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 Make an Order under sections 63(3) and 87(2)(a) of the PBA relating to a refund of contributions with interest to the Estate of Audrey Horne from the Ontario Teachers’ Pension Plan, Registration Number 0345785
Ontario Teachers’ Pension Plan Board
5650 Yonge Street, 4th Floor
Attention: Scott Perkin
Director, Plan Policy & Corporate Privacy Officer
Administrator of the Plan
Arthur G. Horne
Gadshill Station, Ontario
NOTICE OF PROPOSAL
I PROPOSE TO MAKE AN ORDER in respect of the Ontario Teachers’ Pension Plan, Registration Number 0345785, (the “Plan”) under sections 63(3) and 87(2)(a) of the PBA, that contributions made by the late Audrey Horne (“Mrs. Horne”) be refunded with interest at the rate used to calculate interest on contributions of members and former members under the Plan, from the date Mrs. Horne’s membership in the Plan terminated to the beginning of the month of payment.
- The Ontario Teachers’ Pension Plan Board (the “Board”) is the administrator of the Plan.
- During the years 1961 through 1963, Mrs. Horne was a non-vested member of the Plan who made contributions to the Plan in the total amount of $384.00.
- There is no evidence that Mrs. Horne ever applied to withdraw her contributions from the Plan and or that she withdrew from the teaching profession.
- Mrs. Horne died on December 11, 2000. Arthur G. Horne is Mrs. Horne’s widower and the personal representative of her estate (the “Horne Estate”).
- The Board has refused to pay the Horne Estate interest on Mrs. Horne’s contributions for the period prior to January 1, 1987.
- Interest is owing on Mrs. Horne’s contributions with respect to the pre-1987 period for two reasons: a) section 63(3) of the PBA applies; b) in the alternative, section 11 of The Teachers’ Superannuation Act, R.S.O. 1960, C.392 (the “TSA”) applies.
a) Section 63(3) of the PBA
- Section 63(3) of the PBA states: Despite subsection (1) (which states that no member or former member is entitled to a refund of contributions made in respect of employment in Ontario), a member whose employment is terminated and who is not entitled to a pension or to a deferred pension under section 36 (deferred pension for past service) is entitled to payment within the prescribed period of time of an amount equal to not less than the amount of the member’s contributions, and the interest on the contributions, made under the pension plan in respect of the member’s employment before the 1st day of January, 1987.
- Mrs. Horne was not entitled to a pension or a deferred pension under section 36 of the PBA because she was not employed for a sufficient length of time to become vested.
- Section 63(3) of the PBA must be interpreted as having a retrospective effect because:
a) section 63(3) of the PBA does not state that it does not apply to employment prior to January 1, 1987; indeed, it states the opposite;
b) not to apply section 63(3) of the PBA would result in the mischief that this provision was designed to prevent (the inequity of members not being paid interest on their contributions);
c) Mrs. Horne’s contributions earned income for the Plan, and it would be inequitable not to refund the interest to her estate;
d) applying section 63(3) of the PBA in a prospective sense only would render it virtually meaningless or give it a very small scope of application.
- Section 24(11) of Regulation 909, R.R.O. 1990, as amended, states that if a person is entitled to be paid a lump sum from a pension plan, the amount owing shall accumulate interest, to be calculated at the same rate used to calculate interest on contributions of members and former members under the plan, from the date of termination to the beginning of the month of payment.
b) The Teachers’ Superannuation Act
- The Board takes the position that section 48(2) of the “TSA” applies and that therefore no interest is payable on the pre-1987 contributions. Section 48(2) of the TSA states: A person who was employed after the 1st day of April, 1949 for twenty or more days in a school year and ceases to be employed by withdrawing from the profession is entitled to a refund of an amount equal to the whole of his contributions to the Fund, but no such refund shall be made until three months have elapsed after the date upon which the person ceased to be employed.
- The Board’s position is that because section 48(1) of the TSA provides for interest on a refund of contributions to someone who was employed for five or more years, section 48(2) by its silence on interest signifies that no interest is to be paid.
- However, the TSA clearly specified circumstances in which no interest was payable. For example, section 53 of the TSA states that a person who has been employed for fewer than twenty days in a school year is entitled to a refund of an amount equal to the whole of his contributions to the Fund for that school year “without interest”.
- In addition, section 11 of the TSA states that except where specifically provided by the TSA, interest shall be payable on any payment into or out of the Fund, other than an allowance, which is six months or more “in arrear”, at the rate of 4 ¾ % per annum compounded half-yearly.
- The Board takes the position that section 11 of the TSA does not apply because there were never any arrears due to the fact that Mrs. Horne did not apply for a refund of her contributions at any point prior to 1987.
- The requirement under the TSA to apply for a refund of contributions was simply a procedural requirement, however, and does not detract from the fact that Mrs. Horne’s entitlement to the refund arose when she ceased to be employed.
- Finally, even if section 48(2) of the TSA can be interpreted as requiring no interest to be paid, that provision does not apply to Mrs. Horne, because there is no evidence that she ever withdrew from the teaching profession. Therefore, section 48(2) does not apply.
- In addition, even if section 48(2) of the TSA can be interpreted as requiring no interest and as applying to Mrs. Horne, section 63(3) of the PBA prevails. Section 114 of the PBA states that in the event of a conflict between the PBA and any other Act, except the Financial Services Commission of Ontario Act, 1997, the PBA prevails unless the other Act states that it is to prevail over the PBA. Neither the TSA nor the current Teachers’ Pension Act states that it prevails over the PBA.
- 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, 14th Floor
Toronto, Ontario 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, ext. 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 18th day of August, 2008
K. David Gordon
Deputy Superintendent, Pensions
* 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.