Monsanto Canada Inc. v. Ontario (Superintendent of Financial
Services), [2004] 3 S.C.R. 152, 2004 SCC 54
Monsanto Canada Inc. Appellant
v.
Superintendent of Financial Services Respondent
and between
Association of Canadian Pension Management Appellant
v.
Superintendent of Financial Services Respondent
and
Attorney General of Canada, National Trust Company,
Nicole Lacroix, R. M. Smallhorn,
D. G. Halsall,
S. J. Galbraith, S. W. (Bud) Wesley, Canadian Labour
Congress and Ontario Federation of Labour Interveners
Indexed as: Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services)
Neutral citation: 2004 SCC 54.
File No.: 29586.
2004: February 16; 2004: July 29.
Present: McLachlin C.J. and Iacobucci, Major, Bastarache,
Binnie, Deschamps and Fish JJ.
on appeal from the court of appeal for ontario
Pensions — Pension plans — Partial wind-up — Rights
and benefits on partial wind-up — Surplus — Whether pension benefits
legislation requiring distribution of proportional share of actuarial surplus
when defined benefit pension plan partially wound up — Pension Benefits Act,
R.S.O. 1990, c. P.8, s. 70(6).
Administrative law — Judicial review — Standard of
review — Financial Services Tribunal — Standard of review applicable to
Tribunal’s interpretation of s. 70(6) of Pension Benefits Act,
R.S.O. 1990, c. P.8.
As a result of a reorganization of Monsanto Canada
Inc. (“Monsanto”), 146 active members of the pension plan (“Affected
Members”) received notice that their employment with Monsanto would terminate.
The Superintendent of Financial Services refused to approve Monsanto’s partial
wind-up report, for failing to provide for the distribution of surplus assets
related to the part of the pension plan being wound up. A majority of the
Financial Services Tribunal disagreed with the Superintendent and ordered her
to approve the report, holding that s. 70(6) of the Ontario Pension
Benefits Act provides no more than a right to participate in surplus
distribution when, if ever, the plan fully winds up. The Divisional Court set
aside the Tribunal’s order and upheld the Superintendent’s decision. The Court
of Appeal dismissed the appeal.
Held: The
appeal should be dismissed.
When the relevant factors of the pragmatic and
functional approach are properly considered, the appropriate standard of review
applicable to the Financial Services Tribunal’s interpretation of s. 70(6)
of the Pension Benefits Act is that of correctness.
Section 70(6) requires the distribution of a
proportional share of actuarial surplus when a defined benefit pension plan is
partially wound up. The ordinary and grammatical meaning of s. 70(6)
indicates that the assessment of rights and benefits is to be conducted as if
the pension plan was winding up in full on the effective date of partial
wind-up. The realization of rights and benefits, including the distribution of
surplus assets, then occurs for the part of the plan actually being wound up.
Therefore, the Affected Members, if entitled, may receive their pro rata share
of the surplus existing in the fund on a partial wind-up, as if the plan was
being fully wound up on that day. The members affected by a partial wind-up
are thus accorded the rights and benefits that are not less than the group
would have if there were a full wind-up on the date of partial wind-up.
The scheme of the Pension Benefits Act and of
the regulations also supports the ordinary and grammatical meaning of
s. 70(6). Delaying the distribution would not be consonant with the
provisions that make distribution of surplus assets an intended part of the
wind-up process, whether the wind-up is in whole or in part. In addition, the
statutory scheme makes an important distinction between continuing plans and
winding-up plans. The interpretation of s. 70(6) herein proposed is
consistent with the logic of this aspect of the statutory scheme and the
legislature’s choice to treat partial wind-ups in the same manner as full
wind-ups.
A purposive interpretation of s. 70(6) should be
mindful of the legislative objective in the context of the statutory scheme
surrounding surplus and partial wind-up. The Pension Benefits Act is
public policy legislation that recognizes the vital importance of long-term
income security. Its purpose is to establish minimum standards and regulatory
supervision in order to protect and safeguard the pension benefits and rights
of members, former members and others entitled to receive benefits under
private pension plans. The Act seeks, in some measure, to ensure a balance
between employee and employer interests that will be beneficial for both
groups. Distribution of surplus on partial wind-up is unlikely to disrupt that
balance or to compromise the continuing integrity of the pension fund. Policy
and practical reasons also favour an interpretation requiring distribution upon
partial wind-up. Since pension plans are theoretically intended to be
indeterminate in nature, it is reasonable for Affected Members to be subject to
the risks of the plan while they are a part of it, but not after they have been
terminated from it. The most equitable solution is thus to distribute the
fortunes of favourable markets at the time Affected Members are terminated. In
this way, the windfall is related to their actual time and participation in the
plan. Moreover, the increasingly mobile nature of labour should be
recognized. The Affected Members should be able to know their status at the
time of their termination so as to arrange their affairs accordingly and not be
indefinitely tied to an employer that laid them off.
Cases Cited
Discussed: Schmidt
v. Air Products Canada Ltd., [1994] 2 S.C.R. 611; referred to: Barrie
Public Utilities v. Canadian Cable Television Assn., [2003]
1 S.C.R. 476, 2003 SCC 28; Canada (Deputy Minister of
National Revenue) v. Mattel Canada Inc., [2001] 2 S.C.R. 100,
2001 SCC 36; Voice Construction Ltd. v. Construction & General
Workers’ Union, Local 92, [2004] 1 S.C.R. 609, 2004 SCC 23; Pushpanathan
v. Canada (Minister of Citizenship and Immigration), [1998]
1 S.C.R. 982; Law Society of New Brunswick v. Ryan, [2003]
1 S.C.R. 247, 2003 SCC 20; Ross v. New Brunswick School
District No. 15, [1996] 1 S.C.R. 825; National Corn
Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; GenCorp
Canada Inc. v. Ontario (Superintendent, Pensions) (1998), 158 D.L.R.
(4th) 497; Baker v. Canada (Minister of Citizenship and Immigration),
[1999] 2 S.C.R. 817; Dr. Q v. College of Physicians and Surgeons
of British Columbia, [2003] 1 S.C.R. 226, 2003 SCC 19; Canada
(Director of Investigation and Research) v. Southam Inc., [1997]
1 S.C.R. 748; Bell ExpressVu Limited Partnership v. Rex,
[2002] 2 S.C.R. 559, 2002 SCC 42; R. v. Campbell,
[1999] 1 S.C.R. 565; Firestone Canada Inc. v. Ontario (Pension
Commission) (1990), 1 O.R. (3d) 122.
Statutes and Regulations Cited
Financial Services Commission
of Ontario Act, 1997, S.O. 1997, c. 28,
ss. 1 “regulated sector”, 6, 7, 20, 21(4), 22.
Pension Benefits Act, R.S.O. 1990, c. P.8 [am. 1997, c. 28],
ss. 1 “partial wind up”, “surplus”, “wind up”, 68, 69 [am. 2002,
c. 18 , Sch. H, s. 5(1)], 70, 73, 74(1), 77, 78, 79, 84(1)
[am. 1999, c. 6, s. 53(20)], 91(1).
Pension Benefits Act, 1987, S.O. 1987, c. 35.
O. Reg. 103/66,
s. 11 [am. O. Reg. 91/69, s. 3].
O. Reg. 708/87, ss. 7a
[ad. O. Reg. 100/88, s. 1], 7c [ad. O. Reg. 412/90, s. 1].
R.R.O. 1980, Reg. 746,
s. 21(2) [rep. & sub. O. Reg. 31/87, s. 1].
R.R.O. 1990, Reg. 909,
ss. 1(2) “going concern valuation” [rep. & sub. O. Reg. 144/00,
s. 1(2)], 4(1), 8 [am. O. Reg. 743/91, s. 1; am. O.
Reg. 307/98, s. 4; am. O. Reg. 444/03, s. 1], 9 [rep. &
sub. O. Reg. 665/94, s. 1], 10 [am. idem, s. 2;
am. O. Reg. 307/98, s. 5], 10.1 [ad. O. Reg. 286/97,
s. 1; am. O. Reg. 307/98, s. 6], 13(1) [am. O. Reg. 712/92,
s. 9], (1.1) [ad. idem; am. O. Reg. 144/00, s. 8(1)],
16 [am. O. Reg. 712/92, s. 11; am. O. Reg. 144/00,
s. 11], 25 [am. O. Reg. 629/92, s. 3; am. O. Reg. 712/92,
s. 15; am. O. Reg. 307/98, s. 10], 26, 28(5) [am. O. Reg.
712/92, s. 16; am. O. Reg. 307/98, s. 12], (6) [am. O.
Reg. 307/98, s. 12], 28.1 [ad. O. Reg. 144/00, s. 22].
Authors Cited
Deaton, Richard Lee. The
Political Economy of Pensions: Power, Politics and Social Change in
Canada, Britain and the United States. Vancouver: University of
British Columbia Press, 1989.
