The implications of the Monsanto case for Quebec pension plansLinkedIn
There, in black and white
Bulletin NB Vol. 7 N. 13, September 2004
After restructuring the company and reducing its workforce, Monsanto Canada Inc. wound up part of its pension plan registered under Ontario law. This was back in 1997 and at the time there was a surplus in the pension plan. Initially, the Superintendent of the Financial Services Commission of Ontario rejected the report on the grounds that it did not include a procedure for distributing the surplus relating to the part of the fund that had been wound up. After numerous appeals, the case ended up at the Supreme Court of Canada.
The Supreme Court concluded that the portion of the surplus attributable to the members concerned should be distributed on the partial windup date. It is important to note that the Supreme Court did not decide who the surplus belonged to; its decision concerned how the surplus should be treated at the time of a partial windup.
The basis of the Supreme Court’s decision derived from its interpretation of subsection 70(6) of the Ontario Pension Benefits Act, which states that members affected by a partial windup "... shall have rights and benefits that are not less than the rights and benefits they would have on a full windup of the pension plan ...".
The Court’s decision applies to members subject to the Pension Benefits Act in Ontario but it could also be used as jurisprudence for legislation in other provinces containing a similar clause applying to a partial windup.
Impacts on registered plans in Quebec
For pension plans registered in Quebec, the concept of a partial termination ceased to exist in 2001. Between 1993 and 2000, the Supplemental Pension Plans Act contained clauses that were materially different from subsection 70(6) of the Ontario law. Prior to 1993, however, relevant clauses could be interpreted as being similar to that examined by the Supreme Court.
Following is a summary of scenarios that could potentially affect Quebec pension plan sponsors:
In addition, the Supreme Court decision did not clarify many aspects (who the surplus belongs to, how it should be allocated, application to provinces other than Ontario, etc.).
If any of the above scenarios apply to your plan, you should know that, even before the Supreme Court came down with its decision, the Canadian Institute of Actuaries issued an Educational Note suggesting the actuary to disclose in the valuation report the adverse effects that the Monsanto decision could have on the results of the actuarial valuation.
Please feel free to contact us for additional information.
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