agreement requiring the employer to top up list insurance and long-term disability (LTD) benefits and pay retirees’ health benefit premiums. While the employer stated it was required to self-insure to provide the additional benefits, the CRA was not sure how this was done. Their comments accordingly assume that the arrangements are funded on a pay-as-you-go basis.

On the subject of life insurance, CRA noted that where an employer pays a benefit upon the death of an employee out of its own funds and not under a group term life insurance policy, the benefit could be treated as a death benefit, which would be included in the beneficiary’s income pursuant to subparagraph 56(1)(a)(iii) of the Income Tax Act (ITA). By contrast, if the employer funds a plan that pays out benefits on the death of an employee, such a plan could be considered an employee benefit plan (EBP). In such cases, employer contributions to the EBP would not be included in the employee’s income, monies received would not be included in the beneficiary’s income – while payments from an EBP are typically income, there is a specific exemption for death benefits in paragraph 6(1)(g) of the ITA. Based on the information provided, the CRA determined that the life insurance top-up was likely a death benefit, which would be included in the income of the beneficiary, although a determination could only be made after a review of all relevant facts.

In terms of the LTD top-ups, the CRA stated that the tax treatment would depend on how the plan was structured. If the employer used a pay-as-you-go arrangement, the amount paid to the employee in respect of LTD would be included in the employee’s income under the ITA. However, if the LTD benefits were funded on a self-insured basis using a separate trust arrangement that qualified as a health and welfare trust (HWT), provided the benefits were restricted to a group sickness or accident insurance plan, also known as a wage loss replacement plan. If this is the case, affected employees will not be taxed on employer contributions to the trust. However, employees would be taxed on the LTD top-up payments they receive. If the trust is not a qualifying HWT, the CRA noted that it will generally be treated as an EBP, as discussed above. Finally, the CRA noted that if both the life insurance and the LTD top-ups are self-insured using the same trust and one of the plans is considered to be an EBP, the combined plan will likely be an EBP.

As for the retiree health premiums, the CRA stated that, provided the plan constituted a private health services plan (PHSP), any benefit a retiree derived from the plan would be excluded from their income.

*Karen DeBortoli, Leanne Hull and Dean Taylor of Watson Wyatt Worldwide
 

Karen DeBortoli, Leanne Hull and Dean Taylor*

Federal

Employment Insurance Legislative Changes Introduced for the Self-Employed

On November 4, 2009 An Act to Amend the Employment Insurance Act and to make Consequential Amendments to Other Acts (Bill C-56) was introduced in Parliament. If passed, Bill C-56 will make the employment insurance (EI) program and benefits available to self-employed Canadians. Self-employed individuals would be able to opt-in to the program and become eligible to receive 15 weeks of maternity benefits for birth mothers, 35 weeks of parental benefits for biological or adoptive parents, 15 weeks of sickness benefits and six weeks of compassionate care benefits to enable the individual to care for gravely ill family members with a significant risk of death. 

Self-employed individuals who opt-in would be required to participate in the program and pay premiums for one year prior to claiming benefits. An individual who makes a claim would be required to remain in the program for the entire period in which they are self-employed. However, individuals who have not made a claim could opt-out at the end of any tax year. The same EI rate would be paid by self-employed individuals as is currently paid by employed individuals, though no employer portion would be due. If the bill proceeds according to schedule, it is expected that the program would begin in January 2010, which means that eligible individuals could make claims as early as January 2011.

Employment Insurance Benefits Increased

On November 5, 2009, An Act to amend the Employment Insurance Act and to increase benefits (Bill C-50) received Royal Assent in the House of Commons. Bill C-50 will temporarily provide additional employment insurance (EI) benefits to long-tenured workers who become unemployed. Regular EI benefits will be extended for between five and 20 weeks for workers who meet specified criteria. The temporary measures are deemed to come into effect on the second Sunday before Bill C-50 received royal assent and would expire in the fall of 2011. 

GST Rebates for Pension Plan Trusts

On September 23, 2009, Federal Minster of Finance Jim Flaherty released a package of legislative proposals, draft regulations and explanatory notes (Proposals) introducing a new GST rebate for registered pension plan (RPP) trusts. Under the Proposals, all GST paid on pension-related expenses by employers participating in an RPP will be deemed to have been paid by the relevant pension entity. As a result, the entity will then be entitled to claim a 33% rebate on the GST paid or deemed to be paid. The rebate would be available regardless of the nature of the RPP or whether the pension entity is registered for the GST. 