Dewetering, June. Occupational
Pension Plans: Selected Policy Issues. Background paper
(BP-250E) prepared for the Library of Parliament, Research Branch, February
1991.
Driedger, Elmer A. Construction
of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Gillese, Eileen E. “Pension Plans
and the Law of Trusts” (1996), 75 Can. Bar Rev. 221.
Mercer Pension Manual, loose-leaf ed., by William M. Mercer Limited. Agincourt,
Ont.: Carswell, 1988 (updated 2003, release 6).
Ontario. Legislative Assembly of
Ontario. Hansard — Official Report of Debates, Nos. 85 and 108. First
Session, 33rd Parliament, January 13, 1986 and February 4, 1986.
Ontario. Legislative Assembly of
Ontario. Hansard — Official Report of Debates, Nos. 12, 19, 27,
55, 86 and 98. Second Session, 33rd Parliament, May 12, 1986 to
February 4, 1987.
Ontario. Legislative Assembly of
Ontario. Hansard — Official Report of Debates, No. 34. Third Session,
33rd Parliament, June 25, 1987.
Ontario. Royal Commission on the
Status of Pensions in Ontario. Report of the Royal Commission on the Status
of Pensions in Ontario, vol. I, Design for Retirement. Toronto:
Government of Ontario, 1980.
Sullivan, Ruth. Sullivan and
Driedger on the Construction of Statutes, 4th ed. Markham, Ont.:
Butterworths, 2002.
APPEAL from a judgment of the Ontario Court of Appeal
(2002), 62 O.R. (3d) 305, 220 D.L.R. (4th) 385,
166 O.A.C. 131, 29 B.L.R. (3d) 18, 21 C.C.E.L.
(3d) 11, 32 C.C.P.B. 248, [2002] O.J. No. 4407 (QL),
affirming a decision of the Superior Court of Justice (Divisional Court)
(2001), 198 D.L.R. (4th) 109, 144 O.A.C. 204,
10 C.C.E.L. (3d) 257, 27 C.C.P.B. 82, [2001] O.J.
No. 963 (QL), setting aside the order of the Financial Services Tribunal
(2000), 3 B.L.R. (3d) 99, 50 C.C.E.L. (2d) 303,
23 C.C.P.B. 148. Appeal dismissed.
Freya Kristjanson
and Markus Kremer, for the appellant Monsanto Canada Inc.
Jeffrey W. Galway and Randy Bauslaugh, for the appellant the Association
of Canadian Pension Management.
Deborah McPhail
and Leslie McIntosh, for the respondent.
Donald J. Rennie and Kirk Lambrecht, Q.C., for the intervener the
Attorney General of Canada.
J. Brett Ledger and Lindsay P. Hill, for the intervener the
National Trust Company.
William J. Sammon, for the intervener Nicole Lacroix.
Howard Goldblatt, Dona Campbell
and Ethan Poskanzer, for the interveners the Canadian Labour
Congress and the Ontario Federation of Labour.
Mark Zigler and Ari N. Kaplan,
for the interveners R. M. Smallhorn, D. G. Halsall,
S. J. Galbraith and S. W. (Bud) Wesley.
The judgment of the Court was delivered by
1
Deschamps J. — Pension law
is a field which is gaining in importance as more and more people retire and
look to their pensions to sustain them during their “golden years”. The
complex exercise of actuarial accounting that determines how pensions should be
funded is rivalled only by the complexity of the law determining the pension
rights and obligations of employees and employers, which lies at the
intersection of contracts, trust law, and statute law. This appeal is an
attempt to bring some clarity to a relatively confined area of pension law,
which has been the subject of much debate: when there is a partial wind-up of
an Ontario-defined benefit pension plan, must the actuarial surplus be
distributed at that time?
2
In particular, does s. 70(6) of the Ontario Pension Benefits Act,
R.S.O. 1990, c. P.8 (“Act”), require the distribution of a proportional share
of actuarial surplus when a defined benefit pension plan is partially wound
up? The Superintendent of Financial Services answered this question in the
affirmative. She refused to approve the partial wind-up report of the
appellant, Monsanto Canada Inc. (“Monsanto”), for failing to provide for the
distribution of surplus assets related to the part of the Pension Plan being
wound up. A majority of the Financial Services Tribunal (“Tribunal”) disagreed
with the Superintendent and ordered her to approve the report: (2000), 3 B.L.R
(3d) 99. The majority held that s. 70(6) provides no more than a right to participate
in surplus distribution when, if ever, the Plan fully winds up. The Ontario
Divisional Court overturned the Tribunal on appeal ((2001), 198 D.L.R. (4th)
109) and the Court of Appeal agreed ((2002), 62 O.R. (3d) 305). Monsanto and
the Association of Canadian Pension Management now appeal to this Court. The
appeal, for the reasons that follow, should be dismissed.
I. Facts
3
The factual foundation of the legal question raised in the present
appeal can be briefly stated. Monsanto originally maintained three separate
pension plans in respect of various operations. Effective January 1, 1996,
these plans were consolidated to form the Pension Plan for Employees of
Monsanto Canada Inc. (“Plan”). As a result of a subsequent reorganization of
Monsanto, involving a staff reduction program and a plant closure, 146 active
members of the Plan (“Affected Members”) received notice that their employment
with Monsanto would terminate between December 31, 1996 and December 31, 1998.
Monsanto’s report to the Superintendent provided that the partial wind-up was
to be effective May 31, 1997. As of that date, the information supplied to the
regulator by the actuaries for the Plan showed that there was an actuarial
surplus of some $19.1 million, representing the amount by which the estimated
asset value exceeded the estimated liabilities. According to the evidence, the
pro rata share of the surplus related to the part of the Plan being wound up is
approximately $3.1 million.
4
One of the bases for the Superintendent’s refusal to approve Monsanto’s
report was the failure to provide for the distribution of this surplus on
partial wind-up, in accordance with s. 70(6) of the Act. This is the only
ground still in issue before this Court as the other bases for refusal were not
pursued on this appeal. Also noteworthy is the fact that this matter is
preliminary to the question of surplus entitlement, which is not affected by
this decision and will need to be determined at a later date.
II. Issue
5
The only issue in this appeal is whether the Tribunal properly
interpreted s. 70(6) of the Act as not requiring distribution of the actuarial
surplus on a partial plan wind-up. Thus, the analysis must proceed in two
stages. First, the appropriate standard of review of the Tribunal’s decision
must be determined. Second, the Tribunal’s interpretation of s. 70(6) must be
measured against this standard. All of the relevant legislative provisions are
annexed at the end of these reasons.
III. Standard of Review
6
The courts below found, and the appellants and respondent agreed, that
the appropriate standard of review of the Tribunal’s decision was
reasonableness. However, the standard of review is a question of law, and
agreement between the parties cannot be determinative of the matter. An
evaluation of the four factors comprising the pragmatic and functional approach
is required to decide the appropriate level of deference this Court should
grant in reviewing the decision.
A. Privative Clause
7
The legislature did not enact a privative clause to insulate the
Tribunal’s jurisdiction. To the contrary, s. 91(1) of the Act provides for a
statutory right of appeal to the Divisional Court. While not determinative,
this factor suggests that the legislature intended less deference to be
afforded to the Tribunal on judicial review (Barrie Public Utilities v.
Canadian Cable Television Assn., [2003] 1 S.C.R. 476, 2003 SCC 28, at para.
11; Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc.,
[2001] 2 S.C.R. 100, 2001 SCC 36, at para. 27).
B. Nature of the Problem
8
The issue on appeal is a pure question of law, related to the
interpretation of a section that has no specialized technical meaning.
Statutory interpretation is an exercise in which the courts are well equipped
to engage. The question here concerns the establishment of statutory rights by
construing the legislature’s intention from the text of s. 70(6), the
legislative purpose, and the statutory context in which it is situated. Generally
speaking, such legal questions will attract a more searching standard of review
as being clearly within the expertise of the judiciary, unless the legal
question is “at the core” of the Tribunal’s expertise (Voice Construction
Ltd. v. Construction & General Workers’ Union, Local 92, [2004] 1
S.C.R. 609, 2004 SCC 23, at para. 29; see also Pushpanathan v. Canada
(Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, at para.
34).
C. Relative Expertise
9
The expertise of the Tribunal relative to that of the courts must be
evaluated in reference to the particular provision being invoked and
interpreted and the nature of the Tribunal’s expertise (Barrie, supra,
at paras. 12-13; Pushpanathan, supra, at para. 28). In
other words, relative expertise must be evaluated in context and in relation to
the specific question under review (Law Society of New Brunswick v. Ryan,
[2003] 1 S.C.R. 247, 2003 SCC 20, at para. 30).
