IN THE MATTER OF the Pension Benefits Act, R.S.O. 1990, c. P.8, as amended (the “Act”);
AND IN THE MATTER OF an Application under section 78(4) of the Act submitted by Ricoh Canada in respect of the NRG Inc. Retirement Income Plan, Registration Number 0253682 (the “Plan”).
Yonge Corporate Centre
4100 Yonge Street, Suite 600
Toronto, Ontario M2P 2B5
Director, Human Resources
Applicant, Employer and Administrator of the Plan
NOTICE OF PROPOSAL
I PROPOSE TO REFUSE TO CONSENT to the application dated July 13, 2001, under section 78(4) of the Act by Ricoh Canada (the “Applicant”) for payment of $231,472 as of December 31, 2000, plus investment earnings thereon to the date of payment out of the pension fund for the Plan.
REASONS FOR THE REFUSAL:
- The Applicant submitted an application dated July 13, 2001 (the “Application”), pursuant to section 78(4) of the Act, for the Superintendent’s consent to a payment of $231, 472 as of December 31, 2000, plus investment earnings thereon to the date of payment, out of the fund for the Plan. The Applicant claims that this is the amount of an overpayment by the Applicant into the pension fund for the Plan made on February 9, 1999.
- The Plan is a defined benefit pension plan. The Plan was fully wound up with an effective wind up date of February 28, 1996 (the “Wind up Date”). The Wind Up Report disclosed a surplus of $313,000 as of the Wind up Date.
- The Superintendent of Financial Services (the “Superintendent”) approved the Wind Up Report on July 21, 1997 and directed the Applicant to proceed with the distribution of benefits in accordance with the Wind Up Report.
- The Application states that due to delays in receiving approvals from Revenue Canada, settlements of benefits were delayed until middle of 1998. Further, due to a decrease in annuity purchase rates after the Wind up Date, an updated financial position was prepared and filed with FSCO in a supplementary actuarial opinion as of October 1, 1998 (“Supplementary Report”). This Supplementary Report showed a deficit of $765,000. The Applicant made a lump payment of $765,000 to the pension fund of the Plan on February 9, 1999 to fund the deficit and the remaining members’ benefits were fully settled.
- The Applicant states that due to increases in annuity purchase rates between October 1, 1998 and the date of the annuity purchases, there was a financial gain to the Plan resulting in excess assets in the Plan of $231,472 as of December 31, 2000 (the “excess assets”).
- 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.” The excess assets are assets of the pension fund for the Plan left over after all the liabilities under the Plan have been satisfied and, therefore, the excess assets are surplus within the meaning of section 1 of the Act and, as such, the Superintendent can only consent to the payment of money that is surplus to the employer if the requirements of section 79 of the Act have been met.
- Section 78(4) of the Act provides that the Superintendent may consent to payment out of a pension fund to an employer of an amount not in excess of the amount of an overpayment by the employer into the pension fund or of an amount paid by the employer that should have been paid out of the pension fund, but shall not consent unless the application is made in the same fiscal year of the pension fund as the fiscal year in which the overpayment or the payment occurred.
- The excess assets do not result from any of the circumstances listed in the Financial Services Commission of Ontario’s (“FSCO’s”), policy entitled “Application for Refund of Employer Overpayment” (Index No. R350-102), in which an employer may be considered to have over-contributed to a pension fund for the purposes of section 78(4) of the Act. Specifically, the excess assets do not result from contributions made on the basis of an actuarial report for which the effective date has passed but when the new report was filed, such contributions exceeded those required by the new report. Nor do the excess assets result from payments made directly by the employer when those payments should have been made from the pension fund. Lastly, the excess assets do not result from contributions paid into the pension fund of the wrong pension plan as a result of an administrative error.
- Section 75(1)(b)(ii) of the Act requires that where a pension plan is wound up, the employer pay into the pension fund an amount equal to the amount by which, the value of the pension benefits accrued with respect to employment in Ontario exceed the value of the assets of the pension fund allocated as prescribed for payment of pension benefits accrued with respect to employment in Ontario. Section 32(1) of the Regulation states that “[u]ntil the employer’s liability under section 75 of the Act is funded, the administrator of the Plan shall annually cause the Plan to be reviewed and a report to be prepared by a person authorized by section 15 and shall file the report within six months after the valuation date of the report.” Section 32(4) of the Regulation states:
Where a report made under this section shows that there is no further amount to be funded, any surplus may revert to the employer, subject to the requirements of section 79 of the Act
- The Applicant claims that the payment into the Plan was not made pursuant to the annual valuation report prepared in accordance with section 32(1) of the Regulation and since the Plan was in surplus on wind up, section 75 of the Act did not apply. As a result, the Applicant claims that section 32(4) of the Regulations is not applicable in the circumstances.
- Regardless of whether or not amounts paid into a pension fund resulting in an excess are paid in pursuant to a report filed under section 32 of the Regulations or otherwise, the assets in the pension fund of the Plan left over after the payment of all benefit entitlements is surplus and may only revert to the employer if the requirements of section 79 of the Act have been met. The Applicant has not provided any evidence that the requirements of section 79 have been met. Therefore, the Superintendent cannot consent to the withdrawal of any surplus funds by the Applicant.
- Such further reasons as may come to my attention.
YOU ARE ENTITLED TO A HEARING by the Financial Services Tribunal (the Tribunal) pursuant to subsection 89(6) of the Act if, within thirty (30) days after this Notice of Proposal is served on you, you deliver to the Tribunal a written notice that you require a hearing.*.
Your written notice requiring a hearing must be delivered to:
Financial Services Tribunal
5160 Yonge Street, 14th Floor
North York ON M2N 6L9
Attention: The Registrar
FOR FURTHER INFORMATION, contact the Registrar of the Tribunal by phone at 416-226-7752, toll-free at 1-800-668-0128, ext. 7752, or by fax at 416-226-7750.
IF YOU DO NOT DELIVER TO THE TRIBUNAL, WITHIN THIRTY (30) DAYS FROM THE DATE THIS NOTICE OF PROPOSAL IS SERVED ON YOU, A WRITTEN NOTICE THAT YOU REQUIRE A HEARING, I MAY MAKE THE ORDER PROPOSED HEREIN.
DATED at Toronto, Ontario, this 13th day of May, 2006
K. David Gordon
Deputy Superintendent, Pensions
*NOTE—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 mailing.