In recognition of the fact that employers may be responsible for the payment of a portion of expenses related to an RPP, the Proposals provide an election mechanism. Under this mechanism, the pension entity and all its participating employers can jointly elect to transfer all or part of the entity’s rebate entitlement to some or all of the participating employers that are GST registered. As a result of the election, the affected participating employers will be able to take a tax deduction on their corporate returns for the amount rebated. In cases where all participating employers are exclusively engaged in commercial activities, the pension entity and the employers would be free to transfer the rebate entitlement as they choose. In other cases, each participating employer’s maximum rebate will correspond to their share of total pension contributions, with the deduction further limited by the employer’s tax recovery rate.

The rebate contained in the Proposals will not be available to pension entities of pension plans where at least 10% of contributions are made by listed financial institutions. If enacted, the provisions set out above will apply for fiscal years of employers beginning on or after September 23, 2009. For pension entities, the proposed rules will apply to their claim periods beginning on or after September 23, 2009.

Private Members’ Bill Introduced Regarding Priority of Pension Liabilities in Bankruptcy

On November 3, 2009, a private members’ bill was introduced in the House of Commons. Bill C-476, An Act to amend the Bankruptcy and Insolvency Act and other Acts (unfunded pension plan liabilities) proposes amendments to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangements Act (CCAA) to make the liabilities of unfunded pension plans secure debts in the event of bankruptcy proceedings.

Bill C-476 also proposes to amend the Canada Business Corporations Act (CBCA) to provide a procedure through which former employees of a bankrupt corporation can proceed with claims against the corporation’s directors for amounts owed to them. In addition, the Bill proposes to amend the Employment Insurance Act to provide that payments made to a claimant out of proceeds realized from the property of a bankrupt (or by a government in the event of a bankruptcy) will not be deducted from EI benefits payable. Finally, Bill C-476 proposes to amend the Wage Earner Protection Program Act (WEPA) to include proposals, compromises and arrangements within its ambit.

OSFI Instruction Guide Issued on Defined Benefit Pension Plan Terminations

The Office of the Superintendent of Financial Institutions (OSFI) has released an Instruction Guide to inform the pension industry of the filing and reporting requirements for defined benefit (DB) pension plans that have terminated, including DB plans with a defined contribution (DC) component. The Instruction Guide replaces the March 2008 draft Instruction Guide (Draft Guide). The key provisions in the Instruction Guide are as follows:

• Investment Policy – Value of Assets: A new section has been added to the Instruction Guide that is specifically related to the investment policy of terminating plans and states that the administrator has fiduciary obligations to act prudently and ensure that the investment policy is appropriate and that the benefit entitlements calculated are safeguarded until paid out.
   
• Payments by Employer: The Instruction Guide now specifies in detail the types of payments required by the employer on termination and wind-up.
   
• Information to Members: The Instruction Guide now states that if a plan is fully terminating, affected members should be advised of whether benefits may be reduced as a result of the plan terminating in an under-funded position and that members must be given at least 60 days to choose their portability option.
   
• Purchase of Annuities: The Instruction Guide now contains specific details regarding deferred annuities and states that deferred annuities must reflect the option for early retirement, joint and survivor form of pensions and the availability of credit splitting on divorce, separation or annulment.
   
• Distribution of Surplus Following Plan Termination: A section has been added to the Instruction Guide on surplus distribution, and it states that a distribution of surplus assets on plan termination must be specifically supported by the terms of the plan. 

CAPSA Issues Consultation Paper

On November 30, 2009 the Canadian Association of Pension Supervisory Authorities (CAPSA) released The Prudence Standard and the Roles of the Plan Sponsor and Plan Administrator in Pension Plan Funding and Investment (Consultation Paper). CAPSA states that the purpose of the Consultation Paper is to make plan sponsors and administrators aware of key issues in pension plan funding and investments. Stakeholder input will be accepted until January 29, 2010, after which time CAPSA states that it intends to develop three guidelines on best practices that apply to pension plan funding, investment, and examinations by regulators as they apply to funding and investments. 

