Administration

• Author: Ari Kaplan, Mitch Frazer
• Pages: 304-376

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CHA PTER 6

ADMINISTR ATION

The convergence of statutory compliance and common law duties of

care resonates most ful ly in the area of pension plan admi nistration.

This chapter describe s the identity and functions of the pen sion plan

administrator and the legal principles affecting the duties and stan-

dards of care owed by the administrator and its agents to employees

and other plan stakeholders in car rying out the pension plan m andate.

A. INT RODUC TION

1) Identity of the Administrator

a) Who may be the administrator

The Pension Be nef‌its Act1 (PBA) requires that every pension plan have

an “administrator.” A pension plan that does not identify an adminis-

trator is not eligible for registration.2 The identity of the administra-

tor is a matter of plan design. The PBA set s out the prescribed person,

persons or entity that may be an administr ator. Specif‌ically, an ad-

ministrator may be a n employer;3 an arm’s length “pension committee”

1 RSO 1990, c P.8 [PBA].

2 PBA, s 8(1).

3 PBA, s 8(1)(a). If there is more than one employer, the ad ministrator may be one

or more of those employers.

Administration 305

comprised of employer a nd employee representatives4 or just employee

representatives;5 an insurance company;6 a board of trustees;7 a statu-

tory cor poration, board, agency or commi ssion;8 a person appointed by

the Superi ntendent;9 or any other prescrib ed person or entity.10

Similar, but not identical, requirements exi st in other jurisdic-

tions.11 In Quebec and Manitoba, most pension plans reg istered in

those provinces wit h more than twenty-f‌ive employees (in Quebec)

or f‌ifty employees (in Manitoba) must be administered by a “pen sion

committee” that, except in very lim ited circumstances,12 include s em-

ployee and pen sioner represent ation.13

4 PBA, s 8(1)(b).

5 PBA, s 8(1)(c).

6 PBA, s 8(1)(d). If an insurance comp any is the administ rator, all the pension

benef‌its under t he pension plan must be guar anteed by the insuranc e company.

7 PBA, s 8(1)(e). The administrator must b e a board of trustees if t he pension plan

is a multi-employer p ension plan established pu rsuant to a collective agreeme nt

or a trust agr eement; see Section 1(b) below in this cha pter.

8 PBA, s 8(1)(f).

9 PBA, s 8(1)(g). This applies where the pens ion plan is being wound up. Upon

proclamat ion of new legislative provisions , the Superintendent will h ave the

authority to appoi nt an administrator in s ituations other than pla n wind up, as

well as admi nister a plan itself.

10 PBA, s 8(1)(h).

11 See, for example, feder al Pension Benef‌its Standard s Act, 1985, RSC 1985 (2d

Supp), c 32 [PBSA], ss 7–7.1.

12 In Quebec, if a plan ha s fewer than twenty-six mem bers and benef‌iciarie s, the

employer may take t he place of the pension committee . The employer shall, for

the admin istration of the plan, have t he powers, obligations, and liabi lity of a

pension comm ittee: QSPPA , s 149 and Reg (respecting t he exemption of certain

categories of pen sion plans from the applicat ion of the Supplemental Pension

Plans A ct), ss 1 & 2. In Man itoba, a pension committee need only b e established

where the pension pl an has more than the pre scribed number of employees:

MPBA, s 28.1(1) and Reg, s 3.4, sets the number of employees at f‌ifty.

13 In Quebec, a pension plan mus t be administered by a pen sion committee

comprised of at lea st three persons, includ ing one person who is neither a

participa nt nor prohibited from receiving a loan f rom the plan, one person

who is design ated by the employees in the plan at a n annual meeting or, in the

absence of such a des ignation, one employee designate d as and when provided

in the plan, an d one person who is designated by t he pensioners and other

benef‌iciar ies at the annual meeting or, in th e absence of such a designation, one

employee or benef‌icia ry designated as and whe n provided in the plan: QS PPA,

ss 147–59. Pension committee s have the power to establish i nternal by-laws

prescribi ng rules pertain ing to the procedure and governa nce of the commit-

tee. These bylaw s may cover a variety of prescr ibed topics, and can overr ide

provisions i n the plan text. In Manitoba , a pension plan must provide for the

appointment or elect ion of committee members in accorda nce with the regula-

tions, and must en sure that at least one voting act ive member is appointed

PENSIO N LAW

306

While more than one individual can comprise the body that admin-

isters the plan, the legi slation contemplates the existence of only one

administrator.14 An admin istrator can and usually w ill delegate some

of its responsibilities to various persons or committees, including t he

employer or a trade union, a professional third-part y administrator, in-

vestment managers, consulta nts, and advisors. While this may create

an agency relationship between the adm inistrator and its delegate, it

does not change the identity of the admi nistrator for the purposes of the

PBA.15 The Income Tax Act16 (th e I TA) def‌ines the admini strator as the

body with “ultimate responsibility for the admini stration of the plan.”17

Except where permitted in wr iting by the Canada Revenue Agency

(CRA), the administ rator (or the majority of the persons who constitute

the administ rator) must be resident in Canada.18

b) Employee representation

In most pension plans, the administrator is usually the employer that

also sponsors the pla n. Except in very limited circum stances, the PBA

neither provides as a right, nor requires, employees and pensioners to

participate in the adm inistration of the plan. Employee participation in

the administ ration of the plan is permis sive under the PBA, the right

to which derives from collective bargaining or other contractual obliga-

tion imposed on the plan sponsor.19 As a result, a gr ievance arbitration

can decide whether unionized employees should be included in the

or elected by the act ive members, at least one voting non-act ive member is

appointed or elected by t he non-active members, and one addit ional non-voting

member may be appoi nted or elected by the active and non-act ive members:

MPBA, ss 28.1(1)(f) and 28.1(1.2).

14 R v Blair (1995), 129 DLR (4th) 367 at 405 (Ont Ct Gen Div), rev’g (1993), 106

DLR (4th) 1 (Ont Prov Ct).

15 See “Who Is an Admin istrator” in (1990) 1(2) Pension Bulletin 8 at 9. Accord-

ingly, where an employer appoint s itself as admini strator of the pension plan (in

accordance w ith PBA, s 8(1)(a)) and delegates a numb er of day-to-day respon-

sibilities to a p ension committee, the commit tee is not a “pension committee”

adminis trator pursuant to PBA, s 8(1)(b), since this would create two adm inis-

trators and th e PBA does not contemplate “multi” admin istrators. Instead, t he

pension commit tee is an agent of the adminis trator to the extent of its delegated

authority.

16 RSC 1985 (5th Supp), c 1, as amended [ITA].

17 ITA , s 147.1(1) “administrator.”

18 ITA, s 147.1(6). Also, CRA mu st be informed in writ ing, within thir ty days after

the admin istrator has been const ituted, of the name and addres s of the admin-

istrator or of each me mber of the body that is the ad ministrator and be noti f‌ied

of any change in suc h information within s ixty days after the ch ange: s 147.1(7).

19 PBA, ss 8(1)(b) and (e).