10
On the one hand, we have to look at courts’ expertise and the subject
matter which is, as discussed in the previous sections, the statutory
interpretation of s. 70(6). On its face, the provision sets out the rule of
parity between situations of partial wind-up and full wind-up. Except perhaps
in demonstrating the practical implications of proposed interpretations, the
issue is neither factually laden nor highly technical. In this case, as it is
generally, statutory interpretation is “a purely legal question . . .
‘ultimately within the province of judiciary’” (Barrie, supra, at
para. 16; see also Ross v. New Brunswick School District No. 15, [1996]
1 S.C.R. 825, at para. 28).
11
On the other hand, the Tribunal does not have specific expertise in this
area. The Tribunal is a general body that was created under the Financial
Services Commission of Ontario Act, 1997, S.O. 1997, c. 28 (“FSCOA”),
s. 20, to replace the specialized Pension Services Commission. It is
responsible for adjudication in a variety of “regulated sector[s]” (FSCOA,
s. 1), including co-operatives, credit unions, insurance, mortgage brokers,
loans and trusts, and pensions (FSCOA, s. 1). In addition, the nature
of the Tribunal’s expertise is primarily adjudicative. Unlike the former
Pension Services Commission or the current Financial Services Commission, the
Tribunal has no policy functions as part of its pensions mandate (see FSCOA,
s. 22). As noted in Mattel Canada, supra, and in National
Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324,
involvement in policy development will be an important consideration in
evaluating a tribunal’s expertise. Lastly, in appointing members to the
Tribunal and assigning panels for hearings, the statute advises that, to the
extent practicable, expertise and experience in the regulated sectors should be
taken into account (FSCOA, ss. 6(4) and 7(2)). However, there is no
requirement that members necessarily have special expertise in the subject
matter of pensions. The Tribunal is a small entity of 6 to 12 members which
further reduces the likelihood that any particular panel would have expertise
in the matter being adjudicated (FSCOA, s. 6(3)).
12
Overall, there is little to indicate that the legislature intended to
create a body with particular expertise over the statutory interpretation of
the Act. The Tribunal would not have any greater expertise than the courts in
construing s. 70(6). Thus, this factor also suggests a lower amount of
deference is required to be given to the Tribunal’s decisions on the issue of statutory
interpretation.
D. Purposes of the Legislation and the
Provision
13
The purpose of the Act was well stated in GenCorp Canada Inc. v.
Ontario (Superintendent, Pensions) (1998), 158 D.L.R. (4th) 497
(Ont. C.A.), at p. 503:
[T]he Pension Benefits Act is clearly public policy legislation
establishing a carefully calibrated legislative and regulatory scheme
prescribing minimum standards for all pension plans in Ontario. It is intended
to benefit and protect the interests of members and former members of pension
plans, and “evinces a special solicitude for employees affected by plant
closures” . . . .
14
On the one hand, the protection of the rights of vulnerable groups is a
central and long-standing function of the courts. The protectionist aim of the
legislation is especially evident in s. 70(6), which seeks to preserve the
equal treatment and benefits between situations of partial wind-up and full
wind-up. On the other hand, pension standards legislation is a complex
administrative scheme, which seeks to strike a delicate balance between the
interests of employers and employees, while advancing the public interest in a
thriving private pension system. In this task, the regulatory body usually has
a certain advantage in being closer to the dispute and the industry. In part,
this factor led the Ontario Court of Appeal in GenCorp to conclude that
the decisions of the Pension Services Commission should be reviewed on a
standard of reasonableness.
15
Here, however, the Tribunal assumes a different role and function in
relation to the statutory purpose of the particular provision at issue. The
determination of the meaning of s. 70(6) is not “polycentric” in nature. In
other words, s. 70(6) does not grant the Tribunal broad discretionary powers
nor a range of policy-laden remedial choices that involve the balancing of
multiple sets of interests of competing constituencies (see Baker v. Canada
(Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, at para.
56; Pushpanathan, supra, at para. 36; Dr. Q v.
College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R.
226, 2003 SCC 19, at paras. 30-31). Moreover, the issues raised in s. 70(6)
are legal in nature, rather than economic, broad, specialized, technical or
scientific in such a way as to substantially deviate from the normal role of
the courts (Dr. Q, supra, at para. 31; Canada (Director
of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at
paras. 48-49). Therefore, this factor also seems to indicate less deference be
accorded to the Tribunal’s interpretation.
E. Conclusion on the Standard of Review
16
As all four factors point to a lower degree of deference, a standard of
review of correctness should be adopted in this case. There are no persuasive
grounds for the Court to grant the Tribunal any deference on the pure question
of law before us in this case (see also Barrie, supra, at
para. 18, citing Pushpanathan, supra, at para. 37).
IV. Statutory Interpretation of Section 70(6)
17
I now turn to the essence of this appeal: the question of the
interpretation of s. 70(6). The provision reads:
70. . . .
(6) On the partial wind up of a pension plan,
members, former members and other persons entitled to benefits under the
pension plan shall have rights and benefits that are not less than the rights
and benefits they would have on a full wind up of the pension plan on the
effective date of the partial wind up.
18
The appellants argue that the effect of the provision is to afford
Affected Members a vested right, as of the effective date of partial wind-up,
to participate in surplus distribution when, if ever, the Plan fully winds up,
assuming they are so entitled under the Plan agreement. In contrast, the
respondent contends that s. 70(6) requires that the distribution of the surplus
actually occurs on the effective date of the partial wind-up. The main area of
contention between the parties is the import of the last phrase: “on the
effective date of the partial wind up”.
19
The established approach to statutory interpretation was recently
reiterated by Iacobucci J. in Bell ExpressVu Limited Partnership v. Rex,
[2002] 2 S.C.R. 559, 2002 SCC 42, at para. 26, citing E. A. Driedger, Construction
of Statutes (2nd ed. 1983), at p. 87:
Today there is only one principle or approach,
namely, the words of an Act are to be read in their entire context and in their
grammatical and ordinary sense harmoniously with the scheme of the Act, the
object of the Act, and the intention of Parliament.
I will examine
each of these factors in turn, beginning first with the background context.
A. Historical Context
20
Pension plans have a long history in Canada, first appearing in the late
19th century. However, it was not until after the Second World War that the
development of pension plans flourished in tandem with the economic growth and
prosperity of the era (see Report of the Royal Commission on the Status of
Pensions in Ontario (1980), vol. I, at p. 35; R. L. Deaton, The
Political Economy of Pensions: Power, Politics and Social Change in Canada,
Britain and the United States (1989), at p. 79). In the early days,
pensions were commonly regarded as gratuitous rewards for long and faithful
service, subject to the discretion and financial health of the employer (see Report
of the Royal Commission on the Status of Pensions in Ontario, supra,
at p. 2; Mercer Pension Manual (loose-leaf ed.), at p. 1-9). However,
particularly as pensions became a more familiar sight at the collective
bargaining table, a competing conception as an enforceable employee right
developed (see E. E. Gillese, “Pension Plans and the Law of Trusts” (1996), 75 Can.
Bar Rev. 221, at pp. 226-27; Deaton, supra, at pp. 122-23).
The enactment of minimum standards legislation in Ontario, first in 1963 and
again in 1987, “considerably expanded the rights of plan members. It altered,
again, the power balance between employers and employees in the matter of
pensions” (Gillese, supra, at p. 228).
21
The notion of a pension fund actuarial surplus, by contrast, has had a
much shorter history. Surpluses, in any noticeable form, generally did not
appear before the early 80s when millions of dollars in actuarial surplus were
developing in some funds (see, e.g., J. Dewetering, Occupational Pension
Plans: Selected Policy Issues (1991), at p. 17; Deaton, supra, at p.
134). Surplus can only arise in defined benefit plans, like the one provided
by Monsanto, because, in contrast to defined contribution plans, benefits or
plan liabilities are not contingent on the level of nor the return on
contributions. Members are guaranteed specific benefits at retirement in an
amount fixed by a determined formula. Contributions are made each year on the
basis of an actuary’s estimate of the amount which must be presently invested
in order to provide the stipulated benefits at the time the pension is paid out
(“current service cost”). These estimates are generally conservative in nature
and based on a narrow range of assumptions consistent with actuarial standards
and practices. This exercise is inherently somewhat speculative, and in the
event of changes in market conditions or other unforeseeable future experience,
the present value of the assets of the fund may actually be lower or greater
than originally estimated.
22
If, in a given year, the assets of the fund, evaluated as a going
concern, are found to be insufficient to cover the current service cost, there
is said to be an “unfunded liability” and the employer will be called upon to
make up the deficit through contributions (see, generally, s. 4(1) of the Pension
Benefits Act General Regulations, R.R.O. 1990, Reg. 909). If the plan is
underfunded on wind-up, then benefits will be reduced, subject to the
application in Ontario of the Pension Benefits Guarantee Fund (ss. 77 and
84(1) of the Act). In contrast, if the value of the assets are greater than
originally estimated, the fund is said to have a surplus, being “the excess of
the value of the assets of a pension fund related to a pension plan over the
value of the liabilities under the pension plan” (s. 1 of the Act). The
surplus is considered “actuarial” because it has not yet been concretely
realized through the liquidation of assets and the payment of liabilities.
