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 of the Superintendent of Financial Services to Refuse to Consent to an Application made under Section 78(4) of the Act by Honeywell ASCa Inc. for payment of an alleged overpayment from the Pension Plan for
Hourly Employees of the Certified Brakes Division of AlliedSignal Canada Inc., Registration Number 0594408.
Honeywell ASCa Inc.
3333 Unity Drive
Attention: Barbara Moreau
Senior Pension Analyst
Canada Business Systems
Applicant, Employer and Administrator of the Plan
ON or about the 16th day of August, 2006, the Superintendent of Financial Services (the “Superintendent”) issued a NOTICE OF PROPOSAL (the “Notice of Proposal”) to the Applicant, Employer and Administrator (the “Applicant”) of the Pension Plan for Hourly Employees of the Certified Brakes Division of AlliedSignal Canada Inc., Registration Number 0594408 (the “Plan”) whereby he proposed to refuse to consent to payment from the pension fund of the Plan of an alleged overpayment by the Applicant to the pension fund of the Plan.
NO request for hearing has been made by the Applicant to the Financial Services
Tribunal for a hearing with respect to the Notice of Proposal.
THEREFORE the Superintendent:
REFUSES to consent to the application for payment of the alleged overpayment by
the Applicant to the pension fund for the Plan in the amount of $5,917.91, under section 78(4) of the Act.
REASONS for the Refusal:
- The Applicant is the Employer and Administrator of the Plan, which is a defined
- The Plan was fully wound up as at June 30, 1995.
- On September 5, 1996, the Superintendent of Pensions (now the Superintendent of Financial Services, or the “Superintendent”) approved the report that was filed with respect to the full wind up. The Report indicated that no assets would be remaining once all liabilities had been paid.
- The Superintendent has not yet received any indication that the assets have been
distributed, or any final reconciliation of assets.
- On January 7, 2005, the Applicant filed an application for the Superintendent’s consent to payment to the Applicant of an alleged overpayment to the Plan in the amount of $5,917.91.
- The alleged overpayment is the result of the Applicant’s purchase of certain annuities for Plan members from the Plan fund pursuant to a Block Annuity Quote given to the Applicant by The Standard Life Assurance Company (“Standard Life”) on or about March 27, 2002. These annuities were purchased in or about April of 2002.
- On or about March 11, 2004, Standard Life sent the Applicant a cheque in the amount of $5,917.91, advising that this amount represented a refund due to the final reconciliation of the Block Annuity purchase that was secured in 2002.
- Section 78(4) of the Act states:
Subject to section 89 (hearing and appeal), 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 as the fiscal year of the pension fund in which the overpayment or the payment occurred.
- The Applicant’s position is that the refund is an overpayment that is the result of an administrative oversight, because the actual cost of the annuities was less than the original quote from Standard Life.
- The Superintendent’s position is that the alleged overpayment constitutes surplus
that should remain in the Plan fund pending final distribution on full wind up.
- The Financial Services Commission of Ontario (“FSCO”) Policy R350-102, “Refund
of Employer Overpayment”, lists three situations in which an employer may be considered to have over-contributed to the pension fund for the purpose of section 78(4) of the Act. The circumstances in this application do not fall within any of these situations. While these situations are expressed as non-inclusive in the Policy, the circumstances in this application are not even analogous to the situations in the Policy, which are,
(a) the employer has contributed on the basis of an actuarial report for which the effective date had passed but when the new report was filed, such contributions exceeded those required by the new report,
(b) payments have been made directly by the employer and they should have been made from the pension fund, or
(c) employer contributions were 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 states that where a pension plan is wound up, the
employer shall pay into the pension fund the value of the pension benefits accrued with respect to employment in Ontario vested under the pension plan, to the extent these benefits exceed the value of the assets of the pension fund.
- Section 32 of Regulation 909, R.R.O. 1990 (the “Regulation”) states that until the
employer’s liability under section 75 of the Act is funded, the plan shall be annually reviewed and an actuarial report shall be annually prepared. Where such a report 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.
- Section 1 of the Act defines “surplus” as the value of the assets of a pension fund
related to a pension plan over the value of the liabilities under the pension plan. To the extent that funds paid from the Plan fund exceed the actual cost of the Block Annuities, this represents an excess of assets over liabilities and is therefore surplus as defined in the Act. The Superintendent can only consent to the payment of surplus to an 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 of the Act have been met. Nor has the Applicant filed any reconciliation of the assets on wind up.
- Section 78(4) of the Act states that the Superintendent shall not consent to a payment out of a pension fund to an employer of an overpayment unless the application is made in the same fiscal year of the pension fund as the fiscal year in which the overpayment occurred.
- The alleged overpayment was made in 2002, and the Applicant was notified of the
refund to the Plan on March 11, 2004. The fiscal year of the Plan is from January 1 to December 31.
- Therefore, even if there were grounds to treat the refund in this application as an
overpayment within the meaning of section 78(4) of the Act, the application was not made in the same fiscal year of the pension fund as the fiscal year in which the overpayment occurred. The Applicant has not provided any adequate reasons for the time to be extended pursuant to section 105 of the Act.
DATED at Toronto, Ontario, this 14 day of November, 2006.
Pension Plans Branch