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 Make an Order under section 87 of the PBA relating to the Parmalat Canada Pension Plan for Hourly Employees - Belleville, Registration Number 308353.
Local 555, Black Diamond Cheese E. I. U.
184 Black Diamond Road
Belleville ON K8N 5A1
Parmalat Canada Inc.
405 The West Mall, 10th floor
Etobicoke ON N9C 5J1
NOTICE OF PROPOSAL
I PROPOSE TO REFUSE TO MAKE AN ORDER under section 87 of the PBA that Parmalat Canada Inc. is responsible for the payment of the investment management fees and management expense ratio (“IMF/MER fees”) charged in connection with variable investments in respect of the Parmalat Canada Pension Plan for Hourly Employees - Belleville, Registration Number 308353 (the “Plan”).
- The Applicant requested that the Superintendent investigate and determine that Parmalat Canada Inc. is responsible for paying the IMF/MER fees “that have been charged since 1991 to members and improperly deducted from their investment earnings in this D.C. Plan”.
- The Plan is now a single employer defined contribution pension plan for employees in the Belleville Black Diamond Cheese operation of Parmalat Canada Inc.
PLAN AND FUNDING DOCUMENTS 1991 TO 1997
- The employees of Belleville Black Diamond Cheese operation (“Belleville Employees”) were added to the Plan in 1991, when Canada Packers Inc. sold its Belleville operation to Ault Foods Limited. At that time, the Plan was a defined benefit plan for the hourly employees of the Ault Foods plant in Mitchell, Ontario, and the defined contribution component for the Belleville Employees was added to the Plan as Appendix A2.
- In the 1991 and 1993 versions of the Plan text, section 5.04(a) provided that the retirement income and other benefits provided under the Plan would be financed by a fund established for the purposes of the Plan under which all contributions and investment income were to be held to pay such retirement income, other benefits and expenses (the “Fund”). Section 5.04(d) provided that fees of a funding agency, investment manager or investment brokerage, transfer taxes and similar costs arising as a result of the making of investments, sale of assets or realization of investment yield, and the expenses reasonably incurred or compensation properly paid in respect of the Plan would be paid by the company in cash or from the Fund as determined by the company. At that time, “company” was defined as Ault Foods Limited and any successor corporation, whether by amalgamation, merger or otherwise.
- In the 1991 and 1993 versions of the Plan text, section 2.02 of Appendix A2 provided that the terms and conditions of that Appendix formed part of the Plan and applied to the persons who were union hourly Black Diamond Cheese employees and who were members of Independent Union, Local 555, affiliated with the Energy and Chemical Workers Union.
- In the 1991 and 1993 versions of the Plan text, Section 5.01 of Appendix A2 referred to company retirement accounts and member retirement accounts maintained for company contributions and member voluntary contributions respectively. Section 5.02 provided that the Fund, consisting of the balances of the company retirement accounts and the member retirement accounts, would be invested with the funding agency pursuant to directions provided by the employees.
- Section 5.03 of Appendix A2 of the 1991 and 1993 Plan texts provided that the value of the company retirement accounts and member retirement accounts would be determined by the company or the funding agency at each valuation date taking into account the allocation of net investment income and net realized and unrealized capital gains and losses. It also provided that valuation dates would occur at such times as required or permitted by the funding agreement but not less frequently than monthly, and that the value of the retirement accounts would be computed on the basis of market values at the valuation date, having regard to the terms of the funding agreement.
- Recitals in the Trust Agreement entered into as of October 1, 1993, indicate that Ault Foods Limited appointed Royal Trust Corporation of Canada as Trustee of the Fund as of January 1, 1987, and that the terms of that appointment were amended and restated. The trust agreement provided that the trustee would pay out of the Fund all brokerage commissions, taxes, etc., and that “Trustee Compensation and all other disbursements made and expenses incurred in the performance of the duties of the Trustee under the agreement or arising out of the Trust shall constitute a charge upon the Trust Fund and shall be paid out of the Trust Fund unless first paid by the Company”. The Trustee was authorized to pay out of the Fund on directions from the Company the compensation, disbursements and expenses of others and of the Company relating to the administration of the Plan and the Trust (emphasis added).
- The Plan texts and funding documents which governed the Plan for the period 1991 to 1997 contemplated the payment from the pension Fund of fees of an investment manager, investment brokerage and similar costs arising as a result of the making of investments, or otherwise arising out of the performance of the duties of the Trustee. Such fees or costs would include the IMF/MER fees charged to the variable investments of the Fund. Nothing in those documents required the employer to pay the IMF/MER fees.
PLAN AND FUNDING DOCUMENTS 1997 TO PRESENT
- Effective January 1, 1997, the Plan was amended to change the name of the company to Parmalat Food Inc. and to replace the terms of the Plan. At that time, the plan became a defined contribution plan only and it covered the Belleville Employees only. Section 8 provided for Individual Accounts which would be credited with net investment gains or losses at such times and in such amounts as are applicable to each type of investment in the pension fund as described in Article 7 of the Funding Contract. The company agreed to pay any expenses of administering the Plan separate and apart from the Plan, but it did not agree to pay the expenses of administering the Fund. Section 17 provided that the Company has arranged for a Funding Contract to provide for the benefits described in the Plan.
- In 1997, the Plan text defined the Funding Contract as Contract no. 125572GP issued by The Great-West Life Assurance Company to Parmalat Food Inc. Contract 125572GP provided that the contract as first issued, the rules and regulations governing the management of an Investment Fund as amended from time to time and any amendments to the contract constitute the entire contract between the parties. The Rules and Regulations for the Management of The Great-West Life Assurance Company Investment Funds issued in 1999 specifically provided in section 9 that on a valuation date, the Net Asset Value per Unit is determined by dividing the value of the assets of a Fund at the Valuation date less the pro-rated portion of the investment management fee as set out in the attached Schedule “A” by the number of Units in that Fund at the preceding Valuation Date.
- Amendments to the Plan text in 2001 and a new funding contract, being policy No. 42662 with London Life, the Schedule of Fees, the Rules and Regulations for Management of the Investment Funds and the Employee Booklet, all issued effective 2001, provided that the operating expenses incurred in investing and administering the variable investment fund assets will be charged against the variable investment fund either as part of the investment management fee set out therein or as a separate charge to the variable investment fund assets, and that reported values are net of the fee.
- Amendments to the Plan text in 2003 continued to provide that investment income would be applied to the Member’s account in accordance with the terms of the Funding Agreement, and copies of the Employee Booklets issued in 2003 continued to contain a schedule of fees and to indicate that an annualized charge is applied to the variable investment fund assets, and that reported unit values are net of this fee.
- The Plan texts and funding documents that govern the Plan and on file with the Superintendent from 1997 until the present time do not require the employer to pay the IMF/MER fees charged in connection with the variable investments of the assets of the Plan, and are not inconsistent with the Plan text and funding documents that governed the Plan for the period 1991 to 1997. A review of the Plan and funding documents that are on file for that period indicates that those expenses are applied to the variable investment fund accounts and that the member accounts are credited with investment income that is net of those fees.
- 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
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 20st day of August, 2008
K. David Gordon
Deputy Superintendent, Pensions
Mr. Harold F. Caley
Caley Wray Labour/Employment Lawyers
1205-111 Richmond Street West
Toronto, ON M5H 2G4
Counsel for the Applicant.
* 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.