23
Consequently, in the 80s, the surplus issue became a hotly contested
one. Employers claimed the surplus as the result of their assumption of risk,
while employees maintained that the fund, including the surplus, represented
deferred wages belonging to them. It was in this context that the legislature
re-enacted s. 70(6) as part of the Pension Benefits Act, 1987, S.O.
1987, c. 35, virtually unchanged from the previous version introduced in 1969
(O. Reg. 103/66, s. 11, as am. by O. Reg. 91/69, s. 3; see Legislative Assembly
of Ontario, Hansard — Official Report of Debates, 33rd Parl.,
January 13, 1986 to June 25, 1987). Also at this time, definitions of “partial
wind up” and “surplus” were included in the scheme. Concurrently, a moratorium
was placed on surplus withdrawals from ongoing plans in 1986 (R.R.O. 1980, Reg.
746, s. 21(2), as am. by O. Reg. 31/87), which was extended to plans on wind-up
in 1988 (O. Reg. 708/87, s. 7a (added by O. Reg. 100/88)). The surplus sharing
regulation was enacted to replace the moratorium (O. Reg. 708/87, s. 7c (added
by O. Reg. 412/90)), requiring that no payments be made from the surplus of a
pension plan that is being wound up in whole or in part unless it is (a) made
to or for the benefit of members, former members or persons other than the
employer who are entitled to payments; or (b) made to the employer with the
written agreement of a prescribed number of members (R.R.O. 1990, Reg. 909, s.
8(1)). This regulation, designed to encourage agreement and sharing between
employers and employees, ceases to have effect after December 31, 2004 (Reg.
909, s. 8(3)).
24
This historical context, though not determinative, may provide some
insight into the legislature’s intention regarding the effect of s. 70(6).
Through its statutory interventions, the legislature has sought to clarify some
aspects of the relationship between employers and employees in pension
matters. Steps have been taken to improve many employee rights but the
importance of maintaining a fair and delicate balance between employer and
employee interests, in a way which promotes private pensions, has also been a
consistent theme. It is in light of this background that the legal meaning of
the provision must be interpreted in accordance with the accepted approach to
statutory interpretation.
B. Grammatical and Ordinary Sense
25
As noted by the Court of Appeal, s. 70(6) specifies the timing, group
and rights to which the section applies. First, the timing is the partial
wind-up of a pension plan. Second, the specified group of “members, former
members and other persons entitled to benefits under the pension plan” is
generally meant to refer to the members affected by a partial wind-up (para.
41). Lastly, the rights accorded are those rights and benefits that are not
less than the group would have if there were a full wind-up on the date of
partial wind-up (para. 42). The parties agree with these propositions.
26
Where the disagreement lies is with regard to the timing of distribution
following a partial wind-up of a plan in which there is an actuarial surplus.
The respondent reasons that, since (i) s. 70(6) requires the rights and
benefits on a partial wind-up to not be less than those available on full
wind-up, and (ii) all parties agree that surplus distribution would occur on a
full wind-up (Court of Appeal judgment, at para. 43; see also s. 79(4)), then
(iii) s. 70(6) must require surplus distribution on a partial wind-up. In
contrast, the appellants argue that, at most, s. 70(6) requires the vesting of
the right to participate in surplus distribution in a potential future full
wind-up because it is only on final wind-up that an actual, rather than
actuarial, surplus can exist. In my opinion, the former interpretation accords
better with the ordinary and grammatical meaning of the section.
27
First, the section mandates that the Affected Members “shall have”, on
the effective date of the partial wind-up, the rights and benefits they “would
have” on a full wind-up. This wording transposes the timing of the rights and
benefits exigible on full wind-up up to the effective date of partial
wind-up. It does not connote any delay until the future date of full
wind-up before the exercise of acquired rights.
28
Second, the phrase “on the effective date” (emphasis added)
suggests more immediacy than other possible alternatives, such as “as of”. If
the provision was worded “shall have rights and benefits . . . as
of the effective date”, this would be more indicative of a situation where
rights were being vested presently but paid out in the future. The actual
wording of “shall have rights and benefits . . . on the
effective date” (emphasis added) indicates a more immediate realization of
rights and benefits.
29
Third, the appellants’ proposed interpretation, as adopted by the
majority of the Tribunal, in effect reads out this last phrase of the
provision. In my opinion, without the phrase “on the effective date of the
partial wind up”, it may have been open to read s. 70(6) as only vesting rights
to be exercised on full wind-up. However, the presence of this phrase confirms
that rights and benefits are not only measured but also realized on the
effective date of partial wind-up.
30
Lastly, s. 70(6) acts as a residual deeming provision rather than being
an independent delineation of substantive rights. As a matter of logic, if it
equalizes the position of the full and partial wind-up groups, and it is clear
that there is surplus distribution on full wind-up, then there should also be
surplus distribution on partial wind-up.
31
In sum, the provision indicates that the assessment of rights and
benefits is to be conducted as if the Plan was winding up in full on the
effective date of partial wind-up. The realization of rights and benefits,
including the distribution of surplus assets, then occurs for the part of the
Plan actually being wound up. Therefore, the Affected Members, if entitled,
may receive their pro rata share of the surplus existing in the fund on a
partial wind-up, as if the Plan was being fully wound up on that day.
C. Scheme of the Act
32
The statutory scheme further supports this conclusion. First, the
definitions of “wind up” and “partial wind up” in s. 1 of the Act closely
parallel one another, both requiring a distribution of assets:
“partial wind up” means the termination of part of
a pension plan and the distribution of the assets of the pension fund related
to that part of the pension plan;
“wind up” means the termination of a pension plan
and the distribution of the assets of the pension fund;
It then
follows that s. 70(1)(c) requires the administrator to file as part of its full
or partial wind-up report, “the methods of allocating and distributing the
assets of the pension plan”. Similarly, s. 28.1(2) of Reg. 909 requires that
the administrator of the Plan give to each person entitled to a pension a
statement setting out, among other things: “[t]he method of distributing the
surplus assets”, “[t]he formula for allocating the surplus among the plan
beneficiaries” and “[a]n estimate of the amount allocated to the person.”
Thus, delaying the distribution would not be consonant with these provisions
that make distribution of surplus assets an intended part of the wind-up
process, whether the wind-up is in whole or in part.
33
Second, the statutory scheme makes an important distinction between
continuing plans and winding-up plans. The partial wind-up falls, for all
purposes, in the latter group, even though there is a remaining part of the
Plan that continues to exist. Under the scheme, in evaluating rights and
procedural requirements, partial wind-up is treated the same as a full wind-up,
which coincides with the purpose and effect of s. 70(6). For instance, in s.
78(1) the general rule is established that “[n]o money may be paid out of a
pension fund to the employer without the prior consent of the Superintendent.”
Sections 79(1) and 79(3) then provide for exceptions to this rule depending on
whether the application for payment is being made with regard to a plan that is
continuing or one that is winding up. As with the additional conditions set
out in the regulations (Reg. 909, ss. 8 to 10 and 25 to 28.1), it is much
more difficult to justify surplus withdrawal from a continuing plan than from a
plan winding up in whole or in part. The interpretation of s. 70(6) herein
proposed is consistent with the logic of this aspect of the statutory scheme
and the legislature’s choice to treat partial wind-ups in the same manner as
full wind-ups. As a result, a partial wind-up requires a full wind-up to
notionally occur for the purposes of evaluating the pro rata share of the
assets and liabilities related to the partial wind-up, followed by the
continuation of the remainder of the Plan.
34
Lastly, in this statutory scheme, the role of s. 70(6) appears to be as
a residual deeming provision reflecting the legislature’s intent of assuring
that rights on partial wind-up are not less than those available on full
wind-up, whether granted under the Act or under the terms of the Pension Plan.
In almost every section where wind-up is mentioned, the legislature has already
clarified that it is referring to wind-up “in whole or in part”. This is the
case when referring to grow-in rights (s. 74(1)) and immediate vesting rights
(s. 73(1)(b)). These are special rights that members affected by a wind-up
acquire but that ordinary retirees or individuals leaving employment do not.
Provisions regarding the procedural requirements on wind-up similarly specify
application on wind-up both “in whole or in part” (see, e.g., ss. 68 to 70).
One of the rare instances in the Act where both are not expressly included is
with regard to transfer rights on wind-up, which only mentions “wind up” (s.
73(2)). The appellants seem to agree, correctly in my opinion, that those
rights would still have effect on partial wind-up even though it is not
explicitly mentioned. Presumably, this must result from the application of
s. 70(6), and controverts any sort of expressio unius est exclusio
alterius logic for s. 73(2).
