Craig Colpitts v. Superintendent of Financial Services, 2013 ONFST 5

2013 ONFST 5

Decision No. P0507-2012-1

Date: 2013/05/21

IN THE MATTER OF the Pension Benefits Act, R.S.O. 1990, c. P.8, and the Financial Services Commission of Ontario Act, 1997, S.O. 1997, c. 28;

AND IN THE MATTER OF a Notice of Intended Decision of the Superintendent of Financial Services to Refuse to Make an Order under section 87 of the Act relating to The Retirement Plan for Organized Employees of Tembec Enterprises Inc. – Kapuskasing Operations, Registration Number 0342352;

AND IN THE MATTER OF a Hearing in accordance with subsection 89(8) of the Pension Benefits Act, R.S.O. 1990, c. P.8.

and

BEFORE:

John Solursh Chair of the Tribunal and Chair of the Panel

Heather Gavin Member of the Tribunal and Member of the Panel

Shiraz Bharmal Member of the Tribunal and Member of the Panel

For the Applicant – Craig Colpitts

For the Superintendent of Financial Services – Mark Bailey

For the Added Party Tembec Enterprises Inc. – Mark Newton

Date of Hearing:

March 27, 2013

REASONS FOR DECISION

I. INTRODUCTION

1The hearing of this matter was held with respect to a Notice of Intended Decision of the Superintendent, dated August 8, 2012 (the “NOID”) to refuse an order, as requested by Craig Colpitts (the “Applicant”), under section 87 of the Pension Benefits Act, R.S.O. 1990, c. P.8 (the “PBA”) relating to the Retirement Plan for Organized Employees of Tembec Enterprises Inc. – Kapuskasing Operations, Registration Number 0342352 (the “Plan”).

2The Applicant requested an order that would require additional bridge benefits be paid to him pursuant to the Plan terms and the PBA. He submitted that the duration of the bridge benefit depends upon the specific commencement date of his Canada Pension Plan (“CPP”) and Old Age Security (“OAS”) benefits and that there should not be any gap between the cessation of his bridge benefit and commencement of payments to him under CPP and OAS. Also, because he was born on the first day of the month, he did not receive the bridge benefits for the month in which he attained age 65, whereas a person born on any other day of the month would have; he believes this is unfair.

3It was the position of Tembec Enterprises Inc. (“Tembec”), as the employer and Plan Administrator, and of the Superintendent that the Plan terms were clear as to the duration of the bridge benefit and the Applicant had been paid in accordance with the terms of the Plan. They also asserted that the Plan terms are consistent with the requirements of the PBA.

4We have concluded that Mr. Colpitts has been fully paid his bridge benefit entitlement under the Plan and that the terms of the Plan are consistent with the requirements of the PBA. Accordingly, the Superintendent’s NOID should be upheld.

II. THE AGREED FACTS[^1]

5The Plan is a defined benefit pension plan covering employees of Tembec.

6Tembec is the employer sponsor and Administrator of the Plan. Tembec is also party to a collective agreement with the Communications, Energy and Paperworkers Union, Local 256 of which the Applicant was a member during his employment with Tembec.

7The Plan, at section 4.06(a), provides for the payment of a bridging benefit “...payable until the first of the month prior to the attainment of age 65 or the prior death of the Pensioner”.

8Pension payments made from the Plan’s pension fund are paid in advance, on the first banking day of a month for that month.

9The Applicant’s date of birth is April 1, 1947. He attained 65 years of age on April 1, 2012.

10The Applicant retired on March 31, 2007, prior to his 65th birthday. The Applicant elected a level income form of pension payment under which the amount of pension would be greater up to age 65 and then reduced after age 65. This form of pension is designed to ensure that total income over the course of retirement from all sources, including estimated benefits from the Canada Pension Plan and Old Age Security, is relatively uniform.

11The Applicant’s first pension payment, made on April 1, 2007, was payable for that month (i.e. April, 2007). The payment included a bridge benefit in accordance with the Plan terms.

12Payment of the Applicant’s bridge benefit was made until March 1, 2012 and ceased on April 1, 2012, in accordance with the Plan terms. The March 1, 2012 payment was made in advance in respect of the month of March 2012.

