Canada: New Developments For Federally Regulated Pension Plans

Last Updated: June 15 2007
Most Read Contributor in Canada, September 2016

Originally published May 2007

By Borden Ladner Gervais LLP's Pensions Group

The ramifications of two of the Supreme Court of Canada’s recent decisions regarding pension plans are playing out in the federally regulated sphere. The Office of the Superintendent of Financial Institutions ("OSFI") has released a decision regarding the requests for termination of the pension plans involved in the Buschau saga, and the Federal Court has ruled on the application of Monsanto for federally regulated pension plans.

1. Buschau continues

As you will recall, the members of the pension plan for Rogers Communications and other associated companies had attempted to have the pension plans terminated and the surplus distributed by use of the common law. However, the Supreme Court rejected that attempt, finding in part that terminations were within the regulatory sphere of the applicable regulator, and thus outside the jurisdiction of the courts.

After the decision, the members made an application to OSFI, asking the regulator to terminate the pension plan (the "Plan"). OSFI rejected that application by letter of April 27, 2007.

The Superintendent declined to exercise her discretion to terminate the plan on the basis that, "[t]he Plan meets the prescribed standards for solvency, the pension benefits of the Members are not being jeopardized, the Plan meets the requirements of the PBSA and the purpose of the Plan has not been frustrated." The employer had made a contemporaneous application to reopen the pension plan to new members; the plan had been closed to new members since 1984. The Superintendent granted this application, finding that it satisfied the terms of the PBSA and the pension plan, and served the purposes of the original plan.

2. Monstanto extends

The Supreme Court of Canada decision in Monsanto, which determined that surplus must be paid out on the partial wind-up of a pension plan in Ontario, has caused varying levels of concern in other jurisdictions. The May 2nd Federal Court decision in Marine Atlantic held that surplus must also be paid out of a federally regulated plan.

Marine Atlantic is a federally regulated pension plan which underwent several partial wind-ups in 1997, 1998 and 2004. In the partial wind-up reports, the surplus in the pension plans was not dealt with, and OSFI approved the reports. The members were notified by the company at the time of wind-up, but although a committee was formed to discuss the issue, no challenge was filed.

After the release of the Monsanto decision, the committee retained counsel, who launched the proceeding in question. The Court determined that the challenges for the 1997 and 1998 wind-ups were out of time. A decision of the Superintendent must be challenged within 30 days, and the Court determined that the members had enough information at the time partial wind-up to appeal even though OSFI never directly communicated the decision to the members. The communication from Marine Atlantic to the members was found to be sufficient, and the members made a choice to await subsequent events before pursuing the claim.

The Court also found that that the Superintendent did not have the ability to reconsider its own decision without new information and that the release of the decision in Monsanto did not constitute information which would allow the Superintendent to reconsider.

However, the 2005 partial wind-up challenge was within the limitation period. The Court then determined that the relevant provision of the federal legislation is sufficiently similar to the Ontario legislation that it must lead to the same result: a proportional share of actuarial surplus must be distributed on the partial wind-up of a federally regulated pension plan.

Accordingly, sponsors and administrators of federally regulated pension plans must be aware that, based on Marine Atlantic, any partial wind-up reports will not be approved unless they provide for the distribution of surplus. While past wind up reports which have not been challenged before may be immune as being out of time, the courts do retain discretion to extend the limitation period; sponsors may wish to review past windup events.

The Pension Group at Borden Ladner Gervais is available to discuss this, or any other pension issues you may have.

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.

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