35
As a last point, it is worth commenting on the approach of the majority
judgment of the Tribunal in disregarding the regulations in construing the
meaning of s. 70(6). While it is true that a statute sits higher in the
hierarchy of statutory instruments, it is well recognized that regulations can
assist in ascertaining the legislature’s intention with regard to a particular
matter, especially where the statute and regulations are “closely meshed” (see R.
v. Campbell, [1999] 1 S.C.R. 565, at para. 26; Sullivan and Driedger on
the Construction of Statutes (4th ed. 2002), at p. 282). In this case, the
statute and the regulations form an integrated scheme on the subject of surplus
treatment and the thrust of s. 70(6) can be gleaned in light of this broader
context.
36
In summary, the scheme of the Act and of the regulations supports the
ordinary and grammatical meaning of s. 70(6) as requiring distribution of
surplus at the time of partial wind-up.
D. Object of the Act
37
A purposive interpretation of s. 70(6) should be mindful of the
legislative objective in the context of the statutory scheme surrounding
surplus and partial wind-up.
38
The Act is public policy legislation that recognizes the vital
importance of long-term income security. As a legislative intervention in the
administration of voluntary pension plans, its purpose is to establish minimum
standards and regulatory supervision in order to protect and safeguard the
pension benefits and rights of members, former members and others entitled to
receive benefits under private pension plans (see GenCorp, supra;
Firestone Canada Inc. v. Ontario (Pension Commission) (1990), 1 O.R. (3d)
122 (C.A.), at p. 127). This is especially important when, as recognized by
this Court in Schmidt v. Air Products Canada Ltd., [1994] 2 S.C.R. 611,
at p. 646, it is remembered that pensions are now generally given for
consideration rather than being merely gratuitous rewards. At the same time,
the voluntary nature of the private pension system requires the interventions
in this area to be carefully calibrated. This is necessary to avoid
discouraging employers from making plan decisions advantageous to their
employees. The Act thus seeks, in some measure, to ensure a balance between
employee and employer interests that will be beneficial for both groups and for
the greater public interest in established pension standards.
39
Employers often argue that the risk and responsibility of a defined
benefit plan are borne by the employer and, thus, it should be allowed the
control and flexibility to manage the plan as it sees fit. It is contended
that requiring distribution of surplus weighs the balance too heavily in favour
of the employees and will result in funds being contributed to according to
less cautious actuarial estimates, fewer defined benefit plans, and fewer
private pension plans overall. While important considerations, these
arguments are unpersuasive. First, the requirement of distribution is
value-neutral to the question of entitlement, which must be determined
separately under the provisions of the Plan and the Act. Second, the statutory
scheme protects against underfunding by requiring employers and administrators
to follow accepted actuarial practice in their valuations (Reg. 909, s. 16).
Lastly, the provision of pensions serves a number of labour market functions
which benefit the corporate sector, including attracting a labour supply,
reducing turnover, improving morale, increasing productivity and efficiency, promoting
loyalty to the corporation, and so on (Deaton, supra, at p. 119). In
short, there are many reasons for employers to maintain pension plans and a
construction of s. 70(6) that is in accordance with the terms of the statute is
unlikely to disrupt the balance between employer and employee interests.
40
As between employees, it is difficult to see how this interpretation of
s. 70(6) results in any unfairness to the ongoing members, as was argued
before us in this appeal. Requiring that the pro rata share of the actuarial
surplus be distributed at the time of partial wind-up is unlikely to compromise
the continuing integrity of the pension fund. By definition, the fund will
still be in surplus after the distribution, except that the amount of surplus
will be reduced in proportion to the size and level of entitlement, if any, of
the partial wind-up group and subject to the statutory restrictions on
withdrawal of surplus by the employer. In this case, approximately $16 million
in actuarial surplus would have remained in the fund even if the entire surplus
related to the partial wind-up was distributed.
41
By contrast, if Affected Members are required to await a full wind-up at
some indeterminate future date to share in the distribution of surplus, it
would place them in a worse position than continuing employees. Affected
Members are placed in a significantly different position from continuing
employees because they have just lost their jobs, their level of pensionable
earnings are reduced, and they will rarely be able to replicate the same level
of benefits elsewhere. Since pension plans are theoretically intended to be
indeterminate in nature, Affected Members may no longer be reachable if a full
wind-up occurs. It makes sense for the Affected Members to be subject to the
risks of the Plan while they are a part of it, but not after they have been
terminated from it. This same rationale would equally apply to future Affected
Members if another partial wind-up occurs and to all members at the time of a
full wind-up, so that each group would bear the consequences of market forces
at the time of their termination from the Plan. This seems to be the fairest
distribution of risk and in accordance with the object of the Act.
42
There are also policy and practical reasons supporting an interpretation
requiring distribution upon partial wind-up. A surplus is, in effect, a
windfall because it was not within the expectations of either the employer or
the employees when the regime was implemented. The employer contributes to the
fund as much as is necessary to match the funding target of the Plan on a going
concern basis, taking into consideration actuarial estimates and assumptions.
The basic expectation of the employees when joining the Plan is to receive
periodic pension benefits on retirement. The fluctuation in the value of the
assets is essentially the result of unforeseen market performance or plan
experience. As discussed earlier, the most equitable solution is to distribute
the fortunes of favourable markets at the time Affected Members are
terminated. In this way, the windfall is related to their actual time and
participation in the plan rather than being subject to the experience of a plan
of which they are no longer a part.
43
Moreover, the increasingly mobile nature of labour should be
recognized. When a group of employees is terminated and that part of the Plan
is wound up, those accounts should generally be settled concurrently. The
Affected Members should be able to know their status at the time of their
termination so as to arrange their affairs accordingly and not be indefinitely
tied to an employer that laid them off. On the flip side, if Affected Members
only have a right to surplus distribution on full wind-up, assuming they are so
entitled to receive it, they may no longer be alive to realize their right
when, if ever, a full wind-up occurs. Even if they are, they may be difficult
to locate or contact. As a practical matter, it is at the time of termination
that their right to surplus, if any, is most needed, considering they have
just lost their jobs and their source of regular income.
44
Furthermore, the argument that actuarial surplus is notional and thus
too unreliable to justify the liquidation of any Plan assets is unconvincing.
Although the assessment of an actuarial surplus is of necessity an estimate, it
does not follow that the distribution of surplus would be unsound. Actuarial
estimates of pension values are used for many purposes, including the sale of
corporations or divisions of corporations, the division of matrimonial
property, and the taking of contribution holidays by employers. Further, while
the actuarial assumptions at play can vary, some uniformity can be found by
requiring particular methods of valuation for certain purposes. For instance,
the regulations prescribe that a “going concern valuation” (defined in Reg.
909, s. 1(2)) be used for valuing continuing pension plans (see, e.g.,
Reg. 909, s. 13(1) or 26). In contrast, a “solvency valuation” or “wind-up
valuation” can be used when plans are actually or notionally wound up. This is
in line with the different purposes underlying the regulation of continuing as
opposed to winding up plans. In the former, the main concern is capital
regulation to ensure adequate contribution levels based on estimates of current
service costs to maintain fund integrity. In the latter, for wind-ups in whole
or in part, the main concern is severing the terminated part of the Plan and
ensuring Affected Members receive their legal entitlements, if any, as
beneficiaries through the distribution of assets related to the part of the
Plan being wound up.
45
Lastly, distribution upon partial wind up is consistent with the trust principles
outlined in Schmidt, supra, regarding surplus entitlement and
contribution holidays. Although that case dealt with a situation of
entitlement to surplus on a full wind-up, which is not in issue here, the
appellants placed much weight on the distinction made by Cory J. between actual
and actuarial surplus. Cory J. held at pp. 654-55 that:
Employees can claim no entitlement to surplus in an ongoing plan
because it is not definite. The right to any surplus is crystallized only when
the surplus becomes ascertainable upon termination of the plan. Therefore, the
taking of a contribution holiday represents neither an encroachment upon the
trust nor a reduction of accrued benefits.
. . .
When the
plan is terminated, the actuarial surplus becomes an actual surplus and
vests in the employee beneficiaries. [Emphasis added.]
46
Section 70(6) provides for distribution of surplus only at the time of
plan termination, be it partial or full. The definition of “partial wind up”
in s. 1 of the Act explicitly refers to the “termination” of “that part of the
pension plan”. Also, surplus is ascertainable at that time according to
current valuation methods. Neither s. 70(6) nor this appeal affects the
ability of an employer to take contribution holidays while the Plan is ongoing
and the Plan allows for it. Therefore, requiring distribution on partial
wind-up is fully compatible with this Court’s decision in Schmidt and
the principles discussed therein. Upon partial wind-up, the pro rata share of
the surplus ceases to be notional. It is then actual.