13The Applicant’s first CPP and OAS benefit payments were paid on May 29, 2012.

III. ADDITIONAL FACTS PROVIDED THROUGH TESTIMONY

14KR, a retiree under the Plan, testified at the request of the Applicant regarding his pension arrangements under the Plan. He retired on April 30, 2005 having attained age 58 on April 3, 2005. His first OAS payment was received on May 29, 2012. His CPP payments had commenced earlier in 2007. Attainment of age 58 is a requirement under the Plan for entitlement to receive the bridge benefit. His last bridging benefit was paid at the beginning of April 2012 and he received his first payment of his joint and survivor pension in accordance with the Plan on May 1, 2005.

15There was no dispute among the parties that KR was paid his pension benefit and bridge benefit in accordance with the Plan. The parties also acknowledged that the Plan provided for payment of the regular pension benefit effective the first day of each month without requirement that the payee live for the entire month.

16Mr. Norman Leybourne, the Human Resources Manager at Tembec’s operation in Kapuskasing, testified as a witness for Tembec. He joined Tembec as a unionized operator in 1974 and became Human Resources Manager in August 2004. His department was responsible for day to day administration of the Pension Plan. In addition, he is a member of the Administrative Retirement Committee (the “Committee”) which had the ultimate responsibility for the administration of the Plan. The Committee, he testified, seeks to apply the administration of the Plan fairly. It is comprised of two Tembec (employer) representatives and two Union appointed representatives. He was on the Committee at the time of the Applicant’s retirement.

17Mr. Leybourne outlined the procedures of the Committee in approving pension payments, including the requirement for approval by one representative of the employer and one representative of the Union, both of whom in the case of the Applicant’s election, had signed off and approved his election after review. Mr. Leybourne testified that the amount, and time of commencement of, bridge benefits had been administered consistently to his knowledge under the Plan since he first joined that Committee in 1984, including in any circumstances similar to the Applicant’s. He stated that the consistent practice of the Committee has been that a bridge benefit start date is the first day of the month following a Plan member’s retirement and that the last payment is the first day of the month before the member reaches age 65 (generally the age when an individual qualifies for government pension).

18Mr. Leybourne also confirmed that the Plan is a collectively bargained plan. The terms are changed only by collective bargaining and the current Plan provisions affecting the Applicant, including those relating to bridge benefits, were approved through collective bargaining.

19Mr. Leybourne further testified that the bridge benefit entitlement has been administered by the Committee in accordance with paragraph 4.06(a) of the Plan which reads as follows: “A member who retires on an Early Retirement Pension or on a Disability Pension shall be entitled to a Bridge Benefit which shall be payable until the first of the month prior to the attainment of age 65 or the prior death of a pensioner.” He also testified that the Committee was satisfied that the Applicant’s bridge benefit had been paid in accordance with that paragraph. He stated that with respect of the example of KR, KR’s bridge benefit terminated on the first day of the month before he attained age 65 in accordance with the wording of paragraph 4.06(a) of the Plan.

20Mr. Leybourne identified the “Statement Election of Benefits on Retirement” under the Plan provided to the Applicant on March 15, 2007 which was included at Tab 7 of the Agreed Book of Documents. It provided detailed information to the Applicant which Mr. Leybourne testified was not inconsistent with the Committee’s administration of the Plan as it related to the bridge benefit payable to the Applicant. We agreed with Mr. Leybourne’s comments regarding that document and would note that the final page of that document, just above the signature of the Applicant, specifically states that “I further understand that in the event of any conflict between this statement and the Plan terms, the Plan terms will prevail.”

IV. ISSUES

21The Parties agreed that the issues to be determined by the Tribunal were as follow:

“a. What is the correct end date for the payment of the bridge benefit under the Plan to the Applicant in accordance with the Plan and the PBA?

b. Given the answer to issue (a), what remedy, if any, should be granted by the Tribunal?”