British Columbia

Guide for Pension Plan Registration

Financial Institutions Commission of British Columbia (FICOM) has published PENS-09-009, A Guide for the Registration of a Pension Plan in British Columbia (Guide). The Guide outlines the roles of key parties in the registration process, including the plan administrator, fund holder, Superintendent of Pensions (Superintendent) and the Pension Benefits Standards Act (PBSA). The Guide also outlines the steps required in the registration process. The Guide states that if all required documents have been submitted and the application fee has been paid, then the Superintendent will strive to register the plan within 150 days of receipt of a complete package. Where deficiencies exist, the Superintendent may either refuse to register the plan or take other regulatory action. Administrators may request reconsideration if the application has been refused, and if the reconsideration is denied, the Superintendent’s decision can be appealed to the Financial Services Tribunal.

Updated Information Bulletin on Locking-in of Pension Benefits

British Columbia’s Financial Institutions Commission (FICOM) has issued a revised version of Bulletin PENS 07-001, Locking in of Pension Benefits (Bulletin). The Bulletin is intended as an aid for plan sponsors, members and financial institutions in understanding the Pension Benefits Standards Act (PBSA) and the circumstances under which pension funds can be unlocked.

Section 30 of the PBSA does not generally allow pension plan members or former members to cash in the commuted value of their pension plan, in order to “ensure that a plan member’s pension entitlement is used for the purpose originally intended.” However, the PBSA provides the limited exceptions to the locking-in requirement for small amounts, shortened life expectancy or non-residency.

Nova Scotia

Temporary Pension Funding Relief

On November 4, 2009, Nova Scotia’s Ministry of Labour and Workforce Development announced funding relief for private pension plans registered in the province. Order in Council 2009-464 (OIC) amends the Pension Benefits Regulation (Regulation) effective November 3, 2009 to enable plans to amortize the solvency deficiency identified in the first actuarial valuation report prepared between December 30, 2008 and January 2, 2011 over 10 years as opposed to the regular five-year period. 

In order to move to a 10-year amortization schedule, plans must abide by a number of conditions, including written notice to all members and former members, as well as their agents and any trade union, and any other persons entitled to benefits under the plan. Any member, former member or other individual entitled to benefits can object to the proposed extension by sending an objection to the administrator by a specified date. If a minimum of one-third of the members, former members and other entitled individuals (counted together) object to the proposal, then it cannot proceed. If the objection threshold is not met, and provided no payments to the plan are in arrears, the plan may move to the 10-year amortization schedule. A plan that uses the 10-year amortization schedule will be restricted from providing benefit improvements or decreases to contribution rates. As well, the temporary relief provided by the OIC is not available to a pension plan established after 2008, except in limited circumstances. 

Phased Retirement Provisions Receive Royal Assent

On November 5, 2009, An Act to Amend Chapter 340 of the Revised Statutes, 1989, the Pension Benefits Act (Bill 48) received Royal Assent. Bill 48 amends the province’s Pension Benefits Act (PBA) to permit pension plans to offer phased retirement to plan members by permitting payments of up to 60% of an accrued pension to be paid to eligible members without plan members retiring or reducing work hours.

Under Bill 48, employers will not be obligated to offer phased retirement to any or all staff. 

Rather, phased retirement will only be paid to a plan member if the person enters into a written agreement with an employer, under specified circumstances, and where written consent is provided by the spouse or common-law partner. During the phased retirement period, the person will continue to be a member of the pension plan. At the end of the phased retirement period, the pension benefit accrued during the phased retirement period is to be treated as vested “without regard to conditions as to age, the period of membership in the pension plan or the period of employment.” The pension to which the person is entitled or eligible to receive is to be calculated without regard to the amount of the phased retirement benefit received, unless otherwise prescribed.

Ontario 

Pension Regulations Extended for Two Further Years

Effective November 27, 2009, O.Reg. 447/09 amended the surplus sharing regulation for two years to December 31, 2011. The same two year extension has been granted to the Specified Ontario Multi Employer Pension Plans (SOMEPP) regulations, which will now extend to before September 1, 2012. 