47
Section 70(6) was enacted to ensure that Affected Members on partial
wind-up are not in a worse position than a future full wind-up group. This
requirement of equity provided by s. 70(6) is in relation to other rights
provided for under the Act. As far as the distribution of surplus is
concerned, the object of the Act and s. 70(6) strongly promote an
interpretation that requires this distribution to occur at the time of the
partial wind-up rather than later.
V. Conclusion
48
In light of all of the above, I conclude that s. 70(6) requires the
distribution of actuarial surplus related to the part of the Plan being wound
up, on the effective date of the partial wind-up. As a consequence, I agree
with the Court of Appeal’s interpretation and find that the Tribunal
incorrectly interpreted the provision at first instance.
49
This result is also consistent with the historical context of pension
law. Statutory interventions in pension law have sought to clarify and regulate
the relationship between employers and employees in order to promote the
pension system while adjusting imbalances of power. With regard to surplus and
its distribution on wind-up, the legislature has implemented some measures in
this regard, be it to improve the position of employees if the Plan fails to
provide for distribution (s. 79(4) of the Act) or to require consent of members
for the withdrawal of surplus by employers (Reg. 909, s. 8). However, these
steps have also been tailored in such a way as to avoid placing too heavy a
burden on employers in exercising their rights under the Plan or discouraging
them from maintaining pension funds for their workforce. Distribution of
surplus on partial wind-up reflects this balance because it does not reduce or
remove any entitlements of the employers. In contrast, failure to require
distribution could negatively impact the potential entitlements of affected
employees of the partial wind-up group. Considering the text, scheme and
purpose of the Act against this background discloses an intent of the
legislature to require surplus distribution on partial wind-up of a plan.
50
The vital importance of pension schemes in the modern labour market is
evident. Pension funds are a significant asset for employers and an invaluable
nest egg for an aging workforce. Legislative schemes that establish minimum
standards and ensure the protection of employee benefits are an element of
sound financial and social policy. The facilitation and encouragement of
pension plan participation advance the interests of employees, employers, and
the public. As part of the legislature’s statutory structure that aims to
accommodate the interests of ongoing and terminated employees, it enacted s.
70(6) to require actual distribution of the pro rata share of actuarial surplus
on plan wind-up, be it full or partial.
51
The appeal is dismissed with costs.
APPENDIX
Statutory
Provisions
(1) Pension Benefits Act, R.S.O. 1990,
c. P.8
1. In this Act,
. . .
“partial wind up” means the termination of part of
a pension plan and the distribution of the assets of the pension fund related
to that part of the pension plan;
. . .
“surplus” means the excess of the value of the
assets of a pension fund related to a pension plan over the value of the
liabilities under the pension plan, both calculated in the prescribed manner;
. . .
“wind up” means the termination of a pension plan
and the distribution of the assets of the pension fund;
. . .
68. (1) The employer or, in the case of a
multi‑employer pension plan, the administrator may wind up the pension
plan in whole or in part.
(2) The administrator shall give written notice of
proposal to wind up the pension plan to,
(a) the Superintendent;
(b) each member of the pension plan;
(c) each former member of the pension plan;
(d) each trade union that represents members
of the pension plan;
(e) the advisory committee of the pension
plan; and
(f) any other person entitled to a payment from
the pension fund.
(3) In the case of a proposal to wind up only part
of a pension plan, the administrator is not required to give written notice of
the proposal to members, former members or other persons entitled to payment
from the pension fund if they will not be affected by the proposed partial wind
up.
(4) The notice of proposal to wind up shall contain
the information prescribed by the regulations.
(5) The effective date of the wind up shall not be
earlier than the date member contributions, if any, cease to be deducted, in
the case of contributory pension benefits, or, in any other case, on the date notice
is given to members.
(6) The Superintendent by order may change the
effective date of the wind up if the Superintendent is of the opinion that
there are reasonable grounds for the change.
69. (1) The Superintendent by order may
require the wind up of a pension plan in whole or in part if,
(a) there is a cessation or suspension of
employer contributions to the pension fund;
(b) the employer fails to make contributions
to the pension fund as required by this Act or the regulations;
(c) the employer is bankrupt within the
meaning of the Bankruptcy and Insolvency Act (Canada);
(d) a significant number of members of the
pension plan cease to be employed by the employer as a result of the
discontinuance of all or part of the business of the employer or as a result of
the reorganization of the business of the employer;
(e) all or a significant portion of the
business carried on by the employer at a specific location is discontinued;
(f) all or part of the employer’s business or all
or part of the assets of the employer’s business are sold, assigned or
otherwise disposed of and the person who acquires the business or assets does
not provide a pension plan for the members of the employer’s pension plan who
become employees of the person;
(g) the liability of the Guarantee Fund is
likely to be substantially increased unless the pension plan is wound up in
whole or in part;
(h) in the case of a multi‑employer
pension plan,
(i) there is a significant reduction in the number
of members, or
(ii) there is a cessation of contributions under
the pension plan or a significant reduction in such contributions; or
(i) any other prescribed event or prescribed
circumstance occurs.
(2) In an order under subsection (1), the
Superintendent shall specify the effective date of the wind up, the persons or
class or classes of persons to whom the administrator shall give notice of the
order and the information that shall be given in the notice.
70. (1) The administrator of a pension plan
that is to be wound up in whole or in part shall file a wind up report that
sets out,
(a) the assets and liabilities of the
pension plan;
(b) the benefits to be provided under the
pension plan to members, former members and other persons;
(c) the methods of allocating and
distributing the assets of the pension plan and determining the priorities for
payment of benefits; and
(d) such other information as is prescribed.
(2) No payment shall be made out of the pension
fund in respect of which notice of proposal to wind up has been given until the
Superintendent has approved the wind up report.
(3) Subsection (2) does not apply to prevent
continuation of payment of a pension or any other benefit the payment of which
commenced before the giving of the notice of proposal to wind up the pension
plan or to prevent any other payment that is prescribed or that is approved by
the Superintendent.
(4) An administrator shall not make payment out of
the pension fund except in accordance with the wind up report approved by the
Superintendent.
(5) The Superintendent may refuse to approve a wind
up report that does not meet the requirements of this Act and the regulations
or that does not protect the interests of the members and former members of the
pension plan.
(6) On the partial wind up of a pension plan,
members, former members and other persons entitled to benefits under the
pension plan shall have rights and benefits that are not less than the rights
and benefits they would have on a full wind up of the pension plan on the
effective date of the partial wind up.
73. (1) For the purpose of determining the
amounts of pension benefits and any other benefits and entitlements on the
winding up of a pension plan, in whole or in part,
(a) the employment of each member of the
pension plan affected by the winding up shall be deemed to have been terminated
on the effective date of the wind up;
(b) each member’s pension benefits as of the
effective date of the wind up shall be determined as if the member had
satisfied all eligibility conditions for a deferred pension; and
(c) provision shall be made for the rights
under section 74.
(2) A person entitled to a pension benefit on the
wind up of a pension plan, other than a person who is receiving a pension, is
entitled to the rights under subsection 42(1) (transfer) of a member who
terminates employment and, for the purpose, subsection 42(3) does not apply.
74. (1) A member in Ontario of a pension
plan whose combination of age plus years of continuous employment or membership
in the pension plan equals at least fifty‑five, at the effective date of
the wind up of the pension plan in whole or in part, has the right to receive,
(a) a pension in accordance with the terms
of the pension plan, if, under the pension plan, the member is eligible for
immediate payment of the pension benefit;
(b) a pension in accordance with the terms
of the pension plan, beginning at the earlier of,
(i) the normal retirement date under the pension
plan, or
(ii) the date on which the member would be
entitled to an unreduced pension under the pension plan if the pension plan
were not wound up and if the member’s membership continued to that date; or
(c) a reduced pension in the amount payable
under the terms of the pension plan beginning on the date on which the member
would be entitled to the reduced pension under the pension plan if the pension
plan were not wound up and if the member’s membership continued to that date.
77. Subject to the application of the
Guarantee Fund, where the money in a pension fund is not sufficient to pay all
the pension benefits and other benefits on the wind up of the pension plan in
whole or in part, the pension benefits and other benefits shall be reduced in
the prescribed manner.
78. (1) No money may be paid out of a
pension fund to the employer without the prior consent of the Superintendent.
