Canada: The Current Market Volatility and Your Company Pension Plan - What Are Your Obligations?

With evidence that the value of pension fund assets have declined significantly in recent months, companies that sponsor registered pension plans are assessing their legal and fiduciary obligations. For many plan administrators, this will involve the following questions:

  • What is the impact of the current market volatility on our funding obligations?
  • What are our fiduciary duties surrounding the investment of pension fund assets?
  • What, if anything, should we be communicating to our plan members?

This article highlights the applicable legal requirements and some suggested responses to these issues.

Plan administrators – and their pension committees – will want to consider these issues carefully and document their deliberations in response to the current market turbulence. Even where a plan sponsor decides that no immediate action is warranted, it will want to be able to demonstrate that it provided appropriate information to the company's board of directors to ensure that the company meets its fiduciary obligations as plan administrator as well as any relevant disclosure obligations. Both defined benefit (DB) and defined contribution (DC) plan sponsors are affected.

First, a brief overview of the legal regime respecting funding obligations as well as pension fund investment. While the focus here is on Ontario law requirements, the pension statutes of other jurisdictions are similar.

Funding and Reporting Requirements

Sponsors of DB pension plans in most jurisdictions in Canada (including Ontario) must file regular actuarial valuation reports that disclose the funded status of the plan on both a going concern and solvency basis. Actuarial valuation reports are generally required every three years, unless a previously filed report with the regulator discloses a solvency concern, in which case valuations are required annually.

The filed valuation report determines a company's contribution requirements to a DB plan. If the value of the pension fund assets has declined significantly as of the valuation date, the plan's solvency position will also likely have deteriorated, potentially creating a solvency deficiency or exacerbating a pre-existing deficiency. In either case, this will result in increased contributions by the company over the period covered by the report.

Sponsors of DB plans must also file annual financial statements for the pension plan or fund, and in Ontario, must also file an "Investment Information Summary" as part of the financial reporting process.

Sponsors of DC pension plans will not have their contribution requirements affected by a drop in pension fund assets, as their contributions to the plan are a fixed amount (typically a percentage of the employee's earnings) as defined in the pension plan document. In these plans, employees bear the investment risk.

Pension Fund Investment Requirements

Pension fund investment requirements are regulated under pension legislation. While a number of quantitative restrictions exist, the main requirement is that the plan administrator invest the pension fund in a prudent manner, in accordance with a written statement of investment policies and procedures established for the plan. It is the investment policy statement that, among other things, sets asset mix ranges for the fund, rate of return expectations, and specific categories of investments that may be made.

Plan administrators are required to act in a fiduciary capacity when they are setting investment policy and must exercise prudence in the selection of investments for the plan. Clearly, this exercise will be affected by the volatility in equity markets resulting from the current economic turmoil, as DB plan sponsors explore techniques such as asset-liability matching and consider whether their current asset mix and investment policy remain appropriate.

For DC plan sponsors, the selection of investment options and funds is also guided by the statutory standard of prudence. DC plan sponsors must also take into account the "Guidelines for Capital Accumulation Plans" (CAP Guidelines), which set out specific principles respecting the selection, monitoring and termination of investment options and funds for the plan (including the default option), as well as member disclosure. The current market volatility will heighten the need for such monitoring and likely for increased member communication as well.

What Does This Mean for Plan Administrators?

Plan administrators must ensure that they are acting in accordance with their fiduciary obligations towards plan members by ensuring a "good governance" approach to the current market volatility. This may include:

  • Ensuring accurate and timely monitoring of developments and reporting on the value of pension fund assets;
  • Considering any possible changes to the investment mix (under a DB plan) or the investment options (under a DC plan);
  • Revisiting the plan funding policy (for a DB plan);
  • Recording their deliberations and any decisions fully and accurately;
  • Monitoring questions and concerns from their plan membership; and
  • Developing appropriate responses or communications to members.

The extent of disclosure to members will first be guided by statutory disclosure requirements, as well as the CAP Guidelines in the case of DC plans. The current volatility likely increases the need to communicate with DC plan members in particular. Many DC plan sponsors have relied upon the comments issued by their service providers for dissemination to their plan member. DC plan sponsors should also consider reviewing their existing investment education and information materials for members to ensure that they continue to be appropriate.

Obtaining advice from professional advisors (such as investment advisors) will also be important to demonstrate fulfillment of a company's fiduciary obligations. Plan administrators need to tread carefully in these difficult times, ensuring that their pension governance process is operating to ensure compliance with statutory requirements and to address their fiduciary obligations.

Case Law Updates

Buschau Appeals Continue

After more than a decade of litigation and regulatory consideration, Buschau v. Th e Attorney General of Canada and Rogers Communications Inc. continues with an appeal to the Federal Court of Appeal.

In 2006, the Supreme Court was asked to determine whether or not the plan in question, which had been frozen in 1984, could be ordered terminated and the remaining surplus distributed. The Supreme Court found that the decision to order a plan termination belonged not to the courts but to the pension regulator. The federal regulator, the Superintendent of Financial Institutions, subsequently determined that the statute neither required the termination of the plan nor prohibited the continued taking of contribution holiday and declined to order the plan terminated. The members sought judicial review of the OSFI decision.

In September 2008, the Federal Court found the determination not to order the termination of the plan unreasonable and ordered the Superintendent to reconsider her decision. Th e court relied on comments from the Supreme Court that contribution holidays that are otherwise permissible can be illegitimate if pursued in bad faith as part of an improper refusal to terminate a pension plan.

If not overturned on appeal, members of other "frozen" plans in surplus (whether federally or provincially regulated) may bring similar actions seeking a plan termination. A copy of the Federal Court's September 2008 ruling can be found here.

