After finding that an erroneous amendment to its pension plan
had the unintended effect of increasing benefits payable under the
plan to deferred vested members who elected to retire before their
normal retirement date, Amcor Packaging Canada, Inc. (Amcor)
successfully applied to the Ontario Superior Court to have
the plan text corrected.
In an effort to contain costs and minimize its long term
financial risks, Amcor amended its hourly and salaried plans, which
were both defined benefit (DB) plans, to close the DB component of
both plans to new hires and to add a new defined contribution
component to each plan for new hires. Restatements of the plans as
of January 1, 2005 were drafted by the plans' actuary (with
input from Amcor) and filed with the regulatory authorities. None
of these documents reflected an intention to otherwise amend the
benefit formula in the DB component of the plans.
Amcor subsequently replaced the actuarial firm which had been
involved in drafting the plan restatements and the new actuarial
firm discovered that the hourly plan restatement included a change
to the plan terms that had the unintended effect of increasing
benefits for members whose employment was terminated prior to age
55 and who subsequently elected to retire prior to age 65.
Upon discovery of this change, Amcor reviewed its records,
including e-mails, memoranda, meeting notes and resolutions of its
board of directors, and found nothing to indicate that it was
intended that benefits would be increased in such circumstances.
Further, following the hourly plan restatement, all information
communicated to plant managers, controllers and plan members
expressly stated that there were no changes to the existing DB
Amcor brought an application for rectification of the plan
Court Grants Amcor's Application
The Ontario Superior Court began by referring to its
jurisdiction to grant the "equitable remedy of
rectification" to correct a mistake in a legal document. The
Court referred to its earlier decision in Kraft Canada Inc. v. Pitsadiotis and
noted that rectification was available in the pension context. The
Court also stated that the fact that the pension plan was a
unilateral document (i.e. not negotiated with the employees) was
not an impediment to granting rectification.
The Court then examined the specific facts in the case and went
on to find that it was clear from considering the record "on
an objective basis" that an unintended mistake was made.
Specifically, the Court noted that it did not make sense for Amcor
to have closed the DB component to new hires, only to provide an
enhanced early retirement benefit to plan members who terminated
employment with the company before reaching age 55. In addition,
the Court held that there was no evidence of the employees having
relied on the mistake.
Thus, the Court concluded that Amcor was entitled to have the
plan text rectified in order to correct the earlier amendment made
This case provides a good reminder that all pension plan
amendments should be carefully reviewed to ensure that they do not
unintentionally alter other provisions in the plan. The
Amcor case also highlights the benefits of supplementing
any formal changes to plan documents with parallel documentation
describing the changes to the plan. In this case, Amcor was
successful in its bid to rectify the plan terms largely because it
had the evidence – in the form of board resolutions and plan
member communications – to convince the Court of its true
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