Private Member’s Bill Defeated on Additional Options for Plan Wind-up

A Private Member’s Bill entitled An Act to amend the Pension Benefits Act respecting transfers on wind-ups (Bill 213) received first reading in Ontario’s Legislative Assembly on October 27, 2009 and lost on division on November 26, 2009. Bill 213 would have amended the Pensions Benefits Act (PBA) to expand the transfer rights available to plan members on the wind-up of a pension.

Scope of Practice Expanded for Some Regulated Health Professionals 

The Legislative Assembly of Ontario has given third reading to An Act to amend various Acts related to regulated health professions and certain other Acts (Bill 179). Bill 179 proposes to change the scope of practice for numerous regulated health professions. Many regulated health professions would be affected, including pharmacists, dental hygienists, dentists, midwives, naturopaths, nurses, physiotherapists, and respiratory therapists. Most professions would be granted an expanded scope of practice which, depending on the profession, could include an ability to prescribe or the ability or to administer treatments and/or drugs specific to their specialty. Notably, prescribing powers would be granted to pharmacists and also to naturopaths, among other professions.

Quebec

Governance Structure of Régie des rentes

The Quebec National Assembly has passed Bill 22, An Act respecting the governance of the Régie des rentes due Québec and amending various legislative provisions. Bill 22 changes the governance structure of the Régie des rentes du Quebec (Régie) such that it is subject to the same governance legislation that applies to state-owned enterprises. Bill 22 is in force effective October 8, 2009, with the exception of two sections. The fiscal period of the Régie’s Board will change effective April 1, 2010, and the date that the Board is required to submit its activity report will change effective July 1, 2010.

Temporary Solvency Funding Relief Now Available

The November 11, 2009 Gazette Officielle du Quebec included a revised version of the Measures to reduce the effects of the financial crisis on pension plans covered by the Act (Revised Regulation). The Revised Regulation replaces the draft regulation published on May 6, 2009 (May Regulation) and is intended to provide temporary solvency relief to defined benefit (DB) pension plans affected by the current financial crisis. The Revised Regulation comes into force on November 26, 2009, but will be effective retroactive to December 31, 2008. 

Consistent with the May Regulation, the Revised Regulation requires that a sponsor that takes advantage of temporary solvency relief immediately becomes subject to the permanent funding requirements of Bill 30, which include a provision for adverse deviation (PfAD) and annual valuations.
The Revised Regulation includes modified information regarding actuarial valuations. Smoothing will continue to be permitted for a period not exceeding five years to level the impact of short-term fluctuations and ten year amortization remains in the final regulation, The Revised Regulation also continues to require plan sponsors to calculate a financial crisis amount and a financial crisis deficiency (FCD). Key information on the timing of valuations has been identified in the Revised Regulation. Specifically, valuations with a date after December 30, 2008 and prior to March 2, 2009, must be prepared and filed by December 31, 2009. In order to complete these valuations, written instructions to the pension committee will be required from the employer of single employer plans, and from the person or body empowered to amend the plan if it is a multi employer plan. The written instructions must include the actuarial method to be used in the asset valuation. Similarly, written instructions from the employer will be necessary to apply the Canadian Institute of Actuaries values.

*Karen DeBortoli, Leanne Hull and Dean Taylor of Watson Wyatt Worldwide

PENSION e-BULLETIN

Don’t forget to subscribe to the Pension e-Bulletin by clicking on the “Subscribe to Pension e-Bulletin” icon in the pension section of the FSCO website (http://www.fsco.gov.on.ca).

FSCO WEBSITE POSTINGS

Since the last report in September, 2009 the following items have been added to the pages noted below in the Pensions section of the FSCO website. The regulations, policies, forms and other information referred to in these items are available by clicking on the link in the description of the item on the relevant page. You can also access the items directly from the WHAT’S NEW? column on the right hand side of any pension page.

Legislation and Regulatory Changes page:

O. Reg. 447/09, made under the Pension Benefits Act (the “PBA”) was filed November 27, 2009. The regulation amends the following subsections of Regulation 909:

a) subsections 6.0.1(2), 6.0.3(2), and 6.0.4 (1)(b) - extending time limits re: SOMEPP funding relief to Aug 31/September 1, 2012

b) subsection 8(3) – extending surplus sharing provisions to December 31, 2011

c) revising the definition of medical expenses in subsection 83(1), to change the reference from “nursing home” to “long-term care home”, as defined in the Long-Term Care Homes Act, 2007.