Supreme Court Denies Leave to Appeal in Slater Steel Case

The Supreme Court of Canada recently denied leave to appeal of a decision that permitted claims to proceed against certain directors and officers of a bankrupt company in respect of their actions relating to the pension plan.

The Ontario Court of Appeal in March 2008 allowed third party claims to proceed against former directors and officers who served as members of a committee administering the Slater Steel pension plans, notwithstanding the fact that an order previously issued under the Companies' Creditors Arrangement Act released the directors and officers of Slater Steel from any claims. The decision was made on the basis that the directors and officers, when serving on the committee responsible for administering the plans were acting not as directors and officers of the corporation (in which capacity they were protected by the stay order), but in their capacity as employers and agents of the plan administrator.

The committee members sought leave to appeal the decision to the Supreme Court of Canada. The Supreme Court dismissed the leave application in September 2008 without comments.

Supreme Court Upholds Pension Plan Mandatory Retirement Age in New Brunswick

The Supreme Court of Canada has confirmed that exceptions to age discrimination prohibitions contained in New Brunswick human rights legislation for "bonafide" pension plans allow for mandatory retirement provisions so long as the plan is not a sham.

A complaint had been filed with the New Brunswick Human Rights Commission by a miner employed by Potash Corporation of Saskatchewan Inc., who had been forced to retire at age 65 as a result of a mandatory retirement policy contained in the Potash pension plan. The complaint alleged discrimination on the basis of age contrary to the provincial Human Rights Act. However, the Human Rights Act contains an exception for mandatory retirement provisions contained in a "bonafide retirement or pension plan".

After contrary decisions by the Human Rights Commission and the lower courts, the Supreme Court ruled that the employer need only demonstrate that the plan was not a sham in order to rely on the "bonafide" exception. In reaching this conclusion, the Supreme Court rejected arguments that the exception was only available where the pension plan's mandatory retirement age was related to legitimate work-related purposes.

It is important to note that this decision was determined on the basis of the New Brunswick Human Rights Act and whether it applies in other jurisdictions will depend on the human rights legislation in those other jurisdictions. It may be of particular interest to Alberta plan sponsors since Alberta's human rights legislation also contains an exception for a "bonafide" retirement or pension plan.

Pension Reform Updates

CAPSA Proposes New Multi-Jurisdictional Agreement

The Canadian Association of Pension Supervisory Authorities (CAPSA) recently released a consultation paper on a proposed agreement regarding multi-jurisdictional pension plans.

Currently, multi-jurisdictional issues are addressed by the Memorandum of Reciprocal Agreement. The Reciprocal Agreement was established in 1968 and effectively provides that a multi-jurisdictional plan should be registered in the jurisdiction where the plurality of members is employed. Given that the Reciprocal Agreement is now quite dated, CAPSA has looked to modernize it. The Proposed Agreement is significantly more detailed than the Reciprocal Agreement and, if adopted, will bring greater clarity for multi-jurisdictional plan sponsors. Among its proposals is to require the use of the "final location" approach instead of the "checkerboarding" approach for determining the benefit entitlements of members who have been employed in multiple jurisdictions.

CAPSA will be conducting consultation sessions across the country for the balance of 2008 and is accepting comments from stakeholders by January 30, 2009. A copy of the Proposed Agreement can be found here.

Ontario and Alberta/B.C. Expert Panel Reports Released

Expert panels established to review pension legislation in Ontario, Alberta and British Columbia have recently released their reports.

The Ontario Expert Commission on Pensions delivered its report on November 20, 2008. The report will likely form the basis of subsequent legislative reform, although it is not known when and if draft legislation will be introduced. A copy of the report can be found here.

A similar review process took place in Alberta and British Columbia, where the Joint Expert Panel appointed by the Alberta and B.C. governments submitted its report on November 14, 2008 (although the report has not yet been made public). It is anticipated that the Alberta and B.C. governments will respond to the report with legislative reform proposals in 2009. A copy of Bennett Jones's submission to the Joint Expert Panel can be found here.

Bennett Jones will review the expert reports and provide an update to clients and friends of the firm on the panels' key recommendations and governmental responses.

Interim Report Released by Nova Scotia Pension Panel

The Nova Scotia Pension Review Panel recently released an interim position paper that set out its position on key issues. With the final report due in December 2008, the Nova Scotia interim paper perhaps provides a preview of the recommendations to come in that province and perhaps other jurisdictions as well.

The interim report contains a number of significant responses to submissions made to the Review Panel. Chief among them is a rejection of safe harbour rules that would shield defined contribution plan sponsors from liability and a recommendation that an optional province-wide defined contribution plan be established with adjustable contribution rates for employers of any size who wish to participate. The interim report also suggests that the concept of partial wind-ups be removed from pension legislation, but that members on termination (whether individual or group termination) have full portability rights, with the sponsor responsible for making up any resulting deficit if the withdrawal occurs while the plan is less than fully funded. A copy of the interim Nova Scotia report can be found here.

Other Updates

YMPE Update

The Canada Revenue Agency has announced the year's maximum pensionable earnings under the Canada Pension Plan (CPP) for 2009, setting the limit at $46,300, up from $44,900 in 2008. The basic exemption amount for 2009 remains at $3,500, below which no CPP contributions are required.

Contribution rates also remain unchanged, with employee and employer rates at 4.95 percent, to a maximum of $2,188.60.

Does Benefits Fraud Concern You?

Benefits fraud is on the rise in Canada and is increasingly an issue of concern for plan sponsors. "Fraud Squad", an article on this topic by Sean Maxwell published in the October 2008 issue of Benefits Canada, can be found here.

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
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.