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© Copyright 2000 Rogers Media. The following article first appeared in the May 2001 edition of
BENEFITS CANADA magazine.
Monsanto match not over
The Ontario government should clarify Section 70 (6) of its pension legislation.
By Mel Norton
In a game of tennis that may continue, Monsanto served an actuarial valuation report to the Superintendent of
Financial Services with respect to a partial wind-up of its defined benefit pension plan. In this report,
Monsanto did not offer to allocate any surplus to such members at this time. Monsanto's position was that
surplus does not crystallize in an ongoing plan, and cannot be determined with accuracy until a pension plan is
wound up in full. Monsanto did offer to share any ultimate surplus with the impacted group, if and when the
plan was fully wound up and the amount of any surplus was known with certainty.
The Superintendent returned service by issuing a notice of refusal to approve Monsanto's partial wind-up
report, saying that section 70 (6) of the Pension Benefits Act had not been followed. This section gives
rights upon partial wind-up not less than rights upon full wind-up. Since at full wind-up, members and
former members could have the right to an allocation of surplus, the Superintendent's position was that
such rights must also be exercised upon partial wind-up.
Monsanto volleyed by appealing to a Tribunal at the Financial Services Commission of Ontario (FSCO), where,
in a two-to-one vote, the Tribunal overturned the Superintendent's refusal. The next shot placed the ball
in the Superior Court of Justice, Ontario. In a unanimous decision, the court overturned the Tribunal, and
affirmed the Superintendent's initial refusal. If this proves to be the winning shot, Monsanto must address
surplus for the partial wind-up group.
But the point may not be over. The court seemed to beg the point to continue, as it noted that this ". . .
issue has not been adequately clarified and that the language of Section 70 (6) continues to confound those
who are involved." The court suggested legislative clarification of the intent of Section 70 (6). At this
writing, Monsanto has served notice that it will appeal. If the appellate court decides to hear the appeal,
the point will continue for at least one more volley.
There are now over 100 cases before FSCO that are simply on hold awaiting finalization of the Monsanto
decision. Many date back more than four years. Conceivably, past matters considered closed may need
revisiting.
Many plans that have partial wind-up reports on hold at FSCO could have had an excess of the market value
of plan assets over the actuarially computed plan liabilities as of the date of the partial wind-up report
sometime in the past. However, with the recent downturn in equity markets, at least some of these plans, if
valued currently, would likely have unfunded liabilities. It would be particularly painful for a plan
sponsor to be obligated to distribute past surplus, only to place the plan further in deficit.
The solution seems obvious. The legislators must carefully review this matter, and ensure that clear,
thoughtful legislation and regulation applies for all partial wind-up situations, both in the past and into
the future. Otherwise, the only people left playing tennis will be the lawyers and actuaries who will
continue to receive professional fees no matter who wins the points. A quick and decisive settlement of
this match will preserve funds that would enhance the security of plan members' benefits and could arguably
be used to provide members and former members with benefit entitlements.
Mel Norton is a senior vice-president with Aon Consulting Inc. in Toronto. mel_norton@aonconsulting.aon.ca.
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