Wind Up

AuthorAri Kaplan, Mitch Frazer
1) O v er v i ew
a) Introduction
Eventually, a pension plan will run its course and be discontinued. A
pension plan “wind up” may occur for any number of reasons. The
employer may become insolvent, be impacted by a reorganization or
sale of a business, or simply wish to get out of the business of provid-
ing a pension plan. When a pension plan i s wound up, the pension
fund must be liquidated of all its a ssets. Employee pension benef‌its
earned up to the wi nd-up date are typically discharged by rolling over
the assets as sociated with the benef‌its to either another pension plan,
to a locked-in retirement savings vehicle, or are use d to purchase an
immediate or deferred annuity f rom an insurance company. If surplus
assets remai n after all pensions are di scharged, they too must be dis-
tributed to the proper recipients. With str ict regulatory oversight, sur-
plus may be distributed to t he employer, the employees and pensioners,
or to both groups of stakeholders in conjunction with a surplus sha ring
and distribution agreement. If a def‌icit ex ists upon plan wind up, the
employer must rectify the def‌iciency. If the employer also is insolvent
and funds are not available to fund the def‌iciency, employees and pen-
sioners may have their benef‌its reduced.
Wind Up 497
The Pension Benef‌its Act1 (t he PBA) provides two methods by wh ich
a pension plan may be wound up: by voluntary decision of the employer
or administrator, as the ca se may be, or by order of the regulator. There
have been attempts by employees to pursue other ways to term inate
a pension plan or all or part of the pen sion trust fund related to the
plan, without the consent of the employer or an order of the regulator.
Employee-initiated applications to compel the employer to wind up the
pension pl an2 or otherwise compel the dist ribution of trust assets from
an ongoing p ension plan3 have all proved unsucce ssful. The se scen-
arios are discussed in this ch apter, as is the grandfathered concept of
“partial” wind up, and the statutory and legal rights and obligations of
the employer, employees, and the plan administrator during the wind-
up process.
b) Def‌inition of “wind up”
The PBA def‌ines a “wind up” as “the termination of a pension plan
and the distribution of the assets of the pension fund” (in French,
liquidation”).4 Note that the def‌inition combines two concepts ter-
mination and distribution. Other jurisdictions, most notably the feder-
al jurisdiction, sepa rate these two concepts, conceptually and literal ly.
In the Pension Benef‌its Standards Act, 19855 (PBSA), “termination” in
relation to a pension plan means “the ce ssation of crediting of benef‌its
to plan members generally,”6 and “winding up” means “the distribu-
tion of the assets of a pension plan t hat has been terminated.”7 While
the distinction can have legal signif‌icance in the inter pretation of the
statute,8 it illustrates that the discontinuance of a pension plan is best
described as a proce ss than it is a single event, which commences with
a triggering stimulus punctuated by the cessation of further contribu-
tions and benef‌its and which continues unt il the last dollar is liquid-
1 RSO 1990, c P.8 [PBA].
2 Lomas v Rio Algom Ltd, 2010 ONCA 175 [Lomas]; McCann v Canada Mor tgage and
Housing Cor p, 2012 ONCA 243, leave to appeal to SCC refu sed, [2012] SCCA No
286 [McCann].
3 Buschau v Rogers Communicat ions Inc, 2006 SCC 28 [Buschau].
4 PBA, s 1, “wind up.”
5 R SC 1985, c 32 (2d Supp), as amended [PBSA].
6 Federa l (PBSA, s 2(1), “termination”). A pension plan is als o terminated where
the regist ration of the plan has been re voked or where the Superintendent has
declared the pl an terminated, in accor dance with PBSA, ss 29(1) & (2).
7 PBSA, s 2(1), “winding up.”
8 Cousins v Ca nada (Attorney Gene ral), 2008 FCA 226 at para 39 [Cousin s].
ated from the pension fund.9 Employees cease accrui ng benef‌its as of
the effective wind-up date, and no new employees may join the pen sion
plan. The pension fund continues to be subject to the PBA du ring the
wind-up process until al l of the assets have been di sbursed.10
This chapter discus ses the causes of termination, the process of
winding up, who is responsible for implementing the wind up, and the
manner by which the recipients of the distribution may receive their
1) Who May Initiate a Wind Up
a) Employer-initiated wind up
The PBA gives a n employer the right to wind up a pension plan.11 This
does not mean that the employer’s right to wind up is un fettered.12 A
wind up can only be done in compliance with the PBA.13 Like the adop-
tion of a plan amendment, the right to pas s a resolution winding up a
pension plan is usually vested in the board of directors of the company
sponsoring the plan a nd this would be stated in the plan text: “employ-
ers have the right to decide both whether to est ablish pension plans for
their employees and, subject to anything to t he contrary in t he pension
plan documentation, to end any pension plan t hey might establish.”14
An employer-initiated wind up may occur for many reasons, but
most commonly because the employer has been a party to a purchase
or sale of a business or has engaged in a n internal corporate reorganiza-
tion which demands other priorit ies, or seeks to access surplus existi ng
in the plan and wind ing it up is the most cost-effective manner of dis-
tributing it. There may be other motivations for an employer to wind
up a plan, which include any combination of the foregoing.15 Regard-
less of the reason, the employer has f ull discretion to wind up a plan
9 Nolan v Kerry (Canada) Inc, 20 09 SCC 39 at para 21 [Kerry].
10 PBA, s 76.
11 PBA, s 68(1). See also Manitoba (M PBA, s 26(4)), New Brunswick (NBPBA, s 6 0(1)),
Newfoundland and Labrador (NL PBA, s 60(1)), Nova Scotia (NSPBA, s 73(1));
Quebec (QSP PA, s 204).
12 Lomas, above note 2 at para 65.
13 Ibid.
14 Ibid at para 61. Als o see McCann, above note 2.
15 For example, see FSCO Policy W 100-460 (Fal l 1994).

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