Pension Policy Review Project page:

The following policies have been archived:

S900-500 – Procedures for Applications under ss. 7a(2) of O. Reg. 708/87 (743/91) (Grandfathering Provision)

S900-600 – Making Applications under ss. 7a(2)(c)

The following policy has been revised:

P100-202 – Pension Plans are Not Flexible Benefit Plans

Active Pension Policies page:

Policy F100-102 – Requirement to File Pension Plan or fund Financial Statements effective October 1, 2009 was added to the list of active policies. See also the Plan Administrator Questions Answered page where a new Q and A dealing with the application of the CICA Handbook to pension plan/fund financial statements has been added.

Forms

An updated form is available for the Actuarial Information Summary. The form is available for immediate use, and will become mandatory for pension plans registered with FSCO that contain defined benefits and must be filed in conjunction with any funding valuation reports with filing deadlines of June 30, 2010 and beyond.

Other Information

Electronic Filing of Annual Information Returns page has been added to provide information about the e-filing option for AIRs in 2010.

The page titled: Enhanced Stakeholder Engagement has been updated as of October 2009 to report on proposals for consultations with stakeholders.

The Consultations and Proposed Legislation page has been updated to include references to:

• the Federal Pension Proposals that were released on October 27, 2009; and

• the CAPSA consultation paper: The Prudence Standard and the Roles of the Plan Sponsor and Plan Administrator in Pension Plan Funding and Investment that was released on November 30, 2009.

Commuted Value Transfers – Q&As page has been created to answer a number of issues that have arisen as a result of the amendments to section 19 of Regulation 909 that came into effect on June 19, 2009 and out of the new policy T800-402 (Commuted Value Transfers).

COURT MATTERS:

1. Slater Stainless Corp.

Morneau Sobeco Partnership Limited, as administrator of two union plans formerly sponsored by Slater Stainless Corp. (the CAW plan and the USWA Local 7777 plan), commenced a civil suit in the Ontario Superior Court of Justice against AON Consulting Inc. and J. Melvin Norton in November 2005. The claim is for damages for negligence and breach of fiduciary duty. AON and Mr. Norton have applied to the Commercial List for leave to bring third party claims in the civil action against various former directors and officers of Slater. In response, the Slater directors and officers brought a cross motion to have the third party claims struck. These motions were heard by the Commercial List on March 7 and 8, 2007.

The Slater officers and directors have also brought a motion to the Commercial List for a declaration that the Superintendent must indemnify them in any third party claim, based on Minutes of Settlement reached in the Claims Bar proceeding under the Companies Creditors' Arrangement Act in December 2004. In response, the Superintendent has brought a cross motion to have the Slater motion stayed or struck. These motions were adjourned sine die pending the result in the two third party motions mentioned above.

On April 13, 2007, the Court released its decision on the first two motions, holding that the motions for leave to bring the third party claims were dismissed. AON and Mr. Norton both filed Notices of Appeal respecting this decision with the Court of Appeal.

The Court of Appeal heard the appeals on February 21, 2008, and released its decision on March 19, 2008. The Court held that the third party claims could be initiated by AON and by Mr. Norton.

On May 20, 2008, the Slater directors and officers filed a motion for leave to appeal the Court of Appeal’s decision with the Supreme Court of Canada. The Supreme Court dismissed the motion with costs on September 4, 2008.

The two indemnification motions were heard by the Superior Court of Justice (Commercial List) on November 21, 2008 and the Court reserved its decision. The Court released its decision on May 27, 2009. The Court dismissed both motions, finding that there was a genuine issue for trial with respect to the indemnification issue. The Slater directors and officers have filed a motion for leave to appeal with the Divisional Court.

