Canada: Pension Misrepresentation Claims On The Rise In Canada

Last Updated: January 18 2012
Article by David A. Crerar, Andrew Harrison and Markus F. Kremer

Most Read Contributor in Canada, November 2017

Pension misrepresentation claims against companies and actuarial firms are on the rise. Rare in Canadian law until recently, the full exposure posed by such claims remains unknown, given the fact that few cases that have yet come to trial. Any company with a pension plan, however, may be sitting on an unknown and enormous time-bomb of litigation and liability.


Pension misrepresentation claims pose a quadruple threat to companies.

First, because of the numbers of current and retired employees that are potential plaintiffs, and because of the amounts of money involved, potential exposure is enormous.

Second, errors in pension communications do not often surface until years later, often when employees approach their retirement and realize that for whatever reason – and a cynic may question whether the disparity genuinely flows from the pension communications or from a downturn in the marketplace – that the actual pension amount is not as envisioned. This creates special problems in defending such claims, as documents and witnesses disappear over time.

Third, such pension claims may lend themselves to class proceedings. While a single employee may not have the economic or emotional motivation or ability to bring a claim, where the claim arises from a communication made in identical form to multiple employees, a claimant or an entrepreneurial lawyer make seek to have the claim certified as a class action. On the other hand, where different communications are made to different employees, and where there may exist issues about whether it was reasonable for a given employee to rely upon the statements, however, a court is less likely to certify a claim as a class proceeding, on the basis that individual issues predominate over issues that are common to all members of the class.

Fourth, because a pension is of such importance to a retiree's life, and to society at large, there may arise a natural sympathy of a court towards such claimants, prompting a stringent scrutiny of statements made by the company which will generally be deemed more sophisticated and in a better position to carefully and accurately convey facts about the pension plan to its employees.


Any statement by a company or its actuaries to its employees may lead to a claim in misrepresentation. Group pension misrepresentation claims most frequently arise when the company gives its employees an option to switch to another form of pension plan, or to choose from one or more pension options. This may arise from an option given to an individual employee, or an option or conversion provided to all or many employees.

A key example is the offering by many Canadian companies to their employees the option of switching from an existing defined benefit plan to a defined contribution plan. Other companies unilaterally imposed a defined contribution plan on their employees.

Ironically, the companies that tried to do the right thing, and gave their employees an option, or provided the employees with an expansive educational programme about the pension options, may face greater exposure. In the inherently complicated area of pensions, it is not difficult for plaintiffs or their clever counsel to claim that certain phrases or graphs misled the plaintiffs into choosing a pension option that turned out to be unfavourable with perfect hindsight.

The companies' legal duties towards the employees in making such an offering are complicated and have not fully been settled by the Canadian courts. Where the company also acts as the administrator of the pension plan, it owes strict fiduciary duties to the employees in the plan with respect to the administrative aspects of the plan, such as calculating and awarding benefits. At the same time, the employees and employers have different interests with respect to the pension plan, and it is not inappropriate for the employer to consider and protect its own interests in offering or amending a pension plan.

Courts have accordingly found that an employer wears two hats with respect to a pension plan, owing fiduciary duties when acting as administrator and owing a lesser duty of good faith – that may take into account the company's own best interests when acting as employer. But where a company provides pension information to its employees, it is still a legal gray zone as to which hat the employer is wearing, and what duties it will owe.


Companies considering amending the pension arrangements with their employees should carefully consider whether to do so and, if they do decide to proceed, must carefully consider the process and the communications to be presented. Communications must walk a fine line between providing too little or too simple information on one hand, and providing too much or too complicated information, on the other. An ideal information package will provide information to employees in both simplified bullet-point form and well as in more detailed form; in multiple formats of power-point presentations, brochures, and booklets. More advanced packages will allow employees themselves to use computer software to change investment return and other variables in order to decide whether the option is right for them. Employees should always be cautioned that market-based projections and other assumptions may well turn out very differently than presented. Assumptions must be identified and explained clearly. Complicated terms should be defined and explained. Employees should always be encouraged to seek independent advice, and a company may even consider subsidizing visits to an independent actuary or financial advisor. Communications should contain repeated disclaimers, placed clearly and boldly in plain language, that employees should not rely upon the materials, and that such materials are provided only as general illustrations, and that individual employees should seek individual advice based on their unique financial circumstances and retirement aspirations. Finally, companies should impose strict controls on who among management may make representations to employees about pensions, and those person should follow tightly-worded scripts.

At this point, it would be useful to distinguish between the employer providing information and facts to the members (which employers should do, albeit with caution), and providing advice (which employers should generally never do). At times, of course, there may be a very thin line between advice and information. Suffice to say, an employer faces greater exposure where it encourages an employee through advice to make certain pension decisions.

Where a potential lawsuit may be brought a decade or more later, it is unlikely that the oral evidence of witnesses at trial will be reliable or given much weight by the court. A court will be forced to rely heavily on the written documentation to determine the accuracy and adequacy of disclosure. It is thus important that a company making such an offering, or communicating about pensions to carefully preserve documents, particularly those that present clear warnings of the risks associated with the offered option.

Companies that have in past provided their employees with the option to switch between kinds of pension arrangements should discreetly evaluate what potential liabilities they may face, and consider whether they have an obligation to alert their insurer. It may be possible to reverse any adverse transfers that occurred, or to otherwise limit the losses that the employees or the company may face. As set out above, the company will want to locate and preserve documents (both paper and electronic) related to the offering of the option, and make sure that no such documents are destroyed through routine document disclosure policies. The company may well have obligations to proactively alert employees of deficiencies in the communications presented to them before making their decision if such errors are discovered at a later date. And it may be possible to amend the plan or otherwise make changes to mitigate potential losses before they occur.

Finally, companies should strongly consider pension issues before purchasing a company. A company may through no fault of its own face significant litigation based on communications and mistakes made by the long-departed employees of an acquired company. It would be prudent to conduct, where possible, due diligence on all past pension offerings and pension communications. Where possible, an acquiring company may seek representations, warranties, and indemnities concerning past pension representations (as well as concerning the administration and funding of any pension plans).


As those in the baby boomer demographic retire in these troubled economic times, pension claims will certainly rise in the immediate future. Companies would be well advised to investigate potential liability now, rather than when they are first served with a lawsuit.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions