Editor:
Leanne M. Hull

Karen DeBortoli, Leanne Hull, Dean Taylor and Gareth Gibbins*

Acreman v. Memorial University of Newfoundland, 2010 NLTD 4 (CanLII)

Prior to 1978, retirees at the Memorial University of Newfoundland (MUN) each paid 50 percent of the premium associated with the group benefits. MUN eliminated the premium between 1978 and 1992 and re-introduced it after 1993, gradually increasing it back to the 50 percent level. Several retirees objected to the re-introduction of the premium, and initiated a class proceeding. At the certification hearing the judge evaluated the pleadings to determine if they disclosed a cause of action and if a class proceeding was the appropriate forum for resolving the issues. The retirees’ pleadings claimed that a cause of action existed as a breach of contract and also as a breach of fiduciary duty. MUN conceded that a cause of action existed for breach of contract MUN opposed the fiduciary duty claim, arguing that no fiduciary duty action could exist.

The Newfoundland Supreme Court (Court) certified the class proceeding. It held that a cause of action existed for both the breach of contract and breach of fiduciary duty claims made by the plaintiffs. For the breach of fiduciary duty claim, the Court held that the retirees may have reasonably expected MUN to act in their best interest in providing no-cost benefits. While the Court did not decide the merits of the issues, it found that enough evidence existed for the claims to proceed to trial.

Supreme Court of Canada Dismisses Leave Application in Buschau

On April 8, 2010, the Supreme Court of Canada (SCC) dismissed an application for leave to appeal, without costs, in the latest installment of the Buschau saga. In late 2009, the Federal Court of Appeal restored a decision of the Superintendent of Financial Institutions, which had found that Rogers Communications Inc. (Rogers) could revoke a previously implemented merger of its defined benefit pension plan and re-open the plan to new members. The Superintendent also found that the extended contribution holiday taken by Rogers did not require the termination of the plan as it was authorized by legislation and did not impair the plan’s solvency. A group of plan members unsuccessfully sought leave to appeal the FCA decision to the SCC. 

Susan McGrath v. Superintendent of Financial Services et al. FST File No. P0335-2008

In 2007, the OMERS Sponsors Corporation (SC) amended the OMERS Primary Pension Plan (Plan) to change the inflation protection methodology (Amendment). Prior to the Amendment, the Plan required inflation adjustments to be calculated according to a formula based on a comparison between the September Consumer Price Index (CPI) from one year to the next (OM). Effective January 1, 2008, the Amendment eliminated the OM and adopted the method of indexation used by the Canada Pension Plan, based on a year-over-year comparison of average monthly CPI increases for a 12 month period ending in October of each year (NM). The Superintendent of Financial Services (Superintendent) registered the Amendment. Although the Applicant supported the Amendment in principle, she objected to the implementation date for the change and challenged the Superintendent’s decision to register the Amendment on the basis that it reduced both the amount and the commuted value of her pension within the meaning of subsection 14(1) of the Pension Benefits Act (PBA).

In the view of the Financial Services Tribunal (FST), the legislative intent was that the assessment of the Amendment on the amount of the pension must be made on the date the decision was made, taking into account the information reasonably available to the plan sponsor at the time. The FST determined that the “aggregate” impact of the Amendment was that the OM and the NM were actuarially equivalent and that “over time” they were expected to produce the same level of protection. In the FST’s view, a commuted value cannot be calculated “at large”; it requires the identification of a specific date upon which the calculation should be made. The FST determined that the appropriate date upon which to measure the effect of the Amendment on the commuted value of the Applicant’s pension was the date the Amendment was passed. On that date, the OM and NM were actuarial equivalents.

On the basis of the overall evidence, the FST concluded that the Amendment did not have the effect of reducing the commuted value of the accrued pension within the meaning of paragraph 14(1)(b) of the PBA. In reaching this conclusion, the FST noted the Applicant’s suggested approach to calculating both the amount and the commuted value of pension for purposes of subsection 14(1) would leave plan administrators in the untenable position of being unable to pass an amendment like the one in the case at hand (making a change that all parties agreed was desirable) without any degree of confidence that the amendment was valid.

Hydro One v. the Ontario Superintendent of Financial Services

Hydro One underwent a series of restructuring events in 2002, resulting in a number of layoffs. The Hydro One Pension Plan (Plan) contained a subset of employees belonging to the Management Compensation Plan (MCP). The MCP contained 379 members, 79 of whom were terminated, while the total Plan contained 3,913 active members. At termination, the MCP members did not receive any pension enhancements.

