Canada: Supplemental Pension Plans Should Be Read Together With Their Underlying Registered Pension Plan

In a recent decision, the Ontario Court of Appeal (the Court) upheld a motion judge's interpretation of the plain meaning of the pension documents and denied a former employee's claim to an unreduced pension at 62.

Facts:

Mr. Creber, a senior VP and CFO of Revios Canada Ltd. (the Company), was terminated in 2006 at age 52. While employed by the Company, Mr. Creber was a member of its registered pension plan (the Plan) and Executive Supplementary Pension Agreement (the ESPA). The Company started an action in which it sought a declaration that Mr. Creber was not entitled to an unreduced pension at 62 under either the Plan or the ESPA. Mr. Creber defended the action and counter claimed for the benefit. The motion judge granted the declaration and M. Creber appealed. Mr. Creber argued that the provision of the ESPA which provided an unreduced pension at 62 to employees who had taken "early retirement" applied to him, even though under the Plan he was only eligible for a deferred pension (which he could have started receiving at 55). Mr. Creber advanced that, as "early retirement" was not defined in either the Plan or the ESPA, his right under the Plan to receive his deferred pension before the "normal retirement date" of 65, created another "early retirement date", in addition to the right to retire at age 62.

Decision:

In rejecting Mr. Creber's interpretation of the Plan and ESPA, the Court decided that the various provisions of pension plan documents must not be interpreted in isolation, but in a manner that takes the entire agreement into account. The Court noted that the ESPA by it very name is supplementary to the Plan and is thus to be read in conjunction with the Plan which is the "principal pension document". Starting its analysis with the Plan, the Court ruled that at 52, Mr. Creber was not eligible for retirement under the Plan; rather the Plan provided him with a deferred pension commencing when he turned 65, or an actuarially equivalent pension starting at age 55 or later. As Mr. Creber was not entitled to an unreduced pension at 62 under the Plan, the Court ruled that he was similarly ineligible under the ESPA; in giving the same meaning to "early retirement" in both Plan and ESPA, the Court concluded that the ESPA was not intended to create a right to retire which did not exist under the Plan.

Our views:

Supplementary pension arrangements should be drafted unambiguously and should be clearly subordinated to the registered pension plan text. Absent ambiguity, Courts will look at the plain meaning of pension documents and interpret both the supplementary plan and the registered plan together.

Revios is a helpful case for employers in that it stands for the proposition that supplementary pension plans should be subordinate to and read together with the underlying registered pension plan.

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