Pension Plan for Canadian Employees of Aur Resources Inc. - October 3, 2006

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 Wind-up Report by the Superintendent of Financial Services under section 70 of the Act, relating to Amax Inc. Retirement Plan for Canadian Salaried Employees, now the Pension Plan For Canadian Employees of Aur Resources Inc. Registration No. 0216994

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 Canadian Employees of Aur Resources Inc. Registration No. 0216994 (the “Plan”)

TO:

Aur Resources Inc.
1 Adelaide Street East, Suite 2501
Toronto ON M5C 2V9

Attention: Ronald Gagle
Vice - President and Chief Financial Officer

Employer and Administrator of the Plan

 

NOTICE OF PROPOSAL

I PROPOSE TO REFUSE TO APPROVE
the actuarial report on the partial wind-up of the Amax Inc. Retirement Plan for Canadian Salaried Employees ( now the Pension Plan for Canadian Employees of Aur Resources Inc. Registration No. 0216994)
(the “Plan”) as at December 13, 1989 dated December 20, 1990 ( the “wind-up report”) 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 of the Plan effective December 13, 1989, pursuant to sections 70 and 88 of the Act.

REASONS FOR THE PROPOSED ORDER:

  1. The Plan was partially wound up effective December 13, 1989. On December 29, 1989, Amax Inc. filed a preliminary wind-up report in respect of the partial wind up of the Plan, effective December 13, 1989 with the Pension Commission of Ontario, the predecessor to the Financial Services Commission of Ontario (“FSCO”). Amax Inc., the plan sponsor at that time, subsequently filed a finalized wind-up report. The finalized wind-up report showed that there was an excess of partial wind up assets over liabilities in the amount of $40,000. The wind-up report did not contain any proposal for the distribution of surplus related to the partial wind up.

  2. On August 7, 1990 the Superintendent approved the distribution of basic benefits pursuant to section 70(3) of the Act.

  3. The August 7, 1990 letter from the Superintendent references section 71(6) of the Act (now section 70(6)) and states that “ subsection 71(6) of the Act provides that on 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 had on a full wind up”. The letter also states that “At the effective date of partial wind up, assets (including surplus, if any) and liabilities attributable to the persons affected by the partial wind up must be identified and a balance sheet provided under subsection 71(1) of the Act. Thereafter, such assets, including surplus, must be dealt with in the same manner as if the plan wound up in full on the effective date of partial wind up”.

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

  5. Effective August 26, 1994, the Plan was renamed The Canada Tungsten Inc. Retirement Plan for Canadian Salaried Employees. Effective April 1, 1995, the name of the Plan was changed to The Canadian Tungsten Inc. Employees’ Pension Plan.

  6. Effective January 1, 1997 there was an amalgamation between Tungsten Limited and Aur Resources Inc. The name of the Plan was changed to Aur Resources Inc. Retirement Plan and Aur Resources assumed responsibility for the Plan. The Plan was renamed Pension Plan for Canadian Employees of Aur Resources Inc., effective January 1, 1999.

  7. By letter dated August 18, 2004, FSCO informed Aur Resources Inc. that the partial wind up of the Plan had not been completed because there are assets that relate to the portion of the Plan that wound up effective December 13, 1989 that were not distributed on the effective date of the partial wind up of the Plan.

  8. FSCO requested that the plan administrator provide an update of the funding position of the Plan in respect of the wound up portion of the Plan. In the event any surplus assets related to the wound up portion of the Plan remain, to advise FSCO by October 17, 2004 of the proposed plan and timetable to expedite the distribution of surplus.

  9. Mercer Human Resource Consulting (“Mercer”) by letter dated October 13, 2004, on behalf of Aur Resources Inc., requested an extension of the deadline for providing the documents requested in respect of the December 13, 1989 wind up to April 30, 2005 and advanced several reasons in support of the request including: the fact that Amax Inc. was acquired by Aur Resources Inc. 5 years after the partial wind-up of the Plan; that the Plan history had to be reviewed to determine if there are any circumstances prior to December 13, 1989 which might have affected the Plan’s position at that date; that the Plan documents had to be located and reviewed; and that the existing wind-up report had to be reviewed.

  10. By letter dated November 2, 2004 to Mercer, FSCO extended the deadline to provide an update on the funding position in respect of the wound-up portion for the Plan and the distribution of assets of the Plan to January 24, 2005. Mercer, by letter dated January 25, 2005, requested a further extension of time to April 25, 2005. FSCO, by letter dated January 31, 2005, granted the further extension requested.

  11. Neither Mercer nor Aur Resources complied with the extended deadline request. Two further letters were sent by FSCO to Mercer and Aur Resources on
    June 27, 2005 and November 21, 2005 requesting the update and proposal under section 98 of the Act.

  12. Aur Resources Inc. 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 wound-up portion of the Plan as requested by FSCO.

  13. Clause 88(2)(c) of the Act states that the Superintendent may make an order requiring the preparation of a new report 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, Regulation 909, R.R.O. 1990 (the “Regulation”), or the pension plan.

  14. 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.

  15. 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.

  16. 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.

  17. 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.

  18. 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.

  19. Therefore, the Wind-Up Report does not comply with the Act because it does not provide for the distribution of surplus on partial wind up.

  20. 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 the regulation.

  21. 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 78(1) of the Act. The employer must also comply with section 8 of the regulation.

  22. The members are entitled to a surplus distribution on full wind up if they are entitled to surplus under the plan. Pursuant to subsection 70 (6) of the Act, they have the same right on partial wind up.

  23. 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 3 day of October, 2006 .

K. David Gordon
Deputy Superintendent, Pensions


 
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