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 Make an Order under sections 33 and 87 of the Act in respect of the Retirement Plan for Full Time Retail Store Employees of The Great Atlantic & Pacific Company of Canada, Limited who are Members of Local 414 of Retail Wholesale Canada/CAW Division
, Registration No. 900944.
The Great Atlantic & Pacific Company of Canada, Limited
P.O. Box 68 Station ‘A’
Toronto, ON M5W 1A6
Terry R. Howard
Vice President, Treasury, Tax, Retail Financial Planning & Analysis
Employer and Administrator of the Plan
NOTICE OF PROPOSAL
I PROPOSE TO MAKE
- AN ORDER under sections 33 and 87 of the Act that the Administrator of the Retirement Plan for Full Time Retail Store Employees of The Great Atlantic & Pacific Company of Canada, Limited who are Members of Local 414 of Retail Wholesale Canada/CAW Division, Registration No. 900944 (the “Plan”):
- Effective January 1, 1988, permit all current and former part time employees who are or were members of the bargaining unit represented by the Local 414 of Retail Wholesale Canada/CAW Division (the “CAW”) or its predecessor bargaining agents and who were employed on or after January 1, 1988 to become members of the Plan upon 24 months of less than full-time continuous employment with The Great Atlantic & Pacific Company of Canada, Limited (“A&P”), with the lesser of:
- earnings of not less than 35% of the Year’s Maximum Pensionable Earnings as defined in the Act; or
- 700 hours employment with the employer
in each of two consecutive calendar years immediately prior to membership in the Plan; and
- Provide to such current and former part time employees covered by paragraph (1)(a), within sixty (60) days from the date of this Order, and on an ongoing basis, pension benefits in accordance with the terms of the Plan determined on the basis that such part time employees were eligible for membership in accordance with paragraph (a), with interest in respect of any lump sum representing retroactive payments to such part time employees’calculated as prescribed in Regulation 909, R.R.O. 1990; or
- AN ORDER, in the alternative to the order set out in paragraph 1, that A&P establish effective January 1, 1988 and maintain a separate pension plan for current and former part time employees covered by paragraph (1)(a) with pension benefits and other benefits reasonably equivalent to those provided to full time employees under the Plan.
- The Plan is a single employer non-contributory defined benefit pension plan. A&P is both the employer and administrator of the Plan. At all material times, the Plan has been subject to collective bargaining between the CAW or its predecessor bargaining agents (the “Union”) and A&P.
- The Plan (then called The Great Atlantic & Pacific Company of Canada, Limited Retirement Plan for Full-Time Retail Store Employees Who Are Members of Local 414 or the Northern Joint Council of the Retail, Wholesale and Department Store Union) was established effective January 1, 1987 and is a successor to the Retirement Income Plan for Union Employees of New Dominion Stores, Inc. Only employees of A&P who were employed on a full time basis and were members of Locals 414, 429, 545, 579, 582 or 915 of the Retail, Wholesale and Department Store Union (a predecessor union to the CAW) were eligible to become members of the Plan.
- The name and text of the Plan were amended effective August 1, 1995 to reflect the fact that the Retail, Wholesale and Department Store Union, Local 414 affiliated with the United Steelworkers of America to become the Retail Wholesale Canada, Canadian Service Sector Division of the United Steelworkers of America, Local 414. The name and text of the Plan were further amended effective January 1, 2000 to reflect the fact that the CAW became the union under the terms of the Plan.
- From the inception of the Plan in 1987 until 2002, the Plan expressly limited membership to full time employees of A&P who were represented by the Union (“full time employees”). This limitation was consistent with the terms of the applicable collective agreement as negotiated between A&P and the Union.
- Pursuant to the terms of the collective agreement ratified by the members of the Union on January 13, 2002 (the “2002 Agreement”), pension benefits were to be provided to part-time employees represented by the Union (“part time employees”) effective
March 1, 2002 in respect of employment on and after March 1, 2002 by the inclusion of part-time employees as a class of employees entitled to certain identified benefits under the Plan.
- To date, A&P has not filed amendments to the Plan associated with the 2002 Agreement nor has A&P responded to requests from Financial Services Commission of Ontario (“FSCO”) staff for information as to the benefits offered to part time employees and whether or not such benefits are “reasonably equivalent” to benefits provided to full time employees as required by section 34 of the Act.
- Section 31(1) of the Act states that “[e]very employee of a class of employees for whom a pension plan is established is eligible to be a member of the pension plan.”
- Section 31(2) provides that a full time employee “is entitled to become a member of the pension plan upon application at any time after completing twenty-four months of continuous full-time employment.” Section 31(3) sets out the analogous tenure requirement for part time employees stating that,
A pension plan may require not more than twenty-four months of less than full-time continuous employment with the employer, with the lesser of,
- earnings of not less than 35% of the Year’s Maximum Pensionable Earnings; or
- 700 hours employment with the employer,
in each of two consecutive calendar years immediately prior to membership in the pension plan, or such equivalent basis as is approved by the Superintendent, as a condition precedent to membership in the pension plan.
- Section 32 of the Act states that “[a] member of a pension plan who is employed continuously on a less than a full time basis does not cease to be a member by reason only that he or she has” dropped below the earnings or hours thresholds set out in section 31(3) of the Act.
