Amendment

• Author: Ari Kaplan, Mitch Frazer
• Pages: 433-495

433

CHAPTER 8

AMENDMENT

A. INTRODUCTION

A pension plan is a dynamic vehicle that will invariably undergo chan-

ges over its lifetime. Companies reorganize and purchase and divest

themselves of operations, businesses, and divisions. Pension fund

assets and liabilities ebb and f‌low with investment market conditions.

Unionization and workplace environments affect membership cover-

age and contribution levels. These factors and others can impact the

need or desire of an employer to revisit the provisions of a pen sion plan.

In deference to freedom of contract, the Pension Benef‌its Act1(t he

PBA) contemplates the living and evolving d imension of a pension plan.

As matters relating to pension plan design, the implementation of plan

amendments and corporate transactions affecting the plan generally

fall within the purview of plan sponsorship and the particular needs

of the stakeholders as ref‌lected in the plan documentation. However,

the legislation sets out a number of mostly procedural, but also some

substantive, constraints in relation to permitting a sponsor to make

a change affecting a pension plan. The purpose of the PBA’s amend-

ment and corporate transaction provisions are to ensure that accrued

pension benef‌its and other employee interests in the pension plan are

protected and that employees receive due notice of changes affecting

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

PENSION LAW

434

their pension rights. At the same time, the legislation gives reasonable

latitude to employers to carry out corporate transactions that require

changes to pension plans. In addition to the requirements of the PBA,

contractual, trust, and other common law considerations can have the

effect of regulating and sometimes limiting pension plan amendments

and corporate transactions.

This chapter explores the delicate balance between employer and

employee rights when a pension plan undergoes any of the changes

described above.

B. PLAN AMENDMENT

1) Introduction

The authority to make an amendment to a pension plan is generally a

function of contract. The PBA does not require, as a condition of regis-

tration, that a pension plan set out the manner by which amendments

to the plan may be made. A pension plan’s amending formula is usu-

ally left to the plan sponsor, often the employer, to draft in accordance

with general legal and contractual principles. Typically, a pension plan

amendment is adopted by way of a resolution of the board of directors

of the company that sponsors and administers the pension plan.

An exception to this rule is where the plan documentation con-

fers on the plan administ rator certain powers of plan amendment. This

is a function commonly seen in multi-employer pension plan (MEPP)

agreements or other plans co-sponsored by private-sector groups, for

example trade unions. In addition, where employees represented by a

trade union participate in a pension plan, but the union itself is not

involved in the sponsorship or governance of the plan, some plans will

require, as a matter of collective bargaining, that the consent of the

union be obtained or that the union be notif‌ied with respect to all or

certain types of amendments made to the plan.

These exceptions aside, most employer-sponsored pension plans

reserve to the employer a broad power to unilaterally amend the plan

terms with only m inor constraints. As a pure matter of contract, this is

defensible; but like many areas of pension law, regulatory, contractual,

and equitable considerations, serve to inform our understanding of the

applicable legal principles.

Amendment 435

2) Formal Statutory Criteria

a) Introduction

This section discusses the principal requirements of the PBA in con-

nection with the registration and implementation of a pension plan

amendment.

b) Application for registration

The pension plan administ rator is required to apply to the Superintend-

ent of Financial Services (the Superintendent) to f‌ile and register an

amendment to the pension plan.2 Similar rules apply in other jurisdic-

tions.3 An amendment is not effective until the administrator commen-

ces this process.4 Once the amendment is f‌iled, the amendment may

be binding and enforceable and the administrator has an obligation to

administer the plan in accordance with its terms, as amended, pend-

ing its formal registration.5 An amendment f‌iled for registration may

be made effective prospectively or retroactively.6 An amendment with

retroactive effect will generally be valid provided it does not reduce ac-

crued benef‌its.7

c) Notice of registration

After an administrator f‌iles an application for registration of an amend-

ment, the Superintendent must issue a notice of registration.8 This is a

formal requirement of the PBA. There is “no magic” in the issuance of

a notice of registration and the mere acceptance for registration by the

2 PBA, s 12(1). The application must be m ade within sixty d ays after the date th at

the plan was a mended. The application for registr ation of the amendment must be

accompanied by a fee an d f‌iled with certif‌ied copie s of the “amending document”

(for example, board res olution) and other prescribed doc uments: s 12(2). There

are exceptions to t his rule for certai n specif‌ied pension plan s: PBA, s 12(2.1).

3 See federal (PBSA, s 10.1(1)), Alberta (AEPPA, s 20(1) and Reg, s 27(2)); British

Columbia (BCPBSA, s 15(1)); Manitoba (MPBA, Reg, s 2.7(1)); New Brunswick

(NBPBA, s 11(1) and Reg, s 5(1)); Newfoundland and L abrador (NLPBA, s 18(1));

Nova Scotia (NSPBA, s s 18(1) & (2)); Quebec (QSPPA, ss 24 & 25); Saskatc h-

ewan (SPBA, s 17).

4 PBA, s 13(1).

5 Consumers Packaging Inc by its m onitor, KPMG Inc, on behalf of O-I Cana da Corp

v Superinten dent of Financial Services a nd United Steel Workers of America, Local

203G (29 November 2002), File No P0162-2001 at 12 (Ont FST) [Consumers

Packaging].

6 PBA, s 13(2).

7 See Section B(4)(b) in this chapter.

8 PBA, s 17. The Superintendent must is sue a separate notice of registr ation for

each pension pl an amendment registered.