Hydro One did not declare a partial wind-up. However, several MCP members sought a partial wind-up based on the 79 layoffs. While the Superintendent of Financial Services (Superintendent) declined to make an order, the Tribunal found that the MCP group met the partial wind-up threshold in subsection 69(1)(d) of the Pension Benefits Act (Act), which requires a wind-up when a “significant number of members” are terminated. Hydro One appealed and the Divisional Court dismissed the appeal. Hydro One again appealed.

The Ontario Court of Appeal unanimously dismissed Hydro One’s appeal, agreeing with the Divisional Court on the standard of review and the substance of the decision. The Court found that the “significant number of members” at issue could be determined with reference to a subset of members rather than the entire membership of a pension plan.

The Court outlined numerous factors that should be considered in determining if a subset analysis is appropriate. In the present case, the merger targeted a subset of older workers near retirement. The Court held that this was a clear and rational basis for the Tribunal to focus its significance analysis on the subset, given that pension security was an immediate and tangible concern for these employees.

McNaughton v. Saskatchewan Government and General Employees’ Union [2010] S.J. No. 4 2010 SKQB 5

The applicant employees of the respondent Saskatchewan Government and General Employees’ Union (SGEU) were active members of a defined benefit (DB) pension plan administered by SGEU (Plan). Historically, the members contributed nine percent of covered salary to the Plan, which rose incrementally to 19.6 percent by November, 2009. The respondent notified Plan members it intended to raise employee contributions to 54.25 percent of earnings effective January 14, 2010 in order to address a solvency deficiency. The applicants opposed the increase, stating that a 54.25 percent contribution rate was unreasonable and would cause “impossible financial situations” if the respondent implemented the proposed deductions from their salaries.

The Saskatchewan Court of Queen’s Bench (Court) issued an interim injunction restraining the respondent from deducting contributions from the applicants above 19.6 percent unless and until the respondent obtains a written waiver and the approval of the Minister of National Revenue (Minister). The Court noted that the applicants met the test of a strong prima facie case to prove that the contribution increase was not reasonable. The Court cited an affidavit sworn by an employee of the respondent who was directly responsible for the administration of the Plan, who acknowledged that a 54.25 percent contribution rate “is unrealistic and unsustainable and will potentially result in significant resignation of staff.” The Court also noted evidence that the Minister informed the respondent that it would not consider the 54.25 percent increase as reasonable.

Imperial Oil Limited v. Superintendent of Financial Services, Dyer, Rose, et al. Decision No. P0341/P0343/P0344-2009-1

Imperial Oil Limited (IOL) engaged in three partial wind-ups in respect of its pension plans. The Financial Services Commission of Ontario (FSCO) advised IOL that annuity purchases would be required for those members who had not elected a commuted value transfer out of the plan. IOL advised FSCO that some members had elected to leave their pension in the Plan, and those members were offered benefits such as ad hoc increases and retiree benefits that were not provided to individuals who elected an annuity purchase. FSCO issued a Notice of Proposal (NOP) proposing to require IOL to purchase annuities for all former members or spouses affected by the partial wind-ups who did not elect to transfer their entitlements out of the plans.

A hearing was held before the Financial Services Tribunal (Tribunal) and the Tribunal concluded that IOL could offer the option of pensions from the on-going plan and that this was not precluded by the Pension Benefits Act (PBA). The Tribunal reasoned that the plan members in this case could lose valuable benefits if they severed their ties with the pension plans. The Tribunal further reasoned that its decision was supported by the plan members, who were overwhelmingly in favour of continued plan membership.

Re Indalex; 2010 ONSC 114

Indalex Canada commenced proceedings under the Companies’ Creditors Arrangements Act (CCAA) on April 3, 2009. Pursuant to a July 2009 Order, the Ontario Superior Court of Justice (Court) approved a sale of Indalex Canada’s assets, with the assets from the sale to be paid to a number of claims. At the hearing to approve the sale, former Indalex Canada executives and the United Steel Workers claimed that the sale funds were subject to a deemed trust in respect of unfunded pension liabilities in connection with two pension plans, the Executive Plan and the Salaried Plan. All required amounts and contributions had been made to the Executive Plan as of the date the order approving the sale was made, although there were additional annual deficiency payments to be made.

The Court examined the deemed trust provisions in subsection 57(4) of the Pension Benefits Act (PBA) as well as the wind-up payment requirements in section 75 of the PBA. Following this examination, the Court concluded that there were no amounts “due” or “accruing due” to the plans, so no deemed trust arose. The Court also referred to the Ontario Court of Appeal decision in Re Ivaco Inc., which stated that provincial legislation cannot alter the priority scheme under federal bankruptcy legislation by creating a deemed trust.

