Volkswagen Canada Inc. - April 24, 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 a Partial Wind Up Report under section 70 of the PBA relating to the Retirement Plan for the Employees of Volkswagen Canada Inc, Registration No. 0315226.

AND IN THE MATTER OF a Proposal to Require a New Report by the Superintendent of Financial Services under section 88 of the PBA relating to the Retirement Plan for the Employees of Volkswagen Canada Inc., Registration No. 0315226.

 

 

TO:                

Volkswagen Canada Inc.
777 Bayly Street West
Ajax ON   L1S 7G7

 

Attention:      

Mr. D. G. McQuirter
Human Resources Advisor

 

AND TO:       

Mr. Todd Hellstrom
Hewitt Associates
2 Sheppard Avenue East
Toronto, ON M2N 7A4


NOTICE OF PROPOSAL

I PROPOSE TO REFUSE TO APPROVE: The Actuarial Report on the Partial Wind-up of Retirement Plan for the Employees of Volkswagen Canada Inc., Registration Number 0315226, (the “Plan”) as at December 31, 1994.

 

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 December 31, 1994 relating to the Plan, pursuant to sections 70 and 88 of the PBA.

 

REASONS FOR THE PROPOSED ORDER:

  1. The Plan was partially wound up effective December 31, 1994. A partial wind up report was filed with the Superintendent of Financial Services (the “Superintendent”) on April 24, 1995 (the “Wind up Report”). The Wind Up Report indicated that there was an excess of partial wind up assets over liabilities. The Wind Up Report did not contain any proposal for the distribution of surplus to the members of the Plan who were affected by the partial wind up.

  2. On January 16, 1996 the Superintendent approved the distribution of basic benefits pursuant to section 70(3) of the PBA and advised Volkswagen Canada Inc. that any proposals with respect to the distribution of surplus would be dealt with separately.

  3. The Financial Services Commission of Ontario (“FSCO”) by letter dated August 18, 2004, advised Volkswagen Canada Inc. that the partial wind up of the Plan had not been completed as the surplus assets that relate to the wound-up portion of the plan have not been distributed.  FSCO requested that the Company submit a notice of the Company’s intentions regarding the distribution of surplus by October 17, 2004.

  4. The Company advised FSCO, by letter dated February 24, 2005, from Hewitt Associates, the Plan actuary, that it intends to leave the surplus in respect of the December 31, 1994 partial wind-up in the Plan. The Company states that the surplus of $14,690 is too small to justify the expense of determining and distributing the surplus as the cost of updating the Plan’s funded position, determining the ownership of surplus, finding the former employees and distributing the surplus will exceed the updated amount of surplus.

  5. FSCO by letter dated April 22, 2005, advised Hewitt and Associates that before reviewing the letter of February 24, 2005, information relating to the 23 members who were part of the Early Retirement Window during the same time frame as the partial wind-up was needed. FSCO also indicated that if the Early Retirement Window employees are not included as part of the partial wind-up, then the position of the Plan immediately prior to the wind-up is represented in the Wind up Report. FSCO also informed Hewitt that an attribution of the assets by liability as of that date would yield a surplus amount substantially different than the amount of $14,690 quoted in the February 24, 2005 letter.

  6. FSCO did not receive a response from Hewitt to its letter of April 22, 2005. FSCO subsequently sent two reminder letters to Hewitt dated June 23, 2005 and August 9, 2005 requesting that it respond to the issues raised in its letter dated April 22, 2005. To date Hewitt has not responded.

  7. Section 88(2) (c) of the PBA 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 PBA, regulations, or the pension plan.

  8. Section 1 of the PBA defines “partial wind up” as meaning a distribution of assets of the Plan that are related to the partial wind up.

  9. Section 1 of the PBA 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.

  10. Section 70(6) of the PBA 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.

  11. Section 70(1)(c) of the PBA 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 payments of benefits.

  12. 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.

  13. Therefore, both the Wind Up Report and the Revised Report do not comply with the PBA because they do not provide for the distribution of surplus on partial wind up.

  14. Section 87(2)(c) of the PBA 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 PBA or regulations.

  15. 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 wants the surplus paid to the employer, the employer must apply to the Superintendent for consent to withdraw surplus pursuant to section 78(1) of the PBA. The employer must also show compliance with section 79(3) of the PBA and obtain the consent of at least 2/3 of the members pursuant to section 8 of  Regulation 909, R.R.O 1990.

  16. 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.

  17. 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.

  18. 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 section 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 24th day of  April, 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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