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 to Refuse to Approve a Partial Wind up Report by the Superintendent of Financial Services under section 70 of the Act, relating to the Retirement Plan for the Employees of Marshall-Barwick Inc. and Associated Companies Registration No. 0968081.
AND IN THE MATTER OF a Proposal to Require a New Report by the Superintendent of Financial Services under section 88 of the Act relating to the Retirement Plan for the Employees of Marshall-Barwick Inc. and Associated Companies Registration No. 0968081.
Marshall Barwick Inc.
100 Sheppard Avenue East
North York ON M2N 6N5
Employer and Administrator of the Plan
NOTICE OF PROPOSAL
I PROPOSE TO REFUSE TO APPROVE:
- The Actuarial Report on the Partial Wind-up of Retirement Plan for the Employees of Marshall-Barwick Inc. and Associated Companies, Registration No. 098081
(the “Plan”) as at as at August 28, 1992 ( the “Initial Report”), and
- The Revision to the Initial Report dated November 5, 2005 (the “Revised Report”) relating to the Plan, pursuant to section 70 of the Act.
I ALSO PROPOSE TO REQUIRE A NEW REPORT to be prepared and filed within sixty (60) days from the date of this Notice of Proposal, which shall deal with the distribution of surplus related to the partial wind up effective August 28, 1992 relating to the Plan, pursuant to sections 70 and 88 of the Act.
REASONS FOR THE PROPOSED ORDER:
- The Plan was partially wound up effective August 28, 1992. A partial wind up report was filed with the Superintendent of Financial Services (the “Superintendent”) on October 5, 1993 (the “Initial Report”). The Initial Report showed that there was an excess of partial wind up assets over liabilities in the amount of $164,700. The Initial Report did not contain any proposal for the distribution of surplus related to the partial wind up.
- On December 1, 1995 the Superintendent approved the distribution of basic benefits pursuant to section 70(3) of the Act and advised Watson Wyatt Worldwide (the “Plan Actuary”) that any proposals with respect to the distribution of surplus would be dealt with separately.
- The Plan Actuary submitted a revision to the Initial Report, the Revised Report, to the Financial Services Commission of Ontario (FSCO) dated November 5, 2005. The Revised Report shows that the market value of the excess of partial wind up assets over liabilities is $801,600.
- FSCO by letter February 13, 2006, advised Marshall-Barwick Inc. (the “Company”) that the Revised Report did not set out any proposal regarding the distribution of surplus. FSCO requested that the Company submit a notice of the Company’s intentions regarding the distribution of surplus by March 9, 2006.
- By letter dated October 17, 2006, FSCO again requested that the Company submit its proposals regarding the distribution of surplus and gave the Company a deadline of November 17, 2006 to do so.
- The Company advised FSCO, by letter dated January 16, 2007, that it intends to leave the surplus in respect of the August 28, 1992 partial wind-up in the Plan to defray the remaining obligations of the Plan.
- Clause 88(2)(c) of the Act states that the Superintendent may make an order requiring the preparation of a new report and specifying the assumptions or methods or both that shall be used in the preparation of the new report, if the Superintendent is of the opinion that a report submitted in respect of a pension plan does not meet the requirements and qualifications of the Act, regulations, or the pension plan.
- Section 1 of the Act defines “partial wind up” as meaning a distribution of assets of the Plan that are related to the partial wind up.
- Section 1 of the Act defines “surplus” as the excess of the value of the assets of a pension fund related to a pension plan over the value of the liabilities under the pension plan, both calculated in the prescribed manner.
- Subsection 70(6) of the Act states that on a partial wind up, members, former members and other persons entitled to benefits under the pension plan shall have rights and benefits that are not less than the rights and benefits they would have on a full wind up of the pension plan on the effective date of the partial wind up.
- Clause 70(1)(c) of the Act states that the administrator shall file a partial wind up report that sets out the methods of allocating and distributing the assets of the pension plan and determine the priorities for payment of benefits.
- The Supreme Court of Canada has confirmed, in Monsanto Canada Inc. et al. v. Superintendent of Financial Services (2004 SCC 54), that members affected by a partial wind up are entitled to have surplus assets distributed on the effective date of the partial wind up.
- Therefore, both the Initial Report and Revised Report do not comply with the Act because they do not provide for the distribution of surplus on partial wind up.
- Clause 87(2)(c) of the Act states that the Superintendent may make an order if the Superintendent is of the opinion, upon reasonable and probable grounds, that the administrator or employer of the plan is contravening a requirement of the Act or regulations.
- On a full wind up, all assets of the plan are distributed. If there are surplus assets and the members are entitled to surplus under the terms of the pension plan, the surplus must be distributed to the members. If there are surplus assets, and the employer is entitled to surplus under the terms of the pension plan, the employer must apply to the Superintendent for the Superintendent’s consent to withdraw surplus pursuant to subsection 79(3) of the Act. The employer must also obtain the consent of at least 2/3 of the members pursuant to section 8 of Regulation 909, as amended.
- Because the members are entitled to a surplus distribution on full wind up if they are entitled to surplus under the plan, they have the same right on partial wind up.
- Because the members are entitled to consent to a surplus withdrawal by the employer on full wind up if the employer is entitled to surplus under the plan, they have the same right on partial wind up.
- Such further and other reasons as may come to my attention.
YOU ARE ENTITLED TO A HEARING before the Financial Services Tribunal of Ontario (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 REQUEST must be delivered to:
Financial Services Tribunal
5160 Yonge Street, 14th Floor
Toronto ON M2N 6L9
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 ISSUE THE ORDERS PROPOSED IN THIS NOTICE OF PROPOSAL.
DATED at Toronto, Ontario, this 26th day of February, 2007.
K. David Gordon
Deputy Superintendent, Pensions
*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 the day of mailing.