Pension plan member’s request ignored

Weavexx Corporation is a Canadian corporation engaged in the manufacture and distribution of products used in the pulp and paper production process. It is a majority-owned subsidiary of BTR Canada Holdings Inc., which is a Canadian affiliate of BTR Inc., a Delaware corporation. Weavexx employees had the benefit of a pension plan.

In 1993 members of the pension advisory committee (PAC) for retired salaried employees of Weavexx wrote to the Pension Commission of Ontario advising that there had been substantial downsizing in the ranks of salaried employees at Weavexx. In 1995 PAC learned that BTR had made an application to the Pension Commission of Ontario to consolidate the pension plans of all of its affiliates in Canada and the United States.

In response to this, PAC wrote to the Superintendent of Pensions requesting that the Weavexx Pension Plan be wound up, thus ensuring that the employees and former employees would not lose their potential right to a distribution of the substantial surplus. When no response was received, PAC again wrote to the superintendent a year later urging a partial wind-up of the Weavexx pension plan.

In 1995 Weavexx notified its employees and retirees of BTR’s intention to consolidate the pension plans of all its affiliates including Weavexx. In December 1996 Weavexx made a formal application to the Superintendent of Pensions to transfer its pension assets into the consolidated BTR plan with a proposed effective date of Jan. 1, 1996. On Jan. 1, 1996, the Weavexx pension had a surplus of $4,216,300.

On Aug. 15, 1997, the superintendent approved the transfer of pension funds from the Weavexx plan to the BTR plan. This decision was communicated to Weavexx but not to PAC. No formal decision was ever made by the superintendent in response to the request from PAC for a partial wind-up of the Weavexx pension plan.

On June 30, 1998, PAC brought an application for judicial review of the decision to transfer the assets of the Weavexx plan into the consolidated BTR plan. On May 30, 2000, the Divisional Court of Ontario set aside the Superintendent of Pension’s consent and ordered the return of the assets to the Weavexx plan. It concluded that the superintendent had exceeded his jurisdiction when he did not give adequate consideration to the question of wind-up and the trust provisions of the Weavexx plan with its surplus.

The Court ordered that any new decision dealing with the wind-up or partial wind-up of the Weavexx plan was to be referred to the Financial Services Tribunal. Weavexx appealed that decision.

The Pension Benefits Act requires that when a company wants to transfer pension assets from an existing pension plan to a different pension plan, it must obtain the consent of the superintendent. Section 81(5) of the Act requires that the superintendent must withhold consent to a transfer “that does not protect the pension benefits of the members and former members of the pension plan.” The Court of Appeal also made the observation that “pension plans are for the benefit of the employees, not the companies which create them.”

The superintendent owes a high duty to employees with Ontario pension plans. In this case the superintendent focused almost exclusively on the employers’ transfer application but ignored almost entirely the retirees’ request for a wind-up or partial wind-up of the Weavexx Pension Plan with a view to the distribution to them of the surplus that had accumulated in the plan.

The Act permits a wind-up where:

• there is a cessation or suspension of employer contributions to the pension fund;

• a significant number of members of the pension plan ceased to be employed by the employer as a result of the discontinuance of all or part of the business of the employer; or

• all or a significant portion of the business carried on by the employer at a specific location is discontinued.

In this case all three situations occurred. The employer made no contributions to the plan after 1983. There was significant downsizing in the 1990s of the Arnprior plant, which was ultimately closed in 1996. Therefore the request for a wind-up by PAC was reasonable.

Despite the requests from PAC, the superintendent chose instead to focus on the transfer application of Weavexx. The Court of Appeal shared the Divisional Court’s discomfort with the fact that the superintendent did not address the concerns of PAC. As the superintendent did not act with procedural fairness towards PAC, the Court did not allow the appeal of the decision of the Divisional Court.

The Court of Appeal did allow the appeal with respect to the requirement that any future decision by the superintendent with respect to the Weavexx pension plan be referred to the tribunal and this point was conceded to by PAC.

For more information:

Retirement Income Plan for Salaried Employees of Weavexx Corp. v. Ontario (Superintendent of Pensions), Ontario Court of Appeal, Docket Nos., CA C35896 and C35919, Feb. 14/02.

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