Canadian Pension Plans

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Alberta Court Finds "Future Earnings" Is Part of Accrued Benefit and May Not Be Reduced.
Chowdhury, Urmi; Canadian Benefits & Compensation Digest; v28 no1 pp 8-9 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Alberta Court of Queen's Bench has held that it will not overturn the decision of the Alberta Superintendent of Pensions in the case of Halliburton Group Canada Inc. v. Alberta. The Superintendent had ruled that two paragraphs in an amendment violated the Alberta Employment Pension Plans Act by effectively freezing the salary cap for calculating the defined benefit portion of the plaintiff employer's pension plan. The court found that the proper standard for judging the Superintendent's decision was the reasonableness standard, and therefore the Superintendent's decision should be treated with deference. It found the Superintendent's argument that the rejected paragraphs would result in a retroactive reduction in benefits to be reasonable, and that the Superintendent's broad statutory powers included the authority to revoke all or part of a plan amendment after it had been registered.
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Amendment to Pension Unlocking for Shortened Life Expectancy Provision.
Chowdhury, Urmi; Canadian Benefits & Compensation Digest; v28 no1 p 11 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : British Columbia's Pension Benefits Standards Act, Section 40, permits plan members early access to their retirement funds in certain limited conditions. An amendment was added as Section 40(2) to clarify the conditions and process. The change affects members facing the prospect of premature death due to a disability or terminal illness. Their condition must be documented by a health care provider, and the documentation must be accepted by the plan administrator. Section 40(2) takes effect September 2, 2009 and applies to all registered plans in B.C. that allow unlocking funds for these reasons. Affected plans must amend their plan documents to comply.
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Charter Challenge to Age Restrictions in Public Sector Pension Plan to Be Decided by Supreme Court of Canada.
Guindon, Anthony; Canadian Benefits & Compensation Digest; v28 no1 pp 4-5 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In its decision on Withler and Fitzsimonds v. Attorney General of Canada, the Supreme Court of Canada has allowed an appeal for a class action challenging the constitutionality of portions of two laws on superannuation in the public services and armed forces. The laws provide a death benefit payment, subject to a ten percent reduction per year past a certain age the participant achieves before death. The class action claims that this violates Section 15 of the Canadian Charter of Rights and Freedoms, which prohibits age discrimination. While the trial judge found that reduction provisions are not discriminatory, a court of appeal found the government of Canada had contravened Section 15 without justification.
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Court Can Review Use of Surplus by Saskatchewan Municipal Employees Pension Commission.
Brown, Jody; Canadian Benefits & Compensation Digest; v28 no1 pp 6, 9 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Saskatchewan Court of Queen's Bench has held that the actions of the Municipal Employees Pension Commission in the case of C.U.P.E. v. Saskatchewan School Boards Association were judicially reviewable. The Pension Commission had, on the recommendation of the actuary who conducted a regular review of the Municipal Employees Pension Plan, allowed plan surplus to make up the difference between normal actuarial costs and employer contributions. CUPE, representing a majority of plan members, objected and eventually applied for judicial review. The court found that by accepting recommendations contained in actuarial valuations, the Commission made decisions that were subject to judicial review.
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Court Considers Third-Party Interests in Approving Settlement of Class Action.
Teklu, Moya; Canadian Benefits & Compensation Digest; v28 no1 pp 10-11 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In the case of Sutherland v. Hudson's Bay Co., the sitting Ontario Superior Court of Justice judge found a settlement between pension plan members and their employer in an alleged breach of fiduciary duty case could be binding to other interested persons. The plaintiff plan members brought a class action against their employer, claiming in part that the employer had breached its trust by using plan surplus to satisfy its funding obligations with respect to the employees of other companies. The judge approved a proposed settlement, but addressed two concerns. First, the settlement was found to be binding on the employees of the other companies because they benefited from the settlement and their representatives had assented to it. Second, the prohibition on a plan administrator from using plan funds to satisfy legal claims against it was considered effectively waived because the settlement was deemed to be in the interest of plan participants.
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Court Finds Dispute Over Long-Term Disability Benefits Is Within Exclusive Jurisdiction of an Arbitrator.
Brown, Jody; Canadian Benefits & Compensation Digest; v28 no1 p 7 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The importance of collective agreement wording was reinforced by the decision in Campos v. Sun Life Assurance Co. of Canada. In this case, the plaintiff argued against the employer's offsetting long term disability benefits by the amounts received through the Canada Pension Plan, Old Age Security or Employer Pension Payments when she reached retirement age. The Ontario Superior Court of Justice ruled the case must be heard by an arbitrator, as described in the collective bargaining agreement (CBA). While the plaintiff argued the case was about insurance law and should not involve a labor arbitrator, the court saw the purview of labor grievance arbitrators to include anything connected to the CBA, including employment conditions and benefits.