79. (1) Subject to section 89 (hearing and
appeal), the Superintendent shall not consent to payment of money that is
surplus to the employer out of a continuing pension plan unless,
(a) the Superintendent is satisfied, based
on reports provided with the application, that the pension plan has a surplus;
(b) the pension plan provides for the
withdrawal of surplus by the employer while the pension plan continues in
existence, or the applicant satisfies the Superintendent that the applicant is
otherwise entitled to withdraw the surplus;
(c) where all pension benefits under the
pension plan are guaranteed by an insurance company, an amount equal to at
least two years of the employer’s current service costs is retained in the
pension fund as surplus;
(d) where the members are not required to
make contributions under the pension plan, the greater of,
(i) an amount equal to two years of the employer’s
current service costs, or
(ii) an amount equal to 25 per cent of the
liabilities of the pension plan calculated as prescribed,
is retained in the pension fund as surplus;
(e) where members are required to make
contributions under the pension plan, all surplus attributable to contributions
paid by members and the greater of,
(i) an amount equal to two years of the employer’s
current service costs, or
(ii) an amount equal to 25 per cent of the
liabilities of the pension plan calculated as prescribed,
are retained in the pension fund as surplus; and
(f) the applicant and the pension plan comply with
all other requirements prescribed under other sections of this Act in respect
of the payment of surplus money out of a pension fund.
. . .
(3) Subject to section 89 (hearing and appeal),
the Superintendent shall not consent to an application by an employer in
respect of surplus in a pension plan that is being wound up in whole or in part
unless,
(a) the Superintendent is satisfied, based
on reports provided with the application, that the pension plan has a surplus;
(b) the pension plan provides for payment of
surplus to the employer on the wind up of the pension plan;
(c) provision has been made for the payment
of all liabilities of the pension plan as calculated for purposes of
termination of the pension plan; and
(d) the applicant and the pension plan
comply with all other requirements prescribed under other sections of this Act
in respect of the payment of surplus money out of a pension fund.
(4) A pension plan that does not provide for
payment of surplus money on the wind up of the pension plan shall be construed
to require that surplus money accrued after the 31st day of December, 1986
shall be distributed proportionately on the wind up of the pension plan among
members, former members and any other persons entitled to payments under the
pension plan on the date of the wind up.
84. (1) If the Superintendent by order
declares that the Guarantee Fund applies to a pension plan, the following are
guaranteed by the Guarantee Fund, subject to the limitations and qualifications
as are set out in this Act or are prescribed:
1. Any pension in respect of employment in
Ontario.
2. Any deferred pension in respect of employment
in Ontario to which a former member is entitled, if the former member’s
employment or membership was terminated before the 1st day of January, 1988 and
the former member was at least forty‑five years of age and had at least
ten years of continuous employment with the employer, or was a member of the
pension plan for a continuous period of at least ten years, at the date of
termination of employment.
3. A percentage of any defined pension benefits in
respect of employment in Ontario to which a member or former member is entitled
under section 36 or 37 (deferred pension), or both, if the member’s or former
member’s employment or membership was terminated on or after the 1st day of
January, 1988, equal to 20 per cent if the combination of the member’s or
former member’s age plus years of employment or membership in the pension plan
equals fifty, plus an additional 2/3 of 1 per cent for each additional one‑twelfth
credit of age and employment or membership to a maximum of 100 per cent.
4. All additional voluntary contributions, and the
interest thereon, made by members or former members while employed in Ontario.
5. The minimum value of all required contributions
made to the pension plan by a member or former member in respect of employment
in Ontario plus interest.
6. That part of a deferred pension guaranteed
under this subsection to which a former spouse or same‑sex partner of a
member or of a former member is entitled under a domestic contract or an order
under the Family Law Act.
7. Any pension to which a survivor of a former
member is entitled under subsection 48(1) (death before commencement of
payment).
91. (1) A party to a proceeding before the
Tribunal under section 89 may appeal to the Divisional Court from the decision
or order of the Tribunal.
(2) Pension Benefits Act General
Regulations, R.R.O. 1990, Reg. 909
1. . . .
(2) In this Part,
. . .
“going concern valuation” means a valuation of the
assets and liabilities of a pension plan using methods and actuarial
assumptions that are consistent with accepted actuarial practice for the
valuation of a continuing pension plan;
4. (1) Every pension plan shall set out the
obligation of the employer or any person required to make contributions on
behalf of an employer, to contribute both in respect of the normal cost and any
going concern unfunded actuarial liabilities and solvency deficiencies under the
plan.
8. (1) No payment may be made from surplus
out of a pension plan that is being wound up in whole or in part unless,
(a) the payment is to be made to or for the
benefit of members, former members and other persons, other than an employer,
who are entitled to payments under the pension plan on the date of wind up; or
(b) the payment is to be made to an employer
with the written agreement of,
(i) the employer,
(ii) the collective bargaining agent of the
members of the plan or, if there is no collective bargaining agent, at least
two‑thirds of the members of the plan, and
(iii) such number of former members and other
persons who are entitled to payments under the pension plan on the date of the
wind up as the Superintendent considers appropriate in the circumstances.
(2) Despite subsection (1), a payment may be made
from surplus out of a pension plan that is being wound up in whole or in part
if,
(a) the payment would have been permitted by
this section as it read immediately before the 18th day of December, 1991; and
(b) notice of proposal to wind up the pension
plan was given to the Superintendent of Pensions before December 18, 1991.
(3) Subsections (1) and (2) do not apply after December 31, 2004.
9. If an amendment to a pension plan with
defined benefits converts the defined benefits to defined contribution
benefits, the employer may offset the employer’s contributions for normal costs
against the amount of surplus, if any, in the pension fund after the
conversion.
10. (1) The criteria described in this
section must be met before the Superintendent may consent to the payment of
money that is surplus out of a continuing pension plan to the employer.
(2) All persons who are entitled to receive benefits
under the pension plan and all members must consent to the terms upon which the
surplus is to be paid out of the plan.
(3) All persons in respect of whom the
administrator has purchased a pension, deferred pension or ancillary benefit,
other than those persons who requested that the administrator do so, must
consent to the terms upon which the surplus is to be paid out of the pension
plan.
(4) The pension plan must provide that a former
member’s contributions to the plan and the interest on the contributions shall
not be used to provide more than 50 per cent of the commuted value of a pension
or deferred pension in respect of contributory benefits to which the member is
entitled under the plan on termination of membership or employment.
(5) The pension plan must provide that a former
member who is entitled to a pension or deferred pension on termination of
employment or membership is entitled to payment from the pension fund of a lump
sum payment equal to the amount by which the former member’s contributions
under the plan and the interest on the contributions exceed one-half of the
commuted value of the former member’s pension or deferred pension in respect of
the contributory benefits.
. . .
(8) If surplus is allocated to a person to
increase the person’s benefits, the person must be offered the choice of
receiving the surplus in the form of inflation adjustments to the existing
benefits.
(9) The inflation adjustments that are provided
must be made,
(a) by indexing the benefits in accordance
with a formula based upon increases in the annual Consumer Price Index;
(b) by providing an annual percentage
increase in the amount of the benefits or an annual increase of a specified
dollar amount; or
(c) by a combination of the methods
described in clauses (a) and (b).
(10) For the
purpose of subsection (9), the employer may select the method for providing the
inflation adjustments.
(11) The pension
plan must state who is entitled, or must provide a mechanism for determining
who is entitled, to any surplus in the plan after the payment of surplus to
which the Superintendent is being asked to consent.
(12) Subsection (11) applies with respect to
applications under section 78 of the Act made after the 31st day of October,
1990.
10.1 (1) This section applies with respect
to a payment from surplus out of a pension plan to the employer,
(a) if a court has appointed an individual
to represent persons described in subclause 8(1)(b)(iii), persons described in
subsection 10(2) (but not members) or persons described in subsection 10(3);
and
(b) if the Superintendent is satisfied, on
the basis of such information and evidence as he or she may require from the
employer or administrator, that,
(i) in the case of a proposed payment to the
employer from surplus out of a pension plan that is being wound up in whole or
in part, the employer has obtained the written agreement referred to in clause
8(1)(b) of 90 per cent of the former members who are in receipt of a pension
payable from the pension fund on the date of the wind up, or
(ii) in the case of a proposed payment of
money that is surplus out of a continuing pension plan to the employer, the
employer has obtained the consent of 90 per cent of the former members who are
in receipt of a pension payable from the pension fund, whose consent is
required by subsection 10(2).
(2) The court-appointed representative is
authorized to give the written agreement referred to in clause 8(1)(b) on
behalf of the former members in receipt of a pension payable from the pension
fund, who he or she represents. However, the representative is not authorized
to give written agreement on behalf of former members who have agreed or have
objected to the payment from surplus.
(3) The
court-appointed representative is authorized to give the consent required by
subsection 10(2) on behalf of the former members in receipt of a pension
payable from the pension fund, who he or she represents. However, the
representative is not authorized to consent on behalf of former members who
have consented or have objected to the terms upon which the surplus is to be
paid out of the plan.