John Kovacs v. Arcelor Mittal Montreal Inc. 2010 HRTO 303 (CanLII)

Arcelor Mittal (Employer) acquired Stelwire and closed one of its plants. The Employer negotiated an early retirement incentive program (Program), enhanced severance packages and preferential hiring provisions with the union bargaining agent (USWA). The Program was available to employees who had either 30 or more years of service, were older than 55 with 15 or more years of service, or were at least 52, but less than 55, and had 25 or more years of service. One employee affected by the plant closure applied to the Human Rights Commission contesting the Program on the grounds that it discriminated on the basis of age. The affected employee was 47 years of age with 27 years of service and accordingly did not qualify for the Program.

The Human Rights Tribunal (Tribunal), in a case conference decision, found that the Program did not infringe on the Human Rights Code (Code). The Code states that the discrimination in employment provision is not infringed by operation of an employee benefit or pension plan that complies with the Employment Standards Act (ESA). The ESA generally prohibits differential treatment under a benefit plan on account of age, but the ESA Regulations state that differentiation on account of age is permitted for voluntary early retirement programs. Accordingly, the Tribunal found that since the Program complied with the ESA, there was no infringement of the Code.

Kidd v. Canada Life, 2010 ONSC 1097

Canada Life negotiated a settlement with its pension plan members regarding several pension plan partial wind-ups, involving a court application for a variation of trust. A preliminary issue was raised regarding the consent required by spouses of pension plan members. Canada Life sought an order declaring that the Court had the jurisdiction to consent to the pension trust variation on behalf of the spouses of certain plan members.
Canada Life specifically wanted the Court to consent on behalf of spouses of active and deferred vested members of the pension plan who had not yet begun to receive benefits, and on behalf of spouses of retired members of the pension plan where the pension was not being paid on a joint and survivor basis.

The Court granted the order sought by the applicants, finding that the spousal groups at issue could have consent granted by the Court. The Court held that it could not consent on behalf of any spouses who were designated beneficiaries, or who had a family law court order giving them rights to the member’s pension, as those spouses had an existing contingent interest in the pension plan assets, rather than a mere expectancy in the pension. However, where a spouse had not been made the designated beneficiary or been subject to a family law court order, he or she only acquired a pension entitlement upon the first installment of the member’s pension becoming due. Prior to the pension coming due, the spouse’s interests were only a possibility or an expectancy, and could be subject to court consent.

The Court also considered the issue of a spouse named a beneficiary in a will but not a beneficiary in the pension plan. The Court held that this group has “only a hope” of entitlement, not an expectation or a contingent interest, unless the plan member became mentally incompetent of changing his or her will.

Lomas v. Rio Algom Ltd., 2010 ONCA 175

Alexander Lomas, a retired Rio Algom employee and member of the pension plan (Plan), initiated legal proceedings against his former employer and Plan sponsor, Rio Algom. Mr. Lomas alleged that Rio Algom unilaterally amended the Plan to the detriment of members, contrary to its terms, and in breach of trust, contract and fiduciary duty. He applied to Ontario Superior Court of Justice (Court) for an order directing that Rio Algom apply under section 68 of the Pension Benefits Act (PBA) for the partial wind-up of the Plan and the distribution of assets, including surplus assets. As the legal proceeding progressed, the Supreme Court of Canada issued its decision in Buschau v. Rogers Communications Inc. (Buschau), which held that courts do not have the authority to order the wind-up of a pension plan when asked by plan members. Lomas continued his proceeding despite the Buschau decision. He argued that although the court could not order the wind-up, it could nonetheless order the employer to wind-up the Plan. The motions court allowed Lomas to continue his claim on the basis of the indirect wind-up argument, and the Ontario Divisional Court upheld the decision in 2008. Rio Algom appealed to the Ontario Court of Appeal (Court).

The Court allowed Rio Algom’s appeal, overturning the decisions of the Divisonal Court and the motions judge and finding that the court could not order the employer to wind-up the Plan. The Court agreed with the dissenting judge from the Divisional Court decision, finding that plan members could not compel the wind-up of a pension plan, nor could they seek a court ordered wind-up. The Court’s powers were limited to imposing restitutionary measures if Rio Algom were to abuse its powers as the Plan’s administrator. In those circumstances, the court could impose a constructive trust over the assets or other restitution. Otherwise, wind-up orders must originate from the pension regulator.

Re Nortel Networks

Nortel Networks Corporation and a number of related companies (collectively, Nortel) obtained protection under the Companies’ Creditors Arrangement Act on January 14, 2009. Nortel provided its employees and retirees with pension, medical, dental, life insurance, long-term disability (LTD) and survivor benefits. The pension benefits were provided through two plans (Pension Plans) while the other benefits, with the exception of survivor termination benefits, were provided through a Health and Welfare Trust (HWT).

