Canada: ROM Decision: When A Change In Pension Formula Is Not A Reduction Of Accrued Benefits


This case involved determining the scope of the amendment restriction under section 14(1)(a) of the Pension Benefits Act (Ontario) (the PBA) and a plan amendment power which essentially, as is common, incorporated the section 14(1)(a) of the PBA amendment restriction.

In summary, the Financial Services Tribunal (the Tribunal) found that section 14(1) (a) of the PBA "protects only the amount of pension that past service would generate at the time the plan is amended." Accordingly, an amendment which changes the benefit formula from a final average three to a final average five formula, with protection that the benefit would never be less than the benefits under the old formula at the date of the amendment, does not violate the PBA.

The Tribunal stated that "many if not most employers in Ontario" have similar amendment restrictions and therefore this decision is of broad application. This decision will apply to not only benefit formula changes but also to benefit freezes and conversions.

Actuarial Evidence

The Tribunal considered the actuarial evidence of the three actuaries for both the Applicant, The Royal Ontario Museum Curatorial Association, and the Respondent, The Royal Ontario Museum, and found it pointed to consensus among all three actuaries as follows.

The evidence of the Respondent's actuary, Ms Jill Wagman, was described by the Tribunal as follows:

"The essence of her evidence was that '[a]s understood by actuaries, ... the amount of pension accrued is ... a known amount that can be calculated at any point in time and does not require assumptions or estimations to be made in its calculation'. In her opinion, the calculation uses earnings and service as of the date the calculation is made; calculations of accrued pension amounts do not include either future service or future salary projections (Wagman Expert Report, p.7)... Ms Wagman distinguished the calculation of accrued pension amounts from what she saw as a very different calculation, the calculation of projected pension benefits."

The evidence of the Respondent's actuary, Paul Forestell, was to similar effect, and the Applicant's actuary, Marcus Robertson's report stated: "I do not have concerns about the information provided or the claims made in the Mercer [i.e. Forestell] Report (Robertson Report, p.2). He also indicated that he had no concerns about Ms Wagman's report with the exception of her discussion of the implications of a finding in the Applicant's favour (Robertson Report, p.3)".

The Positions of the Parties The Applicant argued that as The Royal Ontario Museum Pension Plan (the Plan) incorporated an earnings definition that requires the determination of earnings for purposes of calculating the retirement benefits to be calculated "prior to retirement", the accrued benefit earned as of December 31, 2009 must include a right to have the pension determined based on future earnings in respect of the pre-2010 service.

In contrast, the Respondent argued that the only amount of pension that had accrued prior to the amendment was the amount to which that member would be entitled if she retired or otherwise left the Plan as of that date, i.e., benefits are determined as of the effective date of the amendment, based on information current as of that date (service accumulated and earnings as of that date). Since the amendment in issue ensured that the pension earned by a member for service prior to January 1, 2010 will never fall below the amount calculated on that basis, the Respondent argued that the amendment does not violate the PBA or the Plan.

In support of its interpretation of "accrued benefits", the Respondent relied heavily on the argument that its approach was supported by the actuarial consensus "that according to standard actuarial practice, a member's 'accrued benefit' is calculated as of a specific date, based on information current as of that date." The Respondent contended that the implications of interpreting the term "accrued" in a manner that deviates from this standard practice would be "very broad and very drastic, requiring actuaries to recalculate plan values in a wide variety of contexts."

The Respondent also argued "that the 'pension promise' is contained in the whole Plan, not simply in the benefit formula. The whole Plan, the ROM argues, includes Section XIII (1), which contemplates modifications to the Plan, always provided that those modifications do not 'reduce accrued benefits'. To argue that the formula cannot be changed simply because it was in place at the time service was accumulated is to ignore the fact that the Plan gives the employer an explicit right to amend, limited only by its obligation to respect 'accrued benefits'."

Tribunal Analysis In its analysis, the Tribunal started by determining that, consistent with the Tribunal decision in McGrath v. Superintendent of Financial Services, OMERS Administration Corporation and OMERS Sponsors Corporation, it is necessary to make the determination of what is an accrued benefit at the effective date of the amendment based on the information available at that time.

The Tribunal then noted that, while the position of the Respondent was supported by the Canadian actuarial practice in evidence, as the issue as to what is accrued for purposes of section 14(1)(a) and the Plan amendment provision is a legal question, it would have been open to the Tribunal "to conclude that actuaries have been operating on an incorrect understanding of the meaning of 'accrued benefits', or that the legislature intended to use the term 'accrued' in s.14(1)(a) in a different sense than it is normally employed by pension actuaries." Importantly, however, the Tribunal did say that it "would not be quick to dismiss an actuarial consensus with respect to the meaning of an essentially technical term which the legislature has chosen not to define."

The Tribunal found that the Canadian case law, other than the Halliburton Group Canada Inc. v. Alberta decision, had found that "accrued benefits" are calculated on a point-in-time basis based on earnings and service at the time of the calculation.

The Tribunal then considered the Halliburton decision. The Tribunal found that the Alberta Court of Appeal held that the right to have a retirement pension calculated on the basis of a pre-amendment formula for prior service was an entitlement vested in plan members, and a plan amendment which purported to reduce the value of that entitlement was therefore void.

The Tribunal found material differences between the Alberta legislation and the PBA in relation to the restriction on plan amendment:

"[106] We are persuaded, however, that there are material differences between the statutory provisions governing Halliburton and those governing this case. Halliburton was decided under s.81 of the EPPA [the Alberta Employment Pension Plans Act], the relevant provisions of which are as follows:

(1) An amendment to a pension plan, or, where one plan has been adopted in place of another, the plan so adopted, may not reduce

(a) a person's benefits in respect of employment on or after the initial qualification date and before the date of the amendment or adoption of the other plan...

(2) Unless the plan so provides, subsection (1)(a) does not apply to that portion of the benefits that is based on the earnings of a member projected in relation to a period after the date of the amendment or adoption of the other plan.

[107] Two differences between s.81 of the EPPA and s.14(1)(a) of the PBA stand out as critical. First, the EPPA protects 'a person's benefits in respect of employment' prior to the amendment, while the PBA protects 'the amount of pension accrued in respect of employment prior to the effective date of the amendment'. As the Responding Parties have pointed out, s.81 of the EPPA does not refer to the 'amount' of the benefit, nor does it contain the crucial word 'accrued'. Second, the EPPA specifically addresses the issue of the projected earnings and provides that those earnings fall outside the scope of s.81(1)(a) of the EPPA; the PBA makes no reference to projected earnings.

[108] It appears to us that the Halliburton decision may ultimately turn on those differences, although we confess that we have not found all of the court's reasoning on the core issues easy to follow."


Accordingly, the Tribunal has found that, notwithstanding the Alberta Court of Appeal decision in Halliburton, neither the PBA, nor the Plan would prohibit the amendment in issue.

The Tribunal also found that the PBA and the plan text were not ambiguous and therefore the rule of contra proferentem, which states that, if there is an ambiguous clause in a contract or other legal document, it will be interpreted against the party responsible for drafting the clause, was not applicable.

Finally, having found that the Tribunal agreed with the Respondent's position, they did not have to consider whether to give deference to the Superintendent or what weight to give to the policy statements of the Financial Services Commission of Ontario.

This is a key decision as many pension plans in Ontario have made, or are considering making, changes to pension plans which could potentially have been subject to challenge under a Halliburton analysis, including changes to benefit formulae, freezes and conversions without salary projection.

An appeal of this decision must be commenced by September 16, 2013.

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.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.