Following a pension plan windup, a plan administrator may soon find itself in a game of hide and seek. The administrator may be holding funds in trust for members who cannot be located or do not have a reliable address. This leaves an administrator in limbo, with a fiduciary obligation to hold funds when there may no longer be an operating business. Without some kind of distribution, the administrator will continue to incur costs indefinitely.
The Pension Benefits Act (PBA) does not address how to distribute pension plan funds for members in these situations or what procedures an administrator should follow. But recently, J. Wilton-Siegel of the Ontario Superior Court of Justice addressed these issues in Hawker Siddeley Canada Inc.
Hawker Siddeley wound up its pension plan in 1996 and its funds were paid out as approved by the Pension Commission of Ontario. Archives showed that payment, including surplus, was made to 2,280 persons (the former plan members).
Following the windup, certain additional funds from the plan were deposited into a trust account. These additional amounts were surplus assets—a portion of which, according to the terms of the surplus-sharing agreements, was to be paid to the former plan members.
No longer an operating entity, Hawker Siddeley wanted to close that trust account and distribute all remaining funds from the plan. However, as nine years had passed since the company had contact with the former plan members, it anticipated that a number of former members would be difficult to locate and, as a result, that there may be unclaimed amounts.
Hawker Siddeley brought an application to the court proposing a procedure for locating former members. It also sought approval of an order to deliver any amounts left to the accountant of the Ontario Superior Court of Justice for unlocatable beneficiaries and for the assets to be held there until claimed. In so doing, Hawker Siddeley aimed to:
• conclude its administrative responsibilities;
• avoid the eventual consumption of the funds by administrative expenses; and
• provide the members with a cost-effective opportunity to partake of the additional assets.
Citing Schmidt v. Air Products, the court affirmed that where the PBA is silent, it is appropriate to apply principles of trust law when they can be applied harmoniously with the PBA. The case also addressed the gaps in the PBA by finding applicable principles in sections 36(1) and (4) of the Trustee Act.
Section 36(1) provides that a trustee may apply for an order for payment of trust money into court. Section 36(4) provides that on the passing of final accounts of a trust by a judge of the Superior Court of Justice, the court may order the trustee to pay into court, to the credit of that person, any trust property belonging to a person whose address is unknown.
The court accepted that the windup of the pension plan under the PBA is equivalent to a passing of accounts—that is, the approval of the records and administration of a trustee by a court. Once the criteria for a passing of accounts are met, Section 36(4) provides for payment into court to protect trust funds for the benefit of persons whose addresses are unknown. On this basis, the court ordered the payment into court of plan funds for any former members who could not be located following the notice program.
Under the order, Hawker Siddeley had to file a list of all missing former members and the amount payable to each with the accountant of the Superior Court of Justice. The order further provided that upon presentation of identification satisfactory to the accountant, such former members (or his or her heirs, successors or legal representatives) would be entitled to the release by the accountant of the individual amount attributable to such former members. (It has not been announced how many former members have come forward to claim their amounts.)
Any plan sponsors in Ontario with wound-up plans, stranded assets and a desire to conclude their administration responsibilities may wish to give consideration to these circumstance.
Alan B. Merskey is a partner and Dera J. Nevin is an associate with Ogilvy Renault LLP.
© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the September 2009 edition of BENEFITS CANADA magazine.