Pension experts in Ontario have been left shaking their heads in recent months after some highly surprising moves from the provincial government and the Financial Services Commission of Ontario, FSCO the body that regulates pensions in the province.
The most recent was a decision by FSCO to appeal a two-to-one decision by the Financial Services Tribunal that deals with, among other things, the issue of surplus distribution at the time of a partial pension wind up (see CHRR, May 22, 2000, page, 1).
“It is a very bad and a very serious situation,” said Priscilla Healy, a principal who specializes in pensions with Towers Perrin.
The appeal has created an incredible period of uncertainty for plan sponsors in regard to the issues covered in the wind up because they have no idea about the financial implications of their pension decisions.
“The appeal will take a very long time. It could take a couple of years, but at least a year. And in the meantime, employers don’t know what to do,” she said.
“It’s a very grave situation for businesses considering partial wind up.”
The Superintendent of the Financial Services Commission of Ontario originally refused a partial wind up proposal from Monsanto Canada Ltd. on the grounds that, among other things, it did not contain provisions to distribute any surplus to those members affected by the wind up. In April, the tribunal ordered that the decision be reversed.
“We’ve taken a long look at decision, both the majority and the minority, and decided there are grounds for appeal,” said Brian Donleavy, a spokesperson for FSCO, declining to explain the grounds because the matter is before the court.
The latest decision follows on the heals of new pension legislation from the Ministry of Finance that would allow people with shortened life expectancy to withdraw the commuted value of their pension in a lump-sum payment, possibly costing plan sponsors billions of dollars in unexpected pension liabilities and adding a dramatic administrative burden to FSCO itself. Donleavy denied there would be extra work for FSCO because it is simply a matter between the individual, their plan and the financial institution involved.
Both developments have left people in the industry shaking their heads, said Healy.
Gretchen Van Riesen, chair of advocacy and government relations committee for the Association for Canadian Pension Management, said that while the ACPM was very pleased with the tribunal’s decision to approve Monsanto’s partial wind up proposal, they were “very surprised” at FSCO’s appeal of that decision.
The ACPM believes the act should be clarified so that surplus would not be distributed at the time of a wind up.
As for the ministry’s decision to allow for the lump-sum payments for people with shortened life expectancy, “Our position is that this is a case of poor communication and inadequate consultation,” said Van Riesen. “The ministry put itself in a bit of a box with the legislation and now it probably feels a little bit sheepish about it,” she said. Ideally, the ministry should be working with FSCO and other groups seeking public consultation to ensure these kinds of mistakes aren’t made, she said.
The appeal by FSCO to the Ontario Divisional Courts has larger implications because this is the first ruling by the tribunal since the formation of FSCO in 1998, said Healy.
The tribunal is an independent adjudicative body of FSCO and is mandated to hear appeals of decisions by the superintendent and is given “exclusive jurisdiction” to determine all questions of fact or law that arise in any proceeding before it.
The appeal raises questions about the value and status of the tribunal, Healy said.
The unexpected changes to pension rules also hinder efforts to develop uniform pension legislation so that identical rules and wording would govern pensions in all provinces.
In order to establish rules, precedents need to be considered in order to find common ground — a procedure made more difficult when stakeholder associations suddenly begin to ignore the precedent they had established earlier, said Van Riesen. For example, Quebec is just in the process of codifying a policy of non-distribution of surplus on partial wind up even as Ontario policy-makers suddenly appear intent on following the opposite course of action.
But Donleavy said FSCO supports the idea of harmonization of pension policy, rather than uniformity, and the latest decisions do not run counter to that intent.
The most recent was a decision by FSCO to appeal a two-to-one decision by the Financial Services Tribunal that deals with, among other things, the issue of surplus distribution at the time of a partial pension wind up (see CHRR, May 22, 2000, page, 1).
“It is a very bad and a very serious situation,” said Priscilla Healy, a principal who specializes in pensions with Towers Perrin.
The appeal has created an incredible period of uncertainty for plan sponsors in regard to the issues covered in the wind up because they have no idea about the financial implications of their pension decisions.
“The appeal will take a very long time. It could take a couple of years, but at least a year. And in the meantime, employers don’t know what to do,” she said.
“It’s a very grave situation for businesses considering partial wind up.”
The Superintendent of the Financial Services Commission of Ontario originally refused a partial wind up proposal from Monsanto Canada Ltd. on the grounds that, among other things, it did not contain provisions to distribute any surplus to those members affected by the wind up. In April, the tribunal ordered that the decision be reversed.
“We’ve taken a long look at decision, both the majority and the minority, and decided there are grounds for appeal,” said Brian Donleavy, a spokesperson for FSCO, declining to explain the grounds because the matter is before the court.
The latest decision follows on the heals of new pension legislation from the Ministry of Finance that would allow people with shortened life expectancy to withdraw the commuted value of their pension in a lump-sum payment, possibly costing plan sponsors billions of dollars in unexpected pension liabilities and adding a dramatic administrative burden to FSCO itself. Donleavy denied there would be extra work for FSCO because it is simply a matter between the individual, their plan and the financial institution involved.
Both developments have left people in the industry shaking their heads, said Healy.
Gretchen Van Riesen, chair of advocacy and government relations committee for the Association for Canadian Pension Management, said that while the ACPM was very pleased with the tribunal’s decision to approve Monsanto’s partial wind up proposal, they were “very surprised” at FSCO’s appeal of that decision.
The ACPM believes the act should be clarified so that surplus would not be distributed at the time of a wind up.
As for the ministry’s decision to allow for the lump-sum payments for people with shortened life expectancy, “Our position is that this is a case of poor communication and inadequate consultation,” said Van Riesen. “The ministry put itself in a bit of a box with the legislation and now it probably feels a little bit sheepish about it,” she said. Ideally, the ministry should be working with FSCO and other groups seeking public consultation to ensure these kinds of mistakes aren’t made, she said.
The appeal by FSCO to the Ontario Divisional Courts has larger implications because this is the first ruling by the tribunal since the formation of FSCO in 1998, said Healy.
The tribunal is an independent adjudicative body of FSCO and is mandated to hear appeals of decisions by the superintendent and is given “exclusive jurisdiction” to determine all questions of fact or law that arise in any proceeding before it.
The appeal raises questions about the value and status of the tribunal, Healy said.
The unexpected changes to pension rules also hinder efforts to develop uniform pension legislation so that identical rules and wording would govern pensions in all provinces.
In order to establish rules, precedents need to be considered in order to find common ground — a procedure made more difficult when stakeholder associations suddenly begin to ignore the precedent they had established earlier, said Van Riesen. For example, Quebec is just in the process of codifying a policy of non-distribution of surplus on partial wind up even as Ontario policy-makers suddenly appear intent on following the opposite course of action.
But Donleavy said FSCO supports the idea of harmonization of pension policy, rather than uniformity, and the latest decisions do not run counter to that intent.