V. POSITIONS OF THE PARTIES AND ANALYSIS

(i) Plan Terms

22Section 4.06(a) of the Plan governs the payment of the bridge benefit. It states:

“A Member who retires on an Early Retirement Pension or on a Disability Pension shall be entitled to a Bridge Benefit which shall be payable until the first of the month prior to the attainment of age 65 or the prior death of a pensioner.” (Emphasis added)

There is no dispute that the Applicant elected early retirement under the Plan and was eligible for a bridge benefit. The first payment of the bridge benefit was made, together with the Applicant’s base pension, on April 1, 2007. The payment was made in advance in respect of the month of April 2007 in accordance with the Plan.

23The last bridge benefit payment was made on March 1, 2012 (the Applicant having turned 65 on April 1, 2012) and was paid, in advance, in respect in the month of March 2012. That decision was in accordance with section 4.06(a) which directs that the bridge benefit is “payable until the first of the month prior to the attainment of age 65”. It did not provide, as do some pension plans, that the bridge benefit was payable “until the first day of the month prior to or coincident with the attainment of age 65”. The Applicant turned 65 on April 1, 2012 and the first of the month prior to (not coincident with) the attainment of age 65 was March 1, 2012.

24The Applicant asserted that he has been treated “unfairly” if his treatment is compared to someone who was born on a date other than the first day of the month. He cited the example of KR. However it is clear that the facts and dates (including the birth date and retirement date) in this situation were quite different from those in KR’s case. It also is clear to us that payment of the bridge benefit in both cases was in accordance with the Plan. Mr. Leybourne noted in his testimony, the Applicant’s bridge benefit entitlement including the payment period, was determined and paid for a period consistent with that of any other Plan member born on the first day of a month. We agree that the Applicant was treated differently than someone who would have been born a day later than he was. However, the Plan has been clearly written and consistently interpreted so that entitlement to a bridge benefit ceases on the first day of the month prior to the attainment of age 65.

25The reality is that this Plan like all pension plans, fixes certain dates or other milestones for the payment of benefits – that is the nature of the way in which pension plans must work. It is inevitable that in some circumstances a particular individual may fall on one side or the other of a milestone. If, as in this case, the milestone is adequately set out in the Plan then the Plan terms are consistent with the PBA.

26The Applicant also relied on section 5.03(c) of the Plan which sets out the terms of the Plan relating to the Level Income Form of Pension which he elected. That form of pension is designed to ensure that total income over the course of retirement from all sources, including estimated benefits from the Canada Pension Plan and Old Age Security, was “relatively uniform”. We agree with the Superintendent and Tembec that section 4.06, not section 5.03(c), governs the payment of the bridge benefit. Section 5.03(c) is merely an optional form of pension which is actuarially equivalent to the normal form of pension. As submitted by the Superintendent and by Tembec, the “integration” of the bridge benefit with CPP and OAS under Section 4.06 is approximate and the timing is based on the attainment of age 65 rather than the precise date of the commencement of CPP and OAS which can be more than a month after the attainment of age 65, as in this case, because the government pensions are first paid towards the end of the month following age 65.

(ii) The PBA and Section 8500(1) of the Income Tax Regulations

27The Applicant argued that even if we conclude his bridge benefit was paid in accordance with the Plan, it was not paid in accordance with the provisions of applicable law, having regard to the requirements of the PBA and Section 8500(1) of the Income Tax Regulations. We do not agree with that argument. We have concluded that, as submitted by the Superintendent and Tembec, neither the provisions of the PBA nor Section 8500(1) of the Income Tax Regulations alter the conclusion that the Applicant’s bridge benefit was paid in accordance with the Plan.

28More specifically, the Applicant relied on the definition of bridging benefit in the PBA which states:

“bridging benefit” means a periodic payment provided under a pension plan to a retired member of the pension plan for a temporary period of time for the purpose of supplementing his or her pension benefit until he or she is eligible to receive benefits under the Old Age Security Act (Canada) or is either eligible for or begins to receive retirement benefits under the Canada Pension Plan or the Quebec Pension Plan;”

29We agree with the submission of the Superintendent and Tembec that the foregoing definition merely defines the term “bridging benefit”. That definition does not prescribe the specifics of the timing or duration of such benefits. The treatment of bridge benefits in the PBA and related regulations is set out in section 51 of Regulation 909, R.R.O. 1990, which reads as follows:

“51. (1) If a member or former member