Following negotiations, a Settlement Agreement was reached between Nortel, the Monitor, representatives of former Nortel employees and LTD recipients, representative settlement counsel and the CAW. Highlights of the $57 million Agreement included funding for medical, dental, life insurance and survivor income benefits for former and LTD employees and other eligible recipients (as appropriate) on a pay-as-you-go basis until December 31, 2010, and also a clause that would require ranking the allowable pension and HWT claims with claims of other unsecured creditors.

The parties applied to Court for approval of the Settlement Agreement. Most parties supported the Settlement Agreement, and the Superintendent of Financial Services (Superintendent) indicated that it would not oppose an order approving the Settlement Agreement. However, groups representing unsecured Nortel creditors (UCC), noteholders, including numerous Canadian and U.S. creditors, objected to the Settlement Agreement on the basis of the inclusion of the clause that would ranked the priorities, which they argued was prejudicial to non-employee unsecured creditors. In addition, 37 LTD employees objected to the Agreement’s proposed release of directors and others from liability, and because they believe actionable breaches of trust occurred in relation to the HWT.

The Court objected to the inclusion of the disputed clause, finding that it introduced a considerable amount of uncertainty into the Settlement Agreement and provided the possibility of its “fundamental alteration.” The Clause would have the effect of negating the concessions the former and LTD employees made in exchange for the priority of certain claims provided in the Settlement Agreement. The Court concluded that it was unreasonable to require creditors to make concessions to these individuals in the Settlement Agreement, while having the terms of that Agreement subject to the uncertainty of future legislation. 

Telecommunication Employees Association of Manitoba Inc. et al. v. Manitoba Telecom Services Inc. et al., 2010 MBQB 11 (CanLII)

Manitoba Telecom Services (MTS) was privatized in the late 1990s, which involved the privatization of the statutory pension plan (Old Plan) to a new plan (New Plan). The legislation enabling the pension transfer included assurances that the benefits under the New Plan would be equal to the benefits under the Old Plan and that any initial surplus from the Old Plan would be used for the benefit of the plan members and not by MTS to reduce its costs or share of contributions to the New Plan. The members of the Old Plan were deemed to consent to the transfer, pursuant to the legislation.

In order to ensure equivalency between the benefits under the New Plan and the Old Plan, the legislation required that the provincial auditor (Singleton) appoint an independent actuary to value the benefits under both plans. The actuary (Fox) concluded that the benefits were equivalent in value. However, the plan members disagreed with his conclusion and initiated legal proceedings against MTS, Singleton and Fox. The plan members alleged that Fox did not act independently and was in breach of his duty to act fairly to the employees. Singleton and Fox successfully removed themselves from the proceedings in 2007.

The allegations related to the actuarial conclusions continued against MTS. The Manitoba Court of Queen’s Bench (Court) declared that Fox’s opinion on actuarial equivalency was invalid and of no force and effect and ordered MTS to return $43 million plus interest to the pension fund.

The Court held that Fox, as the independent actuary, owed a duty of procedural fairness to the members and that they were owed a higher standard of fairness than they received. The Court found that the provincial auditor’s office and MTS wrongfully interfered with the actuarial process, which likely influenced the Fox’s opinion on equivalency.

The amount MTS was ordered to return to the New Plan represented the initial surplus that was intended to be used solely for enhancing benefits such as cost of living adjustments (COLAs). Although the Court found that the members were entitled to the initial surplus, it found that they were not entitled to share in the ongoing surplus in the New Plan. The Court stated that MTS was “solely responsible for unfunded liabilities … they should have ultimate control over the use of ongoing surplus.” Accordingly, the members would not have access to surplus in the New Plan.

Thomy Nilsson et al. v. The University of Prince Edward Island et al. PEI Human Rights Commission, Files 1352-05, 1357-05 and 1378-05

Several employees of the University of Prince Edward Island (UPEI) were terminated at age 65 pursuant to a mandatory retirement program that UPEI said was part of its pension plan. The employees filed a complaint with the Human Rights Commission (Commission) alleging that UPEI discriminated against them on the basis of age contrary to the province’s Human Rights Act (Act). However, as the Act states that the provisions relating to age discrimination “do not affect the operation of a genuine retirement or pension plan,” UPEI argued that its mandatory retirement policy was defensible as part of the pension plan. The Commission initially dismissed the complaints, but permitted reconsideration and appointed a Human Rights Panel (Panel) to inquire further into the complaint.

