IN THE MATTER OF the Pension Benefits Act, R.S.O. 1990, c. P.8, as amended (the “PBA”)
AND IN THE MATTER OF a Proposal of the Superintendent of Financial Services to Revoke the Registration of an Amendment under section 89(1) of the PBA in respect of the PPG Canada Inc. Non-Contributory Retirement Plan for Salaried Employees, Registration Number 0337048.
AND IN THE MATTER OF a Proposal of the Superintendent of Financial Services to Make an Order under section 87 of the PBA in respect of the PPG Canada Inc. Non-Contributory Retirement Plan for Salaried Employees, Registration Number 0337048.
PPG Canada Inc.
834 Caledon Road
Toronto ON M6B 3X9
Mark F. Shoemaker
Director, Finance and Human Resources
Employer and Administrator
NOTICE OF PROPOSAL
I PROPOSE TO MAKE AN ORDER pursuant to section 87 of the PBA to:
- REVOKE THE REGISTRATION of Amendment No. 8 to the PPG Canada Inc. Non-Contributory Retirement Plan for Salaried Employees, Registration Number 0337048 (the “PPG Plan”) dated April 18, 1988; and
- ORDER that PPG Canada Inc. (“PPG”) as Administrator of the PPG Plan include the service for periods of employment that occurred prior to a break in service and that was provided to certain named members of the Duplate Canada Inc. Salaried Employees’ Pension Plan, Registration Number 0212852 (the “Duplate Plan”) under the definition of “Years of Service” in section II of the Duplate Plan, as “Credited Service” as it is defined under the PPG Plan.
- The Duplate Plan and PPG Plan were pension plans of affiliated companies, Duplate Canada Inc. (“Duplate”) and PPG Industries Canada Ltd. (now PPG).
- On July 1, 1982, Duplate was designated as a participating employer in the PPG Plan and the assets of the Duplate Plan applicable to eligible salaried employees of Duplate were transferred to the PPG Plan. The Board Resolution of PPG under which the designation was made stated as follows:
RESOLVED THAT the Duplate Canada Inc. Salaried Employees’ Pension Plan, hereinafter referred to as the Duplate Plan, as in effect on June 30, 1982, shall be added to the list of Prior Plans set out in Section 1.27 and that the dates of July 1, 1982 and June 30, 1982 shall be substituted for July 1, 1981 and June 30, 1981, respectively wherever they occur in the Plan in respect of such eligible salaried employees of Duplate Canada Inc.
- The Duplate Plan provided for both contributory and non-contributory service. It recognized, for specific employees who had breaks in employment with Duplate, the accrual of service for periods prior to the break in employment. The recognition of this service, on a non-contributory basis only (the “Duplate Restored Service”), was set out in paragraph 18 of section II of the Duplate Plan in the definition of “Years of Service”:
18. Years of Service, the period of years, taken to the nearest month, of an employee’s continuous employment by the Company for which he receives salary....For the purpose of Non Contributory Pension Benefits, only, the following periods of service (which occurred prior to a break in service) will be included as Years of Service: [the definition lists 12 individuals, their dates of previous employment and the length of previous employment that is being recognized in the Plan under the heading “Restored Service”]
- As a result of the incorporation of the Duplate Plan into the PPG Plan the members of the Duplate Plan became members of the PPG Plan, and the entitlement of the Duplate Plan members to pension benefits became subject to the provisions of the PPG Plan. Article 5.01 of the PPG Plan in 1982 provided that:
5.01 Normal Retirement Benefit
A Member’s monthly rate of normal retirement benefit, payable commencing on his Normal Retirement Date shall be (a) or (b) below, whichever is greater:
(a) Regular Benefit
The sum of :
(i) 0.85 % of the Member’s Final Average Monthly Salary up to the Final Average Pensionable Earnings, and
(ii) 1.6 % of his Final Average Monthly Salary in excess of the Final Average Pensionable Earnings, multiplied by his years and months of Credited Service.
