Nacan Products Limited Pension Plan for Former Employees of Acheson Colloids (Canada) Ltd., to the Pension Plan for Salaried Employees of Nacan Products Limited and its Associated and Subsidiary Companies - April 24, 2006

IN THE MATTER OF the Pension Benefits Act, R.S.O. 1990, c.P.8, as amended (the “Act”);

AND IN THE MATTER OF a Proposal of the Superintendent of Financial Services to Refuse to Consent to a Transfer of Assets under section 81 of the Act from the Nacan Products Limited Pension Plan for Former Employees of Acheson Colloids (Canada) Ltd., Registration
No. 0576975, to the Pension Plan for Salaried Employees of Nacan Products Limited and its Associated and Subsidiary Companies, Registration No. 0286294.


TO:

Nacan Products Limited
60 West Drive
Brampton, Ontario
L6T 4W7

Attention:

Louise Clune, HR Specialist

Employer and Administrator

ORDER

ON or about February 13, 2006, the Superintendent of Financial Services (the “Superintendent”) issued a NOTICE OF PROPOSAL (the “Notice of Proposal”) to Nacan Products Limited (Employer and Administrator), wherein he proposed to REFUSE TO CONSENT to the transfer of assets and liabilities from Nacan Products Limited Pension Plan for Former Employees of Acheson Colloids (Canada) Ltd., Registration No. 0576975 (the “Acheson Plan”) to the Pension Plan for Salaried Employees of Nacan Products Limited and its Associated and Subsidiary Companies, Registration No. 0286294 (the “Nacan Plan”), effective January 1, 2002, under section 81(5) of the Act.

NO REQUEST for a hearing has been received by the Financial Services Tribunal in connection with the Notice of Proposal within the time prescribed by section 89(6) of the Act.

THEREFORE:

THE SUPERINTENDENT REFUSES TO CONSENT to the transfer of assets and liabilities from the Acheson Plan to the Nacan Plan, effective January 1, 2002, under section 81(5) of the Act.

REASONS:

  1. An application was made to the Superintendent for consent to a transfer of assets from the Acheson Plan to the Nacan Plan.

  2. Section 81 of the Act provides that no transfer of assets shall be made from one pension fund to another without the Superintendent’s consent to the transfer of assets. Section 81(5) provides that:

The Superintendent shall refuse to consent to a transfer of assets that does not protect the pension benefits and other benefits of the members and former members of the original plan or that does not meet the prescribed requirements and qualifications. [Emphasis added]

  1. Section 11(a) of the Financial Services Commission of Ontario (“FSCO”) Policy A700-251 entitled “Full Asset Transfers under Section 81 – Superintendent’s Consent Required”, effective as of October 29, 1996, provides that:



    The Superintendent may decide that the benefits are not protected where:
    1. the transfer ratio of the importing plan is less than the highest transfer ratio of the exporting plans, and is less than 1.0;...


  2. The Actuarial Valuation Report as of January 1, 2002 shows that, on an accrued basis, the Acheson Plan (which is the exporting plan) has a surplus of $214, 946 (the difference between the actuarial liabilities of $836, 228 and the actuarial value of assets of $1,051, 174). It also shows that the Acheson Plan has no solvency deficiency. The Report shows that the Acheson Plan is fully funded for accrued benefits on both an ongoing basis and a solvency basis. Therefore, in the event of a full wind up, there would be sufficient assets in the pension fund of the Acheson Plan to pay all benefits provided for under the Acheson Plan.

  3. The “Plan Merger Actuarial Valuation Report” as of January 1, 2002 shows that the Nacan Plan (which is the importing plan) has an unfunded actuarial liability of $3,102,021 (the difference between the actuarial liabilities of $25,557,192 and the actuarial value of assets of $22,455,171). It shows that the Nacan Plan has a solvency deficiency of $2,084,032. Therefore, in the event of a full wind up, there would not be sufficient assets in the pension fund of the Nacan Plan to pay all benefits provided for under the Nacan Plan.

  4. The Actuarial Valuation Report as of January 1, 2002 shows that the transfer ratio of the Acheson Plan is 1.00. The Plan Merger Actuarial Valuation Report shows that the transfer ratio of the Nacan Plan is 0.773.

  5. The Plan Merger Actuarial Valuation Report reveals that the transfer ratio of the merged plan (the importing plan), if there was to be an asset transfer, would be 0.786. Thus the transfer ratio of the importing plan is less than the highest transfer ratio of the exporting plans and is less than 1.0. Accordingly, as of January 1, 2002, in the event of a full wind-up, there would be insufficient assets in the pension fund of the merged plan to pay all the benefits provided for under the merged plan.

  6. The Superintendent asked Nacan Products Limited, through its actuary, to address the Superintendent’s concern that the pension and other benefits of the members and former members of the exporting plan (the Acheson Plan) would not be protected if there was to be an asset transfer, in a letter dated August 28, 2003. Specifically, the Superintendent asked the actuary to demonstrate how the benefits would be protected under the circumstances or provide the Superintendent with its proposed corrective actions to remedy this situation.

  7. In its response dated October 20, 2003, Nacan Products Limited does not demonstrate how the benefits would be protected under the circumstances and does not propose any action that would ensure that in the event of a full wind-up there would be sufficient assets in the merged plan to pay all the benefits provided for under the Acheson Plan. Further, its opinion that the merger would contribute and enhance the protection and security of the pension plan benefits for all Nacan and Acheson plan members because (1) the merged plan would benefit from lower investment management, administration and consulting costs; and (2) with a larger and stronger asset base the merged plan could take advantage of wider range of investments in order to maximize its growth and earnings potential, is not sufficient. These reasons do not provide any assurance that the pension and other benefits of the members and former members of the exporting plan (the Acheson Plan) provided under the Acheson Plan would be protected in the event of a full wind up of the merged plan.

  8. Therefore, the Superintendent refuses to consent to the transfer of assets from the Acheson plan to the Nacan Plan under section 81(5) of the Act.



DATED at Toronto, Ontario, this 24th day of April, 2006.

Tom Golfetto, Director, Pension Plans Branch by
delegated authority from the Superintendent

 
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