- Under section 33 of the Act, the Superintendent may require by order that the administrator of a pension plan accept an “employee as a member” of the pension plan where “on the basis of the nature of the employment or of the terms of the employment of the employee, the employee is a member of the class” for whom the pension plan is established or maintained.
- Section 34 of the Act states that “[a]n employer may establish or maintain a separate pension plan for employees employed in less than full-time continuous employment if the separate pension plan provides pension benefits and other benefits reasonably equivalent to those provided under the pension plan maintained by the employer for employees of the same class employed in full-time continuous employment.”
- Sections 31 to 34 of the Act came into force effective January 1, 1988. These sections constitute a statutory scheme whereby part time employees are entitled to membership in a pension plan (or membership in a plan which has reasonably equivalent benefits) regardless of their part time status provided that “on the basis of the nature of the employment or of the terms of the employment of the employee, the employee is a member of the class” for whom the pension plan is established or maintained.
Plan Prior to 2002
- Prior to 2002, the denial of Plan membership to part time employees only because of their part time status is a contravention of sections 31 to 34 of the Act.
- A&P has not demonstrated that the nature and terms of employment for part time employees are distinct from the nature and terms of the employment for full time employees as is required to support a finding that part time employees are members of separate class within the meaning of the Act. Differences between the two groups arising out of general demographic characteristics do not give rise to such a class distinction because such differences are not differences in the nature and terms of employment and do not necessarily apply to every member of the group in question. To the extent that the full time and part time employees may exhibit some differences in the general distribution of job duties across each group, these differences do not apply in respect of full and part time groups as a whole and are not the result of distinct characteristics of the part time jobs.
- The fact that the Union, as a matter of collective bargaining, agreed to the exclusion of part time members from Plan membership does not alter the conclusion that the Act has been contravened. Section 19(1) of the Act requires that the administrator of a pension plan administer a pension plan and fund in accordance with the Act and regulations and section 19(4) so requires even if the documents for the Plan set out terms that conflict with the minimum requirements of the Act and regulations. For the reasons set out above, the exclusion of part time employees does not meet the requirements of the Act and the agreement of the Union to such non-compliant Plan provisions does not alter this conclusion.
- A&P has raised the fact of the 2002 Agreement in its submissions to the Superintendent. FSCO staff have not been provided with the text of the amendments to the Plan associated with the 2002 Agreement nor have FSCO staff been provided with any other information from A&P that would permit FSCO staff to conclude that the benefits extended to part time employees in the 2002 Agreement are “reasonably equivalent” to the benefits provided to full time employees under the Plan as is required by section 34 of the Act. Accordingly, the Superintendent is unable to conclude that the 2002 Agreement meets the requirements of the Act.
- In addition, the 2002 Agreement would not be sufficient to bring the Plan into compliance with the Act (even assuming that it did contain reasonably equivalent benefits for part time employees) because the 2002 Agreement does not apply prior to 2002 despite the fact that the provisions of the Act granting entitlement to pension plan membership to part time employees came into force in 1988.
- Section 87 of the Act 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 Act, the regulations or the pension plan or if the pension plan does not comply with the Act and the regulations.
- As set out above, the Plan does not comply with the Act because under the terms of the Plan, part time employees are not entitled to membership in the Plan. The Plan is not being administered in accordance with the Act because the Plan is being administered so as not to extend membership to part time employees although the Act so requires. Accordingly, the Superintendent proposes to order that A&P take measures to comply with sections 31 to 34 of the Act by extending membership eligibility to part time employees effective the date that sections 31 to 34 of the Act came into force, January 1, 1988, in accordance with the terms of paragraph 1 of the proposed order set out above.
- In doing so, A&P is required to recognize the fact that the entitlement of part time employees to Plan membership dates from January 1, 1988. Current and former part time employees may have already become entitled to benefits under the Plan and A&P is required to pay any pension benefits accordingly. Any lump sum amounts payable in respect of pension benefits not paid to date should be paid with interest calculated in accordance with the rate and method applicable to lump sum payments from a pension plan set out in section 24(11) of Regulation 909, R.R.O. 1990.
- In the alternative to the extension of membership in the Plan to part time employees as set out in paragraph 1 of the proposed order, the Superintendent proposes to order that A&P establish a plan for part time employees effective January 1, 1988 that contains benefits that are reasonably equivalent to the benefits provided in the Plan to full time employees.
- Such further and other reasons as may come to my attention.
YOU ARE ENTITLED TO A HEARING before the Financial Services Tribunal (the “Tribunal”) pursuant to subsection 89(6) of the Act. 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, 14th Floor
Attention: The Registrar
For further information, contact the Registrar of the Tribunal by phone at 416-226-7752, or toll free at 1-800-668-0128, ext. 7752, 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, May 12, 2006.
K. David Gordon Deputy Superintendent, Pensions
CC: D. Vincent, Ogilvy Renault LLP
H. O’Reilly, Cavalluzzo Hayes Shilton McIntyre & Cornish
*NOTE—PURSUANT to section 112 of the Act any notice, order or other document is sufficiently given, served, or delivered if delivered personally or sent by first class mail and any document sent by first class mail shall be deemed to be given, served, or delivered on the seventh day after mailing.