2. National Steel Car

On February 6, 2006, the Superintendent issued a Notice of Proposal to National Steel Car Limited ordering it to credit Mr. Taso Ristic with service under the Pension Plan for Employees of National Steel Car Limited for periods while Mr. Ristic was receiving a partial permanent disability pension from the Workmen’s Compensation Board while on lay off. The plan is the Pension Plan for Employees of National Steel Car Limited. National Steel Car requested a hearing. The pre-hearing conference was held on June 5, 2006, and the hearing on November 1, 2006. The panel reserved its decision. On February 16, 2007, the panel issued a decision ordering the Superintendent not to proceed with the Notice of Proposal, finding that the term “workmen’s compensation benefits” in the plan did not include time on lay off while receiving permanent disability benefits from the Workmen’s Compensation Board (as it then was). Mr. Ristic has appealed this decision to the Divisional Court. No date is yet set for the appeal.

3. Hydro One

On July 14, 2005, the Superintendent issued a Notice of Proposal refusing to order a partial wind up of the Hydro One Pension Plan. A group of management members of the Plan requested a hearing by the Tribunal, which was held on various dates from October 2006 to February 2007. Full party status was granted in the hearing to Hydro One, the Power Workers’ Union, and the Society of Energy Professionals.

The Tribunal released its decision on August 1, 2007. The Tribunal held that the Superintendent should be directed to order a partial wind up with respect to one initiative at Hydro One in the fall of 2002, as a result of which about 73 management employees ceased to be employed. The Tribunal held that this was a significant number when compared to the total active management employees in the plan.

Hydro One appealed this decision to the Divisional Court. The appeal was heard on February 8, 2008 and the decision was released on March 27, 2008. The Court dismissed the appeal and upheld the decision of the Tribunal.

On April 9, 2008, Hydro One filed a motion for leave to appeal the Divisional Court’s decision with the Court of Appeal. On October 9, 2008, the Court of Appeal granted leave to appeal. The appeal was scheduled to be heard on May 12, 2009, but was adjourned to September 8, 2009.

The appeal was heard by the Court of Appeal on September 8, 2009; the Court reserved its decision. 

MATTERS BEFORE THE FINANCIAL SERVICES TRIBUNAL:

1. Canada Life Assurance Company

Canada Life Assurance Company requested a hearing respecting the Superintendent’s Notice of Proposal issued on January 30, 2007, proposing to order a partial wind up of The Canada Life Canadian Employees Pension Plan with respect to members who ceased to be employed by Adason Properties Limited during the period November 1, 1999 to February 28, 2001. The Tribunal held a pre-hearing conference on June 18, 2007. The pre-hearing conference continued on October 9, 2007. The hearing dates were adjourned to November 24, 26, 27, and 28, 2008, and have been further adjourned to March 3 to 6, 2009. The hearing dates have been adjourned sine die to permit settlement discussions. The pre-hearing conference continued on March 26, 2009, and will continue on December 9, 2009.

2. Victorian Order of Nurses

On February 8, 2008, the Superintendent issued a Notice of Proposal to the Victorian Order of Nurses for Canada (the “VON”) proposing to refuse to approve various partial wind up reports relating to branches of the VON, to order the VON to pay certain amounts into the fund for the VON Canada Pension Plan with respect to these partial wind ups, and to prepare and file new partial wind up reports. The VON requested a hearing. A pre-hearing conference was held on May 29, 2007. Party status was granted to Six Separate Branches of the VON and to the Ontario Public Service Employees Union. A settlement conference was held on June 13, 27 and December 10, 2008. The pre-hearing conference continued on July 15, October 8, November 7, and December 1 and 11, 2008. The matter did not settle. The hearing was held on April 1 to 3 and 6 and 7, 2009. The panel reserved its decision.

The decision was released on July 3, 2009. The panel held that it had no jurisdiction to deal with the status of the Six Separate Branches. The panel also held that VON Canada was not the employer with respect to the insolvent branches and that the insolvent branches were the employers. Appeals have been filed in Divisional Court by the Ontario Nurses’ Association and by the Ontario Public Service Employees Union with respect to this decision.

3. Canada Life Assurance Company (Pelican Food Services Limited)

On September 19, 2008, the Superintendent issued a Notice of Proposal proposing to order a partial wind up of The Canada Life Canadian Employees Pension Plan in relation to those members and former members who ceased to be employed by Pelican Food Services Limited between February 23 and 28, 2001. Canada Life requested a hearing. A pre-hearing conference was held on January 6, 2009, and continued on March 26, 2009, and will continue on December 9, 2009.

