When companies are involved in a merger or acquisition, there are many issues to consider whether the pension plans should be merged as well.

Elizabeth Boyd, a partner with Blake, Cassels & Graydon LLP, and Evan Howard, a partner with Osler, Hoskin & Harcourt LLP, shared their ideas and recommendations at The Conference Board of Canada’s Post-Merger Integration Strategies 2007 conference in Toronto yesterday.

Regulatory Issues

A merger of pension plans is really just a transfer of assets and liabilities into one plan from another. It can be an expensive and lengthy process, plus it requires legal and actuarial input. There is also a state of uncertainty between the effective date of merger and receipt of regulatory approval. Also, different jurisdictions have different requirements and for the most part, the regime is fairly similar except for Quebec.

Case Law

Recent court cases can also have an impact on mergers, which are in addition to legislative requirements. The intersection of trust and contract law is rarely clear. It is also often dependent on historical terms of plan and funding agreements. Case law can also place restrictions on the use of funds within a merged fund or place restrictions on the ability to move assets from one fund to another.

Downsizing and Wind-ups

If there will be a significant restructuring of the company and the pension plan will be impacted, it could give the Superintendent of Financial Services in Ontario to order a full or partial wind-up. A wind-up, whether it be full or partial, can increase the value of pension liabilities and be costlier to the employer.

To Merge or Not to Merge?

Sometimes it may not make sense for plans to merge as some members will have different plans than others. Unionized staff might have a different plan than non-unionized staff or management could have a different plan than regular staff. There are also legal impediments to merger, such as trust law, collective agreement obligations and regulatory requirements.

For more about plan mergers, check out Done Deal? from the September 2007 issue of Benefits Canada. To read it, click here.

To comment on this story, email craig.sebastiano@rci.rogers.com.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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