The Panel found that the policy in the UPEI pension plan was discriminatory and not justified by the provision of the Act regarding retirement and pension plans. The Panel reasoned that the mandatory retirement policy did not actually form part of the pension plan, but was a policy external to the pension plan. Upon a review of the pension plan, the Panel found that while it contained a normal retirement age provision at age 65, it also contained several other provisions that contemplated postponed retirement pursuant to the employee’s “wishes.” The Panel also analyzed the pension plan and the provision in the act that permits mandatory retirement and found that, based on an actuary’s testimony, mandatory retirement did not affect the operation of the pension plan.

Toronto Transit Commission v. The Minister of National Revenue 2010 FCA 33 (CanLII)

Two Toronto Transit Commission (TTC) employees were in receipt of long-term disability (LTD) benefits through the TTC administrative services only (ASO) plan administered by Sun Life. The terms of the plan entitled employees to a percentage of wages as disability benefits. Employees in receipt of LTD benefits are considered inactive employees on a personal leave of absence from the TTC, retaining seniority and other TTC benefits.

The LTD benefits were paid to employees without any Canada Pension Plan (CPP) deductions. The Minister of National Revenue (MNR) assessed the employer and determined that monthly disability payments constituted remuneration for pensionable employment and therefore were subject to an employer’s contribution under the CPP. The TTC appealed to the Tax Court of Canada, which dismissed the appeal. The TTC appealed to the Federal Court of Appeal (Court).

The Court held that the TTC was not required to deduct and remit CPP contributions from the LTD benefits of its ASO plan. The Court reasoned that the wording of the CPP legislation does not consider LTD payments under an ASO plan as pensionable earnings, nor does it include employees who are not actively employed in its definition of “employment.” Rather, the Court held that employment involves an activity, not just the status of being employed. The Court suggested that the CPP legislation could be amended if the government intended for these LTD payments to attract CPP deductions.

*Karen DeBortoli, Leanne Hull and Dean Taylor of Towers Watson and Gareth Gibbins of OMERS Administration Corporation

Karen DeBortoli, Leanne Hull and Dean Taylor*

Federal

Consultation on Retirement System

On March 24, 2010, the Federal government released a consultation paper on Canada’s retirement income system. Ensuring the Ongoing Strength of Canada’s Retirement Income System (Consultation Paper) focuses on Canada’s public and private retirement income systems and is intended to provide background on the retirement income system in Canada, an overview of the current research on the issues, a description of the existing proposals, as well as soliciting the views of Canadians. Written submissions are accepted until April 30, 2010 and public consultations will be held across the country throughout the spring.

Much of the Consultation Paper describes Canada’s current retirement income system, including a review of the existing research into retirement income issues and existing proposals for reform. Canada’s three-pillar retirement income system is described as including the first pillar of old age security (OAS) and guaranteed income supplement (GIS) systems, the second pillar of Canada/Quebec Pension Plan (CPP/QPP) and the third pillar of private retirement savings arrangements. The Consultation Paper also includes a review of existing research on retirement income levels, poverty rates, and income replacement and discusses three broad approaches to pension reform as establishing a government, sponsored, voluntary defined contribution (DC) plan, expanding the mandatory CPP/QPP system; and reforming the regulatory framework to provide increased flexibility for private sector DC plans and increased opportunities for private savings.

Federal Budget Legislation 

On March 29, 2010 the Federal government introduced An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures (Bill C-9). Part 9 of Bill C-9 contains amendments to the Pension Benefits Standards Act, 1985 to:

• Require that an employer fully fund benefits in the event of a full plan termination;
   
• Authorize the use of letters of credit, if certain conditions are met, to satisfy solvency funding obligations in respect of an ongoing pension plan;
   
• Permit a pension plan to provide for variable benefits, similar to those paid out of a Life Income Fund, in respect of a defined contribution provision;
   
• Establish a distressed pension plan workout scheme whereby employer, member and retiree representatives can negotiate changes to the plan’s funding requirements, subject to Ministerial approval;
   
• Allow the Superintendent of Financial Institutions (Superintendent) to replace a plan’s actuary if the Superintendent is of the opinion it is in the best interests of members or retirees;
   
• Provide partial plan terminations can only be declared by the Superintendent;
   
• Provide for the immediate vesting of members’ benefits; and
   
• Require the provision of additional information available to members and retirees following a plan termination of a pension plan.

Pension plans are also affected by Part 2 of Bill C-9, which amends the Excise Tax Act to provide for a new GST/HST rebate system for employer-sponsored pension plans. 