4. OMERS Primary Pension Plan

On September 11, 2008, the Superintendent issued a Notice of Registration of Amendment registering an amendment to the OMERS Primary Pension Plan which changed the method of calculating indexation increases. A former member of the Plan requested a hearing. A pre-hearing conference was held on January 13, 2009 and continued on March 4 and 31, 2009. The pre-hearing conference continued on May 11, 2009 at which time the remaining issues between the parties concerning the notice of hearing were resolved. Also, on the request of the Applicant, the parties agreed to adjourn the hearing of a motion concerning documentary production originally from June 9, 2009 to October 21, 2009. The pre-hearing conference continued on June 15, 2009 and is scheduled to continue on December 10, 2010 at which time the Tribunal will deal with party status and the Applicant’s motion to have the matter proceed by way of a written hearing only. The production motion did not proceed because there were no production issues between the parties. The hearing has now been scheduled for January 18 to 21 and February 8 and 9, 2010.

5. York University Pension Plan

On September 11, 2008, the Superintendent issued a Notice of Proposal to refuse to issue an order to require York University, the administrator of the York University Pension Plan, to modify how it administers the adjustment to pension benefits resulting from favourable returns on the investments of the Plan. The York University Faculty Association requested a hearing. The pre-hearing conference was held on February 2, 2009 and continued on May 15, 2009. The hearing has now been scheduled for January 29 and February 1 to 3, 2010.

6. Imperial Oil Limited (Proposed Partial Wind Up)

On January 16, 2009, the Superintendent issued a Notice of Proposal proposing to order a partial wind up of the Imperial Oil Limited Retirement Plan under section 69(1)(e) of the PBA with respect to members and former members who ceased to be employed by Imperial Oil at its location at 111 St. Clair Avenue West in Toronto during the period from September 28, 2004 to June 30, 2006. Imperial Oil requested a hearing. A pre-hearing conference was held on April 23, 2009, and continued on July 28 and September 3, 2009. At the July 28 pre-hearing conference party status was granted to the 111 Pension Rights Association and to four individual former members. At the September 3 pre-hearing conference, a motion was brought by the 111 Pension Rights Association to add an additional ground under section 69(1)(d) of the PBA for a partial wind up. The panel heard this motion and reserved its decision. During the week of September 14, three of the four individuals who had received party status withdrew their applications. .

On September 23, 2009, two of the three panel members issued a decision on the motion, holding that the FST has no jurisdiction to add an issue that is not in the Notice of Proposal. The third panel member concurred in the result but for different reasons.

On November 24, 2009, a motion was brought by the 111 Pension Rights Association to adjourn the hearing (which was set for December 14-18, 2009) so that the Superintendent’s examination into whether a partial wind up under section 69(1)(d) of the PBA should be ordered could be concluded and the two issues eventually heard together. The hearing was ordered adjourned sine die, with a conference call scheduled for March 23, 2010.

7. Imperial Oil Limited (Annuitization)

On December 19, 2008, the Superintendent issued a Notice of Proposal requiring the plan administrator for the Imperial Oil Limited Retirement Plan (the “IOL Plan”) to purchase annuities and amend the partial wind up report with respect to the General Electric Capital partial wind up. Also on December 19, 2008, the Superintendent issued a Notice of Proposal requiring the plan administrator for the IOL Plan to purchase annuities and amend the partial wind up report with respect to the Imperial Oil partial wind up. Also on December 19, 2008, the Superintendent issued a Notice of Proposal requiring the plan administrator for the Imperial Oil Limited Retirement Plan for Former Employees of McColl-Frontenac Inc. to purchase annuities and amend the partial wind up with respect to the McColl-Frontenac partial wind up. Imperial Oil requested a hearing with respect to all three Notices of Proposal. A pre-hearing conference was held on April 20, 2009, at which time the three hearings were consolidated. The pre-hearing conference continued on June 17, 2009, and the hearing took place on October 30, 2009. The panel reserved its decision.

On December 2, 2009, the panel issued its decision and held that members may leave their pensions in the plan on partial wind up because this constitutes a “distribution” within the meaning of the PBA. Therefore, annuities do not have to be purchased with respect to members who left their pension entitlements in the plan.