13. (1) Within sixty days after the date of
establishment of a plan, the administrator shall submit a report on the basis
of a going concern valuation that sets out,
(a) the normal cost, in the first year
during which the plan is registered and the rule for computing the normal cost
in subsequent years up to the date of the next report;
(b) an estimate of the normal cost, in the
subsequent years up to the date of the next report;
(c) where applicable, the estimated
aggregate employee contributions to the pension plan during each year up to the
date of the succeeding report;
(d) the past service unfunded actuarial
liability, if any, under the pension plan as at the date on which the plan
qualified for registration;
(e) the special payments required to
liquidate the past service unfunded actuarial liability in accordance with
section 5;
(f) any other going concern unfunded liability;
(g) the special payments required to
liquidate any going concern unfunded liability referred to in clause (f);
(j) where the plan provides for an escalated
adjustment, whether and to what extent,
(i) liability for the future cost of the adjustment
has been included in the determination of any going concern unfunded actuarial
liability, or
(ii) the cost for the escalated adjustment
is included in the normal cost.
(1.1) The report shall also set out, on the
basis of a solvency valuation,
(a) whether there is a solvency deficiency;
(b) if there is a solvency deficiency, the
amount of the solvency deficiency and the special payments required to
liquidate it in accordance with section 5;
(c) whether the transfer ratio is less than
one; and
(d) if the transfer ratio is less than one,
the transfer ratio.
16. (1) An actuary preparing a report under
section 70 of the Act or under section 3, 5.3, 13 or 14 shall use methods and
actuarial assumptions that are consistent with accepted actuarial practice and
with the requirements of the Act and this Regulation.
(2) An actuary preparing a report under section 4
shall use his or her best effort to meet the standards set out in subsection
(1).
(3) The person preparing a report referred to in
subsection (1) or (2) shall certify that it meets the requirements of
subsection (1) or (2), as the case may be.
(4) The person preparing a report referred to in
subsection (2) shall disclose in the report any respect in which the report
does not meet the standards set out in subsection (1).
25. (1) The following information is
prescribed for the purposes of a notice respecting an application under
subsection 78(2) of the Act:
1. The name of the pension plan and its
provincial registration number.
2. The valuation date of the report provided
with the application and the amount of surplus in the pension plan.
3. The surplus attributable to employee and
employer contributions.
4. The amount of surplus withdrawal
requested.
5. A statement that submissions in respect
of the application may be made in writing to the Superintendent within thirty
days after receipt of the notice.
6. The contractual authority for surplus
withdrawals.
7. Notice that copies of the report and
certificates filed with the Superintendent in support of the surplus request
are available for review at the offices of the employer and information on how
copies of the report may be obtained.
(2) The employer shall file a copy of the notice
required by subsection 78(2) of the Act before transmitting it to the persons
required by that subsection.
. . .
(4) An application by an employer for the consent
of the Superintendent to a payment from a continuing pension plan under
subsection 78(1) of the Act shall be accompanied by a certified copy of the
notice referred to in subsection (1), a statement that subsection 78(2) of the
Act has been complied with, details as to the classes of persons who received
notice and the date the last notice was distributed.
(5) An application referred to in subsection (1)
shall be accompanied by a current report prepared on the basis of a going
concern valuation demonstrating that a surplus as determined in accordance with
section 26 exists and that there are no special payments required to be made to
the pension fund.
26. (1) For purposes of determining surplus
in a continuing pension plan,
(a) the value of the assets of the pension
plan shall be calculated on the basis of the market value of the investments
held by the pension fund plus any cash balances and accrued or receivable
items; and
(b) the value of the liabilities of the
pension plan shall be the greater of the calculation of,
(i) the going concern liabilities, or
(ii) the solvency liabilities.
(2) For purposes of subclauses 79(1)(d)(ii) and
79(1)(e)(ii) of the Act, the liabilities of the pension plan shall be
calculated as the solvency liabilities.
28. . . .
(5) A notice required under subsection 78(2) of
the Act for a plan that is being wound up shall contain,
(a) the name of the pension plan and its
provincial registration number;
(b) the valuation date of the report
provided with the application and amount of surplus in the pension plan;
(c) the surplus attributable to employee and
employer contributions;
(d) the amount of surplus withdrawal
requested;
(e) a statement that submissions may be made
in writing to the Superintendent within thirty days of receipt of the notice;
(f) the contractual authority for surplus
reversion; and
(g) notice that copies of the wind up report
filed with the Superintendent in support of the surplus request are available
for review at the offices of the employer and information on how copies of the
report may be obtained.
(6) An application by an employer for the consent
of the Superintendent to a payment from a pension plan that is being wound up
shall be accompanied by a certified copy of the notice referred to in
subsection (5), a statement that subsection 78(2) of the Act has been complied
with, the date the last notice was distributed and details as to the classes of
persons who received notice.
28.1 (1) This section applies if there is a
surplus on the wind up of a pension plan in whole or in part.
(2) The administrator of the pension plan shall
give to each person entitled to a pension, deferred pension or other benefit or
to a refund in respect of the pension plan a statement setting out the
following information:
1. The name of the pension plan and its
provincial registration number.
2. The member’s name and date of birth.
3. The method of distributing the surplus
assets.
4. The formula for allocating the surplus
among the plan beneficiaries.
5. An estimate of the amount allocated to
the person.
6. The options available to the person
concerning the method for distributing the amount allocated to the person and
the period within which any election respecting the options must be made.
7. The method of distribution that will be
used, if an election is not made within the specified period.
8. The name and details of the person to be
contacted with respect to any questions arising out of the statement.
9. Notice that the allocation of surplus
and the options available for distributing it are subject to the approval of
the Superintendent and of the Canada Customs and Revenue Agency, and may be
adjusted accordingly.
(3) Financial Services Commission of Ontario
Act, 1997, S.O. 1997, c. 28
1. In
this Act,
. . .
“regulated sector” means a sector that consists of,
(a) all co‑operative corporations to
which the Co‑operative Corporations Act applies;
(b) all credit unions, caisses populaires
and leagues to which the Credit Unions and Caisses Populaires Act, 1994
applies;
(c) all persons engaged in the business of
insurance and governed by the Insurance Act;
(d) all corporations registered or
incorporated under the Loan and Trust Corporations Act;
(e) all mortgage brokers registered under
the Mortgage Brokers Act; or
(f) all persons who establish or administer
a pension plan within the meaning of the Pension Benefits Act and all
employers or other persons on their behalf who are required to contribute to
any such pension plan;
6. (1) There is hereby established a
tribunal to be known in English as the Financial Services Tribunal and in
French as Tribunal des services financiers.
. . .
(3) In addition to the chair and the two vice‑chairs,
the Lieutenant Governor in Council shall appoint at least six persons, and not
more than 12, as members of the Tribunal for the length of time not exceeding
three years that the Lieutenant Governor in Council specifies and may reappoint
any member to the Tribunal.
(4) In appointing members to the Tribunal, the
Lieutenant Governor in Council shall, to the extent practicable, appoint
members who have experience and expertise in the regulated sectors.
7. (1) A matter referred to the Tribunal
may be heard and determined by a panel consisting of one or more members of the
Tribunal, as assigned by the chair of the Tribunal.
(2) In assigning members of the Tribunal to a
panel, the chair shall take into consideration the requirements, if any, for
experience and expertise to enable the panel to decide the issues raised in any
matter before the Tribunal.
20. The Tribunal has exclusive jurisdiction to,
(a) exercise the powers conferred on it
under this Act and every other Act that confers powers on or assigns duties to
it; and
(b) determine all questions of fact or law
that arise in any proceeding before it under any Act mentioned in clause (a).
21. . . .
(4) An order of the Tribunal is final and
conclusive for all purposes unless the Act under which the Tribunal made it
provides for an appeal.
22. For a proceeding before the Tribunal, the Tribunal may,
(a) make rules for the practice and
procedure to be observed;
(b) determine what constitutes adequate
public notice;
(c) before or during the proceeding, conduct
any inquiry or inspection that the Tribunal considers necessary; or
(d) in determining any matter, consider any
relevant information obtained by the Tribunal in addition to evidence given at
the proceeding, if the Tribunal first informs the parties to the proceeding of
the additional information and gives them an opportunity to explain or refute
it.
Appeal dismissed with costs.
Solicitors for the appellant Monsanto Canada Inc.: Borden
Ladner Gervais, Toronto.
Solicitors for the appellant the Association of Canadian Pension
Management: Blake, Cassels & Graydon, Toronto.
Solicitor for the respondent: Ministry of the Attorney General
of Ontario, Toronto.
Solicitor for the intervener the Attorney General of
Canada: Attorney General of Canada, Ottawa.
Solicitors for the intervener the National Trust
Company: Osler, Hoskin & Harcourt, Toronto.
Solicitors for the intervener Nicole Lacroix: Barnes,
Sammon, Ottawa.
Solicitors for the interveners the Canadian Labour Congress and the
Ontario Federation of Labour: Sack Goldblatt Mitchell, Toronto.
Solicitors for the interveners R. M. Smallhorn,
D. G. Halsall, S. J. Galbraith and S. W. (Bud) Wesley: Koskie
Minsky, Toronto.