Surplus Limit Update

The Canada Revenue Agency Registered Plans Directorate has added an item to its Frequently Asked Questions (FAQ) on the proposed surplus threshold increase. The question refers to the proposed increase to the surplus threshold under the Income Tax Act (ITA) from 10 percent to 25 percent, and asks when the proposed limit can be reflected in actuarial valuation reports. The proposal is contained in Bill C-9, the bill that would implement a number of Federal budget initiatives, and the surplus threshold increase is proposed to be effective for service costs for 2010 and subsequent years. CRA’s response is that an actuarial valuation report with an effective date of December 31, 2009 or later could reflect the higher surplus threshold in determining eligible contributions for the purposes of the ITA, despite that the measure has not yet completed the legislative process.

OSFI Solvency Information Returns 2010

The Office of the Superintendent of Financial Institutions (OSFI) has announced the 2010 Solvency Information Return (OSFI 575 Form). The OSFI 575 Form is required for federally registered defined benefit (DB) and combination type plans. Plan administrators completing the form are required to respond to questions regarding contribution holidays and annual rates of return for plans with a fiscal year end between October 1, 2009 and September 30, 2010. The form is due the later of 45 days after the plan year-end date, or February 15, 2010.

Health Canada Re-classifies Select Natural Drugs and Food Products

Health Canada has historically regulated over-the-counter (OTC) natural health products as either drugs assigned a Drug Identification Number (DIN) or as food. Effective January 1, 2010, the Natural Health Products Regulation (Regulation) now requires many OTCs to obtain a license as a Natural Health Product (NHP) and a Natural Health Number (NHN). Affected products include many herbal and homeopathic remedies, vitamins, minerals, probiotics, and other products that have medicinal ingredients and intended uses. Depending on the individual product, some OTCs and food products have been re-classified as NHPs, while other OTCs have retained their status as drugs with a DIN.

Alberta 

Delays to Prescription Drug Program Amendments

Alberta Health and Wellness has announced that changes it proposed last year to its prescription drug coverage program for seniors will be delayed. Instead, the existing program will continue indefinitely, until the legislative and regulatory changes are made to enable the newly proposed system. The new drug program, which was scheduled to take effect July 1, 2010, would have replaced the current premium-free universal plan with an optional plan with co-payments and monthly premiums based on taxable income. The News Release issued by Alberta Health and Wellness does not indicate whether the promised legislative and regulatory changes will reflect the original proposal, or when the changes will be introduced.

British Columbia

Consultation Paper Issued on Retirement Income

The British Columbia Minister of Finance has released a consultation paper seeking public input “on ways to strengthen the pension system and expand pension coverage for the majority of workers currently without occupational pension plans.” This consultation is the latest development in a federal-provincial review of Canada’s pension system. Two possible approaches for expanding the Canada Pension Plan have been outlined along with other measures, such as changes to income tax and pension standards legislation.

Manitoba

Pension Reform Finalized

Manitoba has finalized its long-awaited pension reform statute and regulations. The majority of provisions in the Pension Benefits Amendment Act (Act) and Pension Benefits Regulation (Regulations) will be effective May 31, 2010, but plan sponsors have until December 31, 2011 to make amendments related to the legislative changes. Among the changes is the new requirement that all plans with over 50 members, other than multi-unit plans, jointly trusteed plans, or simplified money purchase plans, must be administered by a pension committee. Some of the other changes include immediate vesting, new commutation and portability rules, changes to early and postponed retirement, phased retirement, rules for surplus withdrawal and wind-ups. 

Nova Scotia

Nova Scotia Releases Pension Discussion Paper

On March 5, 2010, the Nova Scotia Department of Labour and Workforce Development (Labour) released a Discussion Paper on Pensions (Discussion Paper). The Discussion Paper is in response to recommendations made with respect to the January 27, 2009 Pension Review Panel (Panel) Report Promises to Keep. The Discussion Paper reviews 30 recommendations made by interested stakeholders, including issues regarding funding formula and the impact of pension legislation changes on the near-public sector. Submissions were accepted until April 15, 2010.

Ontario

Ontario Drug Reform

On Thursday, April 8, the Ontario Minister of Health and Long Term Care issued the Proposed Regulation Amending Reg. 935 Under the DIDFA (Proposed DIDFA Regulation) and the Proposed Regulation Amending O.Reg. 201/96 Under the ODBA (Proposed ODBA Regulation). The Proposed DIDFA and ODBA Regulations, as well as parts of Creating Foundations for Jobs and Growth Act (Bill 16), make a number of changes to the drug system in Ontario for public and private payers, including capping generic drug prices and reducing professional allowances. The public plan will also see adjustments to fees for drug dispensing and other services.