8. Corby Distilleries

On December 11, 2008, the Superintendent issued a Notice of Proposal to refuse to register an amendment to the Pension Plan for Salaried Employees of Corby Distilleries and Affiliated Companies. Corby Distilleries requested a hearing. A pre-hearing conference was held on April 23, 2009, and was adjourned to June 17, 2009, October 23, 2009 and then to February 18, 2010 to accommodate settlement discussions between the parties.

9. Woodbine Entertainment Group

On January 15, 2009, the Superintendent issued a Notice of Proposal to refuse to issue an order to require Woodbine Entertainment Group, the administrator of the Woodbine Entertainment Group Mutuel Employees’ Pension Plan, to accept non-seniority list employees as members of the Plan. The CAW-Canada Local 2007 requested a hearing. A pre-hearing conference was held on April 20, 2009. A settlement conference was held on June 12, 2009. The matter did not settle. The pre-hearing conference continued on June 29, 2009. The hearing was held on November 19, 20, 23 and 24, 2009. The panel reserved its decision.

10. Shoppers Drug Mart (Funding Issues)

On March 9, 2009, the Superintendent issued a Notice of Proposal refusing to consent to a suspension of funding in relation to the Pension Plan for Executives of Shoppers Drug Mart with respect to the ongoing plan. Shoppers Drug Mart requested a hearing. A pre-hearing conference was held on July 7, 2009 and a settlement conference was held on August 17, 2009. The pre-hearing conference resumed on October 26, 2009, and continued on December 3, 2009. The hearing is scheduled for February 3, 2010.

Request to Withdraw Funds from Locked-In Accounts

No significant new decisions.

PROSECUTION MATTERS:

1. Trustees of the Canadian Commercial Workers Industry Pension Plan

Charges were laid on June 27, 2006, against persons who were Trustees of the Canadian Commercial Workers Industry Pension Plan (“CCWIPP”) during 2002 and 2003 for failing to exercise the care, diligence and skill in the administration and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another person, failing to supervise the investment committee as agent of the Board in prudent and reasonable manner and failing to comply with certain quantitative investment limits. The first appearance was on July 26, 2006 and the matter was put over to August 16, 2006. On August 16, 2006, the matter was put over to September 6, 2006 and was further put over (at subsequent appearances) to October 11, 2006, November 2, 2006, December 13, 2006, February 15, 2007, March 7, 2007, May 2, 2007 and October 3, 2007. A Judicial Pre-Trial Conference was convened on December 12, 2006 and continued on February 6, 2007, April 13, 2007, September 17, 2007, March 25, 2008, May 16, 2008 and June 24, 2008. Originally, the trial was scheduled for February 11, 2008 to March 7, 2008, March 25 to 28, 2008 and April 1 to 4, 2008. The defendants requested an adjournment of the February to April 2008 trial dates. The adjournment request was granted at the pre-trial conference on September 17, 2007. The trial commenced on August 21, 2008 at which time certain of the counts relating to particular investments were withdrawn and all charges against one defendant were withdrawn on compassionate grounds. The trial continued on September 5 and 15, 2008. The trial schedule was revised in light of the fact that none of the parties intended to call witnesses. The trial continued on September 19, 24 to 26, 29, October 10, 15 to 17, 2008 and January 23, 26 and 29, and February 27, 2009 at which time all submissions were completed. The matter was put over to April 28, 2009 and then to June 3, 2009. On June 3, 2009, the Court advised the parties that it required further written submissions concerning the alleged violations of the quantitative investment limits. The matter was put over to July 15, 2009 at which time the Court heard further oral submissions concerning the quantitative investment limits and the matter was put over to September 22, 2009. At the request of the Court, further written submissions concerning the quantitative investments limits were filed on August 4, 2009. On September 22, 2009, the matter was put over to December 7, 2009. 

On December 7, 2009, the Court issued a 124 page judgment. The Court convicted the Trustees who were members of the investment committee with contravening the 10% quantitative investment limit in respect of investments made in certain resort and hotel properties in the Caribbean. Further, the Court convicted the Trustees who were not members of the investment with failing to adequately supervise the investment committee in a prudent and reasonable manner in respect of compliance with the 10% investment limit. The Court acquitted the Defendants on all other counts which alleged that the Trustees failed to exercise the care, diligence and skill in the administration and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another person in respect of certain identified investments of the Plan.