St. Lawrence Cement - March 9, 2007

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 Refuse to Approve a Partial Wind up Report under section 70 of the Act, relating to  the Retirement Plan for Salaried Employees of St. Lawrence Cement Registration No. 0338301.

 

AND IN THE MATTER OF a Proposal by the Superintendent of Financial Services to Require a New Report under section 88 of the Act relating to the Retirement Plan for Salaried Employees of St. Lawrence Cement Registration No. 0338301.

 

TO:                

St Lawrence Cement
1945 Graham Blvd., 2nd Floor
Mount Royal QC H3R 1H1

Attention: Marie-France Lavallée                    

Employer and Administrator of the Plan

                      

NOTICE OF PROPOSAL

                       

I PROPOSE TO REFUSE TO APPROVE the Report on the Partial Wind up of the Retirement Plan for Salaried Employees of St. Lawrence Cement Registration No. 0338301 (the “Plan”) as at July 31, 2000 (the “Initial Report”), dated February 2001 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 July 31, 2000 relating to the Plan, pursuant to sections 70 and 88 of the Act.

 

REASONS FOR THE PROPOSED ORDER:

  1. The Plan was partially wound up effective July 31, 2000. The Initial Report was filed with the Superintendent on March 5, 2001. The Initial Report showed that, in respect of the partial wind up, there was an excess of assets over liabilities in the amount of $629,600. The Initial Report did not contain any proposal for the distribution of the surplus related to the partial wind up.

  2. On August 29, 2001, the Superintendent approved the distribution of the basic benefits pursuant to section 70(3) of the Act.

  3. The August 29, 2001, letter from the Superintendent states that “pursuant to subsection 70(6) of the Act, the members, former members and other persons affected by the partial wind up ‘shall have rights and benefits that are not less than the rights and benefits they have on a full wind up of the pension plan on the effective date of the partial wind up.’ The rights and benefits referred to in this subsection may include any entitlements to surplus that would exist on a full wind up. As a result, the surplus attributable to the members, former members and other persons affected by the partial wind up must be dealt with in accordance with the Act.”

  4. No action was taken by the administrator of the Plan respecting the surplus related to the partial wind up. 

  5. By letter dated August 23, 2004, the Financial Services Commission of Ontario (“FSCO”) informed the plan administrator that the partial wind up of the plan had not been completed because there are assets that relate to the partial wind up portion of the Plan that were not distributed on the effective date of the partial wind up of the Plan.

  6. In the August 23, 2004, letter FSCO also requested that the plan administrator provide an update of the funding position of the Plan in respect to the wound-up portion of the Plan and if any surplus assets related to the wound-up portion of the Plan remain, advise the FSCO of the proposed plan and timetable to expedite the distribution of surplus.

  7. Mercer, the Plan actuary, provided FSCO with an update on the funding position of the Plan with respect to the July 31, 2000 partial wind up of the Plan (the “Revised Wind-up Report”) on May 2, 2005. The Revised Wind-up Report shows that the surplus related to the wound-up portion of the Plan was $264,500 as of February 28, 2005. However, Mercer did not provide a proposed plan and time line to expedite the distribution of surplus at that time. However by letter dated July 25, 2006, Mercer provided a work plan and a timeline. The work plan provided a two phase approach. Phase 1 involved the update of the financial position, a legal review and an analysis of the Plan. It also involved making a determination of on whether to propose a surplus distribution agreement. Phase 2 consisted of the distribution of surplus.

  8. Mercer proposed to complete Phase 1 by the end of the third quarter of 2006 and to complete Phase 2 by the end of the fourth quarter of 2006 or within 3 months after a surplus distribution agreement is reached.

  9. To date, the plan administrator has not provided an update on the financial position for the partial wind up of the Plan or a plan for distribution of the remaining assets related to the partially wound-up portion of the Plan as proposed.

  10. Section 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.

  11. 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.

  12. 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.

  13. Section 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.

  14. Section 70(1)(c) of the Act states that the administrator shall file a wind up report that sets out the methods of allocating and distributing the assets of the pension plan and determining the priorities for payment of benefits.

  15. 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.

  16. Therefore, the Initial Report does not comply with the Act because it does not       provide for the distribution of surplus on partial wind up.

  17. Section 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 Regulation 909.

  18. 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 and wishes to have the surplus paid to the employer, the employer must apply to the Superintendent for the Superintendent’s consent to withdraw surplus pursuant to subsection 78(1) of the Act.  In so doing, employer must demonstrate compliance with section 79(3) of the Act and obtain the consent of at least 2/3 of the members pursuant to section 8 of Regulation 909, as amended.

  19. 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. 
  20. 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.

  21. 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 9th day of March, 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.


 
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