New Workplace Violence and Harassment Provisions in Ontario

On December 15, 2009 the Ontario government gave Royal Assent to Bill 168, An Act to amend the Occupational Health and Safety Act with respect to violence and harassment in the workplace and other matters. Bill 168 adds new provisions to the Occupational Health and Safety Act (OHSA) requiring employers to implement programs and procedures designed to address and prevent workplace violence and workplace harassment. Bill 168 includes definitions of the terms workplace harassment and workplace violence, which is defined to include threats of violence against an employee. Under Bill 168, employees will be able to refuse work in circumstances where workplace harassment or violence is likely to endanger the employee. Bill 168 will come into force six months after Royal Assent or by June 15, 2010.

Status of Ontario RRSP Protection Legislation

On February 24, 2010, the Ontario Legislature ordered Bill 96, Registered Retirement Savings Protection Act, 2009 (Bill 96) for Third Reading after amendments. Bill 96 is designed to protect Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and deferred profit sharing plans (DPSPs) from certain creditors.Bill 96 exempts “all rights, property and interests of a planholder in a registered plan” from garnishment, execution seizure or attachment by most creditors. The exceptions are for orders made regarding the separation of property in matters pursuant to the Family Law Act or similar legislation, and to support orders enforced under the Family Responsibility and Support Arrears Enforcement Act, 1996.

Quebec

Quebec Releases Draft Funding Regulations for Municipalities and Universities

On December 23, 2009 the Regulation respecting the funding of pension plans of the municipal and university sector (Draft Regulation) was published in the Gazette Officielle du Quebec. The Draft Regulation provides special funding measures for municipalities and universities, and once implemented it will be retroactive to December 31, 2008. Submissions on the Draft Regulation were accepted until February 5, 2010.

*Karen DeBortoli, Leanne Hull and Dean Taylor of Towers Watson and Gareth Gibbins of OMERS Administration Corporation
 

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 December, 2009 the following items have been added to the pages noted below in the Pensions section of the FSCO website. The legislation, 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 Pensions page.

The Legislative and Regulatory Changes page has been updated to include the following:

Bill 236, the Pension Benefits Amendment Act, 2010 was introduced and received first reading on December 9, 2009, was carried over to the new session of the Legislature, was before the Legislature for second reading on March 4, 2010, and was referred to the Standing Committee on Finance and Economic Affairs. Bill 236 was reported by the Standing committee as amended, and ordered for third reading on April 19, 2010

Bill 16, Creating the Foundation for Jobs and Growth Act, 2010 (the Budget Bill) was introduced and received first reading on March 25, 2010. It received second reading on April 15, 2010. This Bill contained provisions in Schedules 8 and 24 which amend the Financial Services Commission of Ontario Act, 1997 and the Pension Benefits Act. The majority of the provisions in these schedules deal with the authority to implement a multi-jurisdictional agreement that will provide a framework for regulating multi-jurisdictional pension plans. These provisions come into force on proclamation. Other minor changes to the PBA:

a) amend subsection 82(5) to permit the Lieutenant Governor in Council to impose terms and conditions on any grants made to the PBGF (this amendment will be retroactive to March 25, 2010);

b) amend subsection 115(6) so that it will allow a funding regulation to be retroactive to December 31, 2009; and

c) amend subsection 115(7) to extend the temporary authority to make retroactive regulations under subsection 115(6) from June 30, 2010 to June 30, 2011.

O. Reg. 477/09 which was filed and became effective on December 11, 2009 added the non-registered supplemental pension plan for Justices of the Peace established by Order in Council 1902/09 to the list of plans that are exempted from the application of the Pension Benefits Act.

The FSCO - Stakeholder Consultations page includes the following additions:

• Update on the Improving Pension Regulatory Services (IPRS) Project;
   
• Consultation Paper on FSCO’s Proposed Solutions, Service Goals and Processes for Defined Benefit Pension Applications; and
   
• Consultation on new policy on Management and Retention of Pension Records by the Administrator.

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

• Amendments to the Pension Benefits Standards Act, 1985 (PBSA) have been introduced—See Part 9 of Bill C-9 tabled in Parliament on March 29, 2010;
   
• Manitoba News Release on March 26, 2010 announced changes to Manitoba’s pension legislation;
   
• Alberta announced a public consultation on strengthening the retirement income system and expanding pension coverage for those not covered by a workplace pension. Deadline for submissions is April 16, 2010;
   
• Nova Scotia released a discussion paper on March 5, 2010 asking for input on private sector pension plan management. Deadline for submissions is April 15, 2010;
   
• British Columbia released an online consultation on February 2, 2010, asking for ways to strengthen the pension system and expand pension coverage. Deadline for submissions is April 1, 2010; and
   
• CAPSA Consultation Update – CAPSA has extended the comment period on its consultation paper The Prudence Standard and the Roles of the Plan Sponsor and Plan Administrator in Pension Plan Funding and Investment to April 30, 2010.