(b) Alternate Benefit
1.25% of the Member’s Final Average Monthly Salary up to $1,200.00,multiplied by his years and months of Continuous Service.
Notwithstanding anything contained herein to the contrary, the amount of retirement benefit payable to a Member shall in no event be less than the amount of pension benefit payable to him according to the terms of the Prior Plan of which he was a member based on his earnings and service up to July 1, 1981.
- Under Article 5.01 of the PPG Plan the choice of whether a member’s normal retirement benefit is calculated on the basis of the Regular or Alternate Benefit formulae is based on whether the members’ Credited or Continuous Service is used. Article 3.02 sets out what was included in Credited Service for the purposes of the PPG Plan in 1982:
3.02 Credited Service:
(a) Credited Service shall include the number of years and months of a Member’s Continuous Service subsequent to the first day of the month in which the Member attains age 25.
(b) Credited Service for services rendered prior to July 1, 1981 shall be reduced by:
(i) any period during which the Employee was eligible to participate but elected not to participate in a Prior Plan; and
(ii) any period in respect of which the Employee withdrew his contributions made under a Prior Plan;
however, such Credited Service prior to July 1, 1981 shall not be less than the amount of pensionable service credited under a Prior Plan.
- Under Article 3.02 “Credited Service” cannot be “less than the amount of pensionable service credited under a Prior Plan.” There is no definition of “pensionable service” in the Duplate Plan or the PPG Plan. However, because the Duplate Plan provided that the Duplate Restored Service will be included in the Years of Service for the named individuals, it was pensionable service under the Duplate Plan. The Duplate Restored Service was, therefore, pensionable service when the Duplate Plan was incorporated into the PPG Plan. Duplate Plan members who were entitled to the Duplate Restored Service were entitled to have that service included as “Credited Service” when calculating their benefit under the Normal Retirement Benefit in Article 5.01 of the PPG Plan.
- Amendment No. 8 to the PPG Canada Inc. Non-Contributory Retirement Plan for Salaried Employees (“Amendment 8”) was signed on April 18, 1988, with an effective date of June 30, 1982. Amendment 8 defined “Special Duplate Service” and credited members who had Special Duplate Service as follows:
3.03 Special Duplate Service
(a) A Member shall have recognized as Special Duplate Service such service prior to July 1, 1982 which was:
(i) accrued prior to a break in service with Duplate Canada Inc. as determined in accordance with paragraph 18 of Article II of the Duplate Canada Inc. Salaried Employees’ Pension Plan as in effect June 30, 1982...
5.03 Provisions for Members who have Special Duplate Service
The following provisions contained in Article 5.03 apply only to Members who have Special Duplate Service.
(a) The normal retirement benefit payable to such a Member shall be the lesser of (A) or (B) below:
(A) The sum of:
(i) the Member’s normal retirement benefit as determined in accordance with Section 5.01, and
(ii) 1.25% of the Member’s Final Average Monthly Salary up to $1,200 multiplied by his years and months of Special Duplate Service.
(B) The sum of:
(i) 0.85% of the Member’s Final Average Monthly Salary up to the Final Average Pensionable Earnings, and
(ii) 1.6% of his Final Average Monthly Salary in excess of the Final Average Pensionable Earning, multiplied by 35 years....
- Amendment 8, by providing for a separate calculation of Special Duplate Service using the Alternate Benefit Formula in Article 5.03 (a)(A)(ii) in effect, calculates the benefit for the Duplate Restored Service using the Alternate Benefit formula in the Normal Retirement Benefit provision of the PPG Plan. PPG has confirmed that it administers Article 5.03 on this basis. However, PPG was required to recognize the Duplate Restored Service as at the time when the Duplate Plan was incorporated into the PPG Plan in 1982. When PPG chose to do so by making the terms of the PPG Plan applicable to the members of the Duplate Plan, without any specific restrictions on the Duplate Restored Service, PPG recognized the Duplate Restored Service as “Credited Service” under the PPG Plan and entitled the members of the Duplate Plan who had the Duplate Restored Service to have that service credited under the Regular Benefit formula in Article 5.01. By later passing Amendment 8 that credited the Duplate Restored Service as Special Duplate Service using the Alternate Benefit formula instead of the Regular Benefit formula, Amendment 8 reduced the accrued benefit that had already been provided to those Duplate members.
