Dura Automotive Systems (Canada) Ltd. - September 21, 2007

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 refuse to approve, pursuant to section 70(3) of the PBA, payment of 100% of the monthly pension benefit entitlements commencing after the giving of a Notice of Proposal of Wind Up of the Dura Automotive Systems (Canada) Ltd. Pension Plan for Stratford Bargaining Unit Employees, Registration Number 240960.

 

 

TO:                

Dura Automotive Systems (Canada) Ltd.
617 Douro Street
Stratford, ON 
N5A 6V5

Attention: Diana Sinatra

Administrator and Applicant

 


NOTICE OF PROPOSAL

 

I PROPOSE TO REFUSE TO APPROVE the request made December 5, 2006 by Dura Automotive Systems (Canada) Ltd. (“Dura”) for payment of 100% of the monthly pension benefit entitlements of former employees who retired after the date that Dura issued a Notice of Proposal of Wind Up of the Dura Automotive Systems (Canada) Ltd. Pension Plan for Stratford Bargaining Unit Employees, Registration Number 240960 (the “Plan”), pursuant to section 70(3) of the PBA.

 

REASONS:

 

  1. Dura is the employer and administrator of the Plan.  The Plan is a defined benefit plan which covers employees at Dura’s facility in Stratford, Ontario who are represented by the International Association of Machinists and Aerospace Workers, Local No. 1927.

  2. Dura’s American parent company recently sought Chapter 11 Bankruptcy protection in the United States and parallel Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”) proceedings were commenced in Ontario on November 1, 2006. A CCAA stay of proceedings is currently in place.

  3. On or about November 30, 2006, Dura provided notice of its intention to wind up the Plan effective November 2, 2007. Dura has indicated that the reason for the wind up is the planned closure of its Stratford facilities. The bulk of the associated terminations are expected between November 30, 2006 and November 2, 2007.

  4. On December 5, 2006, Dura requested (through its consultant Aon Consulting Inc., “AON”) approval under section 70(3) of the PBA to “commence monthly pension benefits to those members that are eligible for immediate retirement” at the 100% level and for the payment of eligible expenses out of the Plan.

  5. By letter dated December 11, 2006 to AON, Financial Services Commission of Ontario (“FSCO”) staff requested further information in respect of the estimated funded ratio of the Plan on a wind up basis and the level of benefits being paid to current pensioners. Plan related administrative fees and expenses actually occurred at the date of payment and while Dura remained the administrator of the Plan were approved.

  6. On January 15, 2007, AON advised, in a response to FSCO’s December 11, 2006 request, that the transfer ratio for the Plan was 85% as at November 30, 2006. AON also indicated that it was Dura’s intention to “pay out all current and future retirees at 100% of their pension entitlement, while continuing to fund the solvency deficit in accordance with the last filed valuation report.”

  7. On January 31, 2007, Dura’s request for approval under section 70(3) of the PBA to pay 100% of pension entitlements to those members who elect to receive an immediate pension was refused in the Refusal Letter signed by Tom Golfetto, Director, Pension Plans Branch by Delegated Authority from the Superintendent of Financial Services. The reasons cited for the refusal were uncertainty (given the ongoing insolvency proceedings) whether Dura will be able to meet the funding requirements of the Plan, the transfer ratio of 85% and the fact that the solvency payments to the Plan did not take into account the Plan’s wind up liabilities.

  8. On February 21, 2007, counsel for Dura, Baker & Mackenzie LLP, requested clarification on whether the Refusal Letter constituted a Notice of Proposal to Refuse approval and whether or not Dura was entitled to request a hearing in relation to this decision.

  9. On March 28, 2007, FSCO staff responded to Baker & Mackenzie’s February 21, 2007 letter, confirming that FSCO’s January 31, 2007 response did not constitute a proposed refusal of the Superintendent (or his designate) giving rise to hearing rights but was intended to provide Dura with an indication of the recommendation that FSCO staff would make to the Superintendent (or his designate) if the matter were to proceed to the Notice of Proposal (NOP) stage and was based on information available to FSCO staff at the time of the January 31, 2007 letter. Dura was then invited to provide new information supporting their position.

  10. Baker & Mackenzie responded by letter dated May 1, 2007 indicating that Dura did not have any new information to submit at that time and requesting on behalf of Dura that a Notice of Proposal be issued by the Superintendent (or his designate) under section 89 of the PBA in respect of the position set out in FSCO’s January 31, 2007 letter.

  11. There are insufficient grounds in the present case to approve payment of 100% of pension benefit entitlements to employees who have or will retire from Dura subsequent to the effective date of the wind up (“Future Retirees”). In particular:

    1. Adequate funding of the pension fund is in doubt due to the CCAA proceedings;

    2. In the event that the restructuring of Dura fails and Dura proceeds to bankruptcy and there are insufficient funds available in the estate to fund the wind up deficit, benefits will need to be reduced by the administrator appointed by the Superintendent;

    3. The proposal of Dura to continue to fund the solvency deficit in accordance with the last filed valuation report does not address the deficit with respect to the wind up of the Plan effective November 2, 2007.


      Consequently, payment of 100% of pension benefit entitlements to Future Retirees could add additional hardship to all retirees should the payment of the additional amounts over the funded ratio of 85% need to be repaid or recouped through lump sum payments or a reduction in future pension benefit payments.

  12. 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  21st day of September, 2007

 

 


                            _______________             

K. David Gordon
Deputy Superintendent, Pensions

 

Copy:  

Baker & Mackenzie LLP
BCE Place
181 Bay Street, Suite 2100
P.O. Box 874
Toronto, ON 
M5J 2T3

Attention: Susan G. Seller
Counsel for Dura Automotive Systems (Canada) Ltd.

 

* 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.

 
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