The Pension Forms page has been updated to include the following:

• 2010 Pension Unlocking Forms; and
   
• 2010 Financial Hardship Unlocking Forms,

Pension Policies page has been updated to include the following:

• Policy L200-408 includes the 2010 Schedule 1 LIF maximum annual income payment table; and
   
• Policy L200-409 includes the 2010 Schedule 1.1 LIF maximum annual income payment table.

The Plan Administrator Questions Answered page has been updated to include FAQs on the following topics:

• Purchase of Annuities on Partial Wind Up; and
   
• Effective Date of a Plan Amendment that Reduces Benefits.

The Changes to the Life Income fund (LIF) – FAQ page has been updated to add the following;

• Updated LIF Changes (March 1, 2010).

Miscellaneous pages include the following additional information:

• A new page titled: New Electronic Filing Option for Annual Information Returns was added to provide information about the new electronic filing option for AIRs that was launched by FSCO on March 31, 2010; and
   
• FSCO’s sixth annual report on DB pension plan funding has now been posted
   
• In February 2010 the 2009-10 pension assessment invoices were mailed to all pension plan administrators

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. The Court released its decision on January 11, 2010, dismissing the appeal. No application for leave to appeal to the Supreme Court of Canada has been filed. 

4. 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. No date has been set for the hearing of the appeals.

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, December 9, 2009, and will continue on June 1, 2010.

2. 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, March 26, 2009, December 9, 2009, and will continue on June 1, 2010.

3. 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, 2009 at which time the Tribunal will dealt with party status applications (which were granted) and the Applicant’s motion to have the matter proceed by way of a written hearing only (which was denied). The production motion did not proceed because there were no production issues between the parties. The hearing was held on January 18, February 8 and 9, 2010. The panel released its decision on March 26, 2010 and dismissed the hearing request and upheld the Superintendent’s registration of the amendment. On April 7, 2010, the Applicant filed with the Tribunal a Request for Review of the March 26, 2010 decision. The Tribunal has not yet released a decision concerning the Request for Review. 

4. 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 was held on February 23, 2010 and the panel reserved its decision. 

5. 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.

On January 6, 2010, the Superintendent issued a Notice of Proposal to partially wind up the Plan under section 69(10(d) of the PBA. Imperial Oil requested a hearing.

A conference call was held on March 23, 2010 and it was agreed to convene a pre-hearing conference on April 12, 2010. At that pre-hearing conference, it was agreed to consolidate the two proceedings and to hear them together as one. Hearing dates are to be set for ten days in October and November 2010.

6. 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, February 18, 2010 and then to May 25, 2010 to accommodate settlement discussions between the parties. 

7. 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 released its decision on January 27, 2010. The panel dismissed the request for hearing and upheld the Superintendent’s Notice of Proposal. The CAW-Canada Local 2007 served a Notice of Appeal to the Divisional Court on February 25, 2010. No dates have been set for the hearing of the appeals.

8. 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 was held on February 3, 2010 and the settlement reached between the parties was approved and incorporated into an Order.

9. Residential Painting Contractors Association

On May 20, 2009, the Superintendent issued a Notice of Registration of Amendment to the International Union of Painters and Allied Trades Province of Ontario Pension Plan. The Residential Painting Contractors Association requested a hearing in respect of the Notice of Registration. A pre-hearing conference was held on December 4, 2010. The Trustees of the Plan brought a preliminary motion challenging the jurisdiction of the Tribunal to hear the matter. The preliminary motion was heard on February 16, 2010. The panel released it decision on the motion on February 25, 2010. The panel dismissed the preliminary motion. A continuation of the Pre-Hearing Conference is scheduled for May 19, 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.

A sentencing hearing was held on April 6 and 7, 2010. On April 7, 2010, the Court issued its sentence. The Trustees were each fined $18,000 for a total collective fine of $162,000 plus victim fine surcharge.

2. Honeywell ASCa/Honeywell Limited

On February 1, 2010, Superintendent laid 55 charges involving 11 pension plans against Honeywell ASCa and Honeywell Limited in their capacity as pension plan administrator. The charges alleged that the defendants failed to comply with various mandatory filing requirements under the PBA. The first court appearance with respect of the charges was on February 24, 2010 and the matter was put over to April 7, 2010. On April 7, 2010 the matter was again put over to May 26, 2010 to be spoken to.