- Section 14 (1) of the PBA states:
(1) An amendment to a pension plan is void if the amendment purports to reduce,
(a) the amount or commuted value of a pension benefit accrued under the pension plan with respect to the employment before the effective date of the amendment;
(b) the amount or the commuted value of a pension or a deferred pension accrued under the pension plan; or
(c) the amount or the commuted value of an ancillary benefit for which a member or former member has met all eligibility requirements under the pension plan necessary to exercise the right to receive payment of benefit.
- Amendment 8 reduces the accrued benefit of the Applicant by accounting for the Duplate Restored Service as an Alternate Benefit instead of as a Regular Benefit when calculating the Normal Retirement Benefit. Therefore, Amendment 8 violates section 14 of the PBA and is void.
- Section 87 of the PBA authorizes the Superintendent by order to require that an administrator “take or refrain from taking any action in respect of a pension plan or a pension fund” if the Superintendent is of the opinion, upon reasonable and probable grounds, that a pension plan is not being administered in accordance with the PBA, the regulations or the pension plan, or if the pension plan does not comply with the PBA and the regulations.” Section 18(1)(e) of the PBA provides that the Superintendent may “revoke the registration of an amendment that does not comply with this Act and the regulations.”
- For the reasons set out above, Amendment 8 violates section 14 of the PBA and is void. Therefore, the Superintendent proposes to make an order under section 87(1) to revoke the registration of Amendment 8 to the PPG Plan.
- Section 19 of the PBA requires the administrator of a pension plan to “ensure that the pension plan...[is] administered in accordance with this Act and the regulations… whether or not the pension plan is amended to comply with this Act and the regulations.”
- As the Duplate Restored Service under the Duplate Plan was incorporated into the PPG Plan as Credited Service, the Superintendent proposes to make an order under section 87 of the PBA that the Duplate Restored Service be treated as Credited Service in the PPG Plan when calculating the Normal Retirement Benefit.
- Such further and other reasons as may come to my attention.
YOU ARE ENTITLED TO A HEARING by the Financial Services Tribunal (the “Tribunal”) pursuant to section 89(6) of the PBA. To request a hearing, you must deliver to the Tribunal a written notice that you require a hearing, within thirty (30) days after this Notice of Proposal is served on you.*
YOUR WRITTEN NOTICE must be delivered to:
Financial Services Tribunal
5160 Yonge Street
Toronto ON M2N 6L9
Attention: The Registrar
FOR FURTHER INFORMATION on a Form for the written notice, please see the Tribunal website at www.fstontario.ca or contact the Registrar of the Tribunal by phone at
(416) 590-7294, toll free at 1-800-668-0128, extension 7294, or by fax at (416) 226-7750.
IF YOU FAIL TO REQUEST A HEARING WITHIN THIRTY (30) DAYS, I MAY CARRY OUT THE PROPOSAL AS DESCRIBED IN THIS NOTICE.
DATED at Toronto, Ontario, this 18 day of December, 2006.
K. David Gordon
Deputy Superintendent, Pensions
Mercer Human Resource Consulting
161 Bay Street, P.O. Box 501
Toronto ON M5J 2S5
Attention: Duncan B. Richardson
* NOTE - Pursuant to section 112 of the PBA any Notice, Order or other document is sufficiently given, served or delivered if delivered personally or sent by regular mail and any document sent by regular mail shall be deemed to be given, served or delivered on the seventh day after the date of mailing.