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 Pension Plan for Employees of BetzDearborn Canada Registration No. 0220459.
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 Pension Plan for Employees of BetzDearborn Canada Registration No. 0220459 (the “Plan”).
BetzDearborn Canada Inc.
2300 Meadowvale Blvd.
Mississauga, ON L5N 5P9
Lin Ann Rowe
Secretary -GE Betz Pension Committee
Employer and Administrator of the Plan
NOTICE OF PROPOSAL
I PROPOSE TO REFUSE TO APPROVE the Report on the Partial Wind-up of the Pension Plan for Employees of BetzDearborn Canada, Inc. as at December 31, 1996, dated September 30, 1997, (the “Initial 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 December 31, 1996, 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 December 31, 1996. A partial wind up report was filed with the Superintendent on October 27, 1997, (the “Initial Report”). The Initial Report showed that there was an excess of partial wind up assets over liabilities in the amount of $2,515,000. The initial 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.
- On June 26, 1998, the Superintendent approved the distribution of basic benefits pursuant to section 70(3) of the Act.
- The June 26, 1998, letter from the Superintendent references section 70(6) of the Act and 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.”
- No action was taken by the administrator of the Plan respecting the surplus related to the partial wind up.
- By letter dated August 17, 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.
- FSCO requested that the plan administrator provide an update of the funding position of the Plan in respect to the partially wound-up portion of the Plan and if any surplus assets related to the partial wound up portion of the Plan remain, advise FSCO of the proposed plan and timetable to expedite the distribution of surplus.
- The Plan administrator did not comply with the Superintendent’s request and reminder letters were sent to the plan administrator on November 15, 2004, and on January 26, 2005.
- The plan administrator by letter dated February 7, 2005, indicated that it was seeking advice from its actuaries and legal counsel regarding the proper course to follow. It also advised that it was making best efforts to comply with FSCO’s requirements. FSCO, by letter dated February 25, 2005, granted an extension of time to the plan administrator to March 25, 2005.
- The plan administrator subsequently requested an extension of time to May 25, 2005, which was granted by FSCO. FSCO also granted a further extension of time, at plan administrator’s request, to September 25, 2005.
- The plan administrator has not provided the update on the financial position for the partial wind up of the Plan and the proposed plan for distribution of the remaining assets related to the partially wound-up portion of the Plan as requested by FSCO.
- 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 determining 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, the Initial Report does not comply with the Act because it does 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 North York, Ontario, this 6th day of February, 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.