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Legislation Reducing Pension Entitlement Did Not Breach Charter Rights.
Guindon, Anthony; Canadian Benefits & Compensation Digest; v28 no1 pp 2-3 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In 2002, Eleanor Clitheroe, CEO of Hydro One, was terminated and saw her pension entitlement reduced as the result of a law passed by the Ontario government. Hydro One's supplementary pension plan included a provision for special arrangements, and Clitheroe had been the only one to benefit from such an arrangement, receiving credit for multiple years of service for her time as CEO. The law which terminated her employment also eliminated the additional years of credit. Clitheroe sued the Crown, claiming that denying her pension entitlement amounted to a violation of her right to not be deprived of liberty under Section 7 of the Canadian Charter of Rights and Freedoms. In his ruling on Clitheroe v. Hydro One Inc., a trial judge from the Ontario Superior Court of Justice cited Charles v. Canada, in which it was decided that the deprivation of the plaintiffs' pension contributions did not engage Section 7.
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Measuring and Recording Pension and Benefit Plan Compliance: The Latest in Best Practices.
McCreary, Michael C.P.; Morrison, Danna; Canadian Benefits & Compensation Digest; v28 no1 pp 12-15 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The importance of complying with recommendations on pension and benefit plan management is widely recognized, and the ideal compliance strategy is to follow established best practices. But plans must also establish a way to track compliance with best practices, internally and by service providers. Roles and responsibilities must be clearly understood, and providers must be willing to follow them. A plan's governing body should convey expectations and develop uniform and consistent methods to monitor compliance. There must also be clear procedures for handling failures to meet performance standards. Confirmation that best practices are being followed supports transparency, plan performance, due diligence and fiduciary responsibility.
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Expressed Views.
Natchek, Sally; Benefits Canada; v34 no1 p 31 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Over 500 organizations attending the 2009 Canadian Employee Benefits Conference responded to a survey about their strategies to address funding concerns, plan conversions and pension reform. Only five percent indicated the recession's impact on their plan was severe, while 69 percent saw minimal or moderate impact. Primary concerns were reduced pension benefits, delayed retirement, less job security and the challenge of saving sufficiently for retirement. Twelve percent of plans cut benefits, but almost 40 percent are trying to fund the plan better. Since 2004, ten percent considered converting from defined benefits to a defined contribution plan. They are more likely to look at investment policies, actuarial costs and assumptions and seek higher employee contributions. Support for consistent pension standards reform across provinces was strong at 69 percent.
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Full Disclosure.
Litner, Wendy; Benefits Canada; v34 no1 pp 28-29 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The spotlight on defined contribution plan fees has grown stronger across Canada, reflecting growing regulation in the U.S. Canada's Capital Accumulation Plan (CAP) Guidelines Section 4.4 set out specific fee disclosure requirements, including a description and amount of fees and all other costs members must pay for. The Guidelines do not constitute regulations but best practices for plan sponsors to follow. The Office of the Superintendent of Financial Institutions (OSFI) has produced a draft disclosure guideline, taking the CAP Guidelines a step further. The OSFI draft states both general principles and detailed requirements for disclosure for federally regulated pension plans registered with the Office. Taken together, they provide plan sponsors with clear advice on fee analysis and disclosure.
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Manager Hunt.
Lum, Hubert; Benefits Canada; v34 no1 pp 22-26 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A pension plan may initiate a search to replace an investment manager for underperformance or due to organizational change, mergers, personnel shifts, asset reallocation and other causes. A pension committee or other group independent of the board of directors should be responsible for a manager search. A consultant, if hired, must have no conflict of interest and support the fiduciary responsibility of the plan. The search should include determination of critical attributes, screening numerous candidates and narrowing the field to six to eight. A due diligence investigation of those organizations follows, with selection and an orderly and fully documented transition process. Potential trouble spots include focusing excessively on a manager's performance, not considering alternative fund structures and failing to monitor the manager's ongoing performance.
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Themes and Variations.
Gros, Barry; Benefits Canada; v34 no1 pp 15-17 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Out of the pension market instability between 2007 and 2009, some reactions and trends are becoming clear. Federal and provincial governments offered some welcome funding relief for deficits, but the disparate responses revealed the need for a consistent and viable regulatory strategy and better risk management approaches. Pension standards reform made some progress, but the need remains to address pension surplus, funding and plan design for the long term. Questions around government's role in propping up failing pension plans and plans' priority in bankruptcy proceedings demand examination. Pension coverage and adequacy remain as challenges, with some hopeful solutions coming out of British Columbia and Alberta. In 2010, outstanding issues include pension reform, accounting, risk management and accountability.
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Being Accountable.
Zadorozny, Loyd; Bull, Darrin; Benefits Canada; v33 no12 p 77 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Public firms must prepare for their move to pension and benefits accounting under International Accounting Standard (IAS) 19, starting with deciding on a transition strategy. They can adopt IAS 19 as new or choose retroactive application. Each approach has advantages and drawbacks for treating retained earnings and future expenses. Firms can recognize gains and losses on a deferred or immediate recognition basis. Ways of handling potential future benefit increases will change under the standard, and it may be preferable to include the liabilities in the transition. HR and finance must work together to properly handle these constructive obligations. Important differences also arise from the application of International Financial Reporting Interpretations Committee Interpretation 14, focusing the effect of required minimum funding contributions on the balance sheet.
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Closing the Gap.
Smith, Brooke; Benefits Canada; v33 no12 pp 27-50 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Capital accumulation plans (CAPs) face the challenge of recovering the loses of 2008-2009. The CAP industry coped surprisingly well with market volatility and, looking ahead, is focusing on participation and retirement income adequacy. Key areas of concern will be solutions for spending down assets and handling long term inflation risk. Offerings of target date funds, guaranteed minimum withdrawal benefit products and tax free savings account products will expand. Concerns rise from the trend toward sponsors offering fewer investment options and various pension reform proposals. The industry is seeing consolidation, with dominance by Sun Life Financial, Great-West Life, Standard Life and Manulife Financial. Includes a directory of 23 CAP suppliers.
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Federal Court Finds Caps on Pensionable Service Constitutional and Not in Violation of Charter Rights.
Deokiesingh, Alana; Canadian Benefits & Compensation Digest; v27 no6 pp 5, 7 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The plaintiffs in Singh Gill v. Canada argued the Canadian Charter of Rights and Freedoms should contravene the Public Service Superannuation Regulations (PSSR). These rules block employee and employer contributions for those aged 71 or with 35 years of pensionable service. The plaintiffs, who had reached age 71 but wanted to continue working and accruing benefits, alleged age discrimination. Canada's Federal Court of Appeal upheld the lower court in finding the PSSR created no negative effects for those over age 71, do not contradict human rights legislation and comply with the national constitution. A British Columbia case is pending which alleges that the federal rules discriminate on the basis of age.
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Federal Pension Reform Framework: Changing the Rules for DB Pension Plans?
Watson Wyatt Special Memorandum; no09-05 pp 1-14 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The framework to reform federally regulated Canadian pension plans, released in October 2009, addresses the competing demands from plan sponsors, retirees and unions to a degree. The proposal would lower volatility with ten-year amortization with conditions and set solvency funding rules with minimum funding. Plans being terminated must be fully funded, and sponsors must annually report total assets and liabilities. Sponsors may not declare partial windups, and contribution holidays are limited. Vesting will be immediate. The government will help plans that cannot meet short term funding requirements. Changes for defined contribution plans are also proposed. Numerous points were not included and questions remain. The framework applies only to federally regulated plans, but it will likely influence others plans, though ultimately may not stem the migration from defined benefit schemes.
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Lessons for Plan Sponsors.
Ripsman, Colin; Benefits and Pensions Monitor; v19 no8 pp 27-29 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The market crash of 2008 came at a high point for the popularity and asset share of target date funds (TDFs). The 2008 performance of TDFs has led to increased regulatory scrutiny in the U.S. The U.S. experience can provide lessons for Canadian sponsors, including the importance of examining the differences between TDFs and awareness of the risks of TDFs. In the aftermath of the 2008 market correction, TDFs and defined contribution plans in general will likely see changes such as better support for the decumulation period, better linkage to inflation and minimum income guarantees.
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Manitoba Pension Commission Releases Proposed Regulation for Comment.
Archer, Simon; Canadian Benefits & Compensation Digest; v27 no6 pp 2-3 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Manitoba Pension Commission proposes to revise the province's Pension Benefits Act. The changes cover the makeup, power and activities of pension committees and require a committee in some cases. Disclosure of plan documents and information would be required to current and past members and bargaining agents. Jointly sponsored pension plans would be an additional plan category. Rules for using surplus funds over 105 percent would be more detailed, all employees would be eligible including part time and nonunion workers, and vesting would be immediate back to July 1, 1976. A one-time transfer from life income funds and locked in retirement funds would be allowed, as would phased retirement and credit splitting to divide pension benefits in the context of divorce.
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Master Plans.
Bauer, Gabrielle; Benefits Canada Across Borders; v1 no2 pp 7, 9 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : SNC-Lavalin is a construction and engineering firm with operations in Canada and more than 35 other countries. Most of its Canadian employees participate in a generous combined registered retirement savings plan and deferred profit sharing plan. The four U.S. business units operated separate pension plans until 2009, when a single harmonized plan was developed, still allowing business units flexibility. Standardizing plan designs for overseas divisions is more challenging. The international business groups are permitted to establish plans to suit their needs, with monitoring but without overt corporate direction, as long as they balance their income targets and costs.
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Ontario Court Permits Use of "Rectification" to Correct Errors in Plan Text Caused by Employer Neglect.
Landy-Shavim, Michelle; Canadian Benefits & Compensation Digest; v27 no6 pp 8-9 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The case of Kraft Canada Inc. v. Pitsadiotis was about the plaintiff's plan amendment of 1989 requiring a two-year waiting period for plan participation. Other changes were made in 1992, including an inadvertent deletion of this eligibility provision, which led to more generous benefits calculations, though plan administration continued as before. In 2003 a union representing plan members asked the Superintendent of Financial Services to order credit for the waiting period, while the employer sought an order from the Ontario Superior Court allowing rectification of the text. The judge saw the plan as a unilateral instrument giving the sponsor rights to make the corrective change without notifying plan members. The judge ruled the amendments did not adversely affect current or former plan members, since they were still subject to the 1989 version of the plan.
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Role Models.
Driscoll, Peter; Benefits Canada; v33 no12 p 81 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The case of Amherst (Town) v. Nova Scotia (Superintendent of Pensions) illustrates one way of interpreting the employer role when multiple employers participate in a single employer defined benefit pension plan. When the plan faced solvency trouble, the nine towns participating in the Police Association of Nova Scotia maintained they were not liable. The Nova Scotia Court of Appeal ruled they were employers and responsible for funding, based on 24 years of contributing to the plan despite the lack of a written agreement. In a contrasting case, in Victorian Order of Nurses for Canada v. Superintendent of Financial Services, the Ontario Financial Services Tribunal found Victorian Order of Nurses not liable as an employer since it did not pay the branch employees and therefore was not directly responsible for funding their pension plan.
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Rough Markets Require a Proactive Approach.
Lester, David; Benefits and Pensions Monitor; v19 no8 pp 19, 21 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : There are three lessons pension managers can take away from the market crash of 2008. First, although interest rates dropped to their lowest level in 60 years, the basic pattern of rising and falling stock markets is not unique. Second, the high levels of liability growth seen from the late 1980s to the mid 2000s should be considered the pension industry's biggest problem. Third, matching liabilities to assets will require a proactive approach by pension boards, trustees and managers.
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Sifting Through the Aftermath.
Gerard, Derek; Benefits Canada; v33 no12 pp 24-25 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The economic crisis left many employers wondering about recovery for their defined benefit pension plans in 2009 and beyond. The average plan lost up to 20 percent, prompting regulatory changes in some Atlantic provinces. But a more fundamental approach to solvency and risk management is needed and even reevaluation of the basic premise of pension coverage and design. Unable to fund retirement benefits adequately, some sponsors may consider dropping them. A different pension plan design is the jointly trusteed target benefit plan, promoted by pension review panels in Nova Scotia, Ontario and Alberta/British Columbia. Expanded to single employers, this would adopt different funding rules to support predictable costs and collective risk management.
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Transfer of Lump Sums From Defined Benefit Plans in Ontario May Require Superintendent Approval.
Canadian Benefits & Compensation Digest; v27 no6 p 4 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In June 2009, Ontario Regulation 239/09 amended the province's Pension Benefits Act (PBA) with a key change affecting lump sum payments from defined benefit plans. Plans must receive approval from the superintendent before making a commuted value transfer if the plan transfer ratio has fallen by ten percent or more since the most recently determined transfer ratio. This rule applies whether the plan administrator knows or should know about the decline in value and affects the entire amount of the transfer. Plan administrators should monitor the transfer ratio regularly for PBA Section 42 or Section 43 requests, preferably on a quarterly basis, to ensure current information about plan members' access to funds.
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Major Tweaks Proposed for Pensions.
Dobson, Sarah; Canadian HR Reporter; v22 no20 pp 8-9 Nov 16, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Canadian government has proposed a number of changes for federally regulated pension plans. The intent of the changes is to increase protection for plan members, decrease funding volatility for defined benefit plans, improve the defined contribution framework and modernize pension investment rules. Significant proposals include restricting an employer's ability to take a contribution holiday without building up a five percent funding cushion and requiring employers to fully fund pension benefits on plan termination. Some experts say that the proposed regulations offer no incentive to employers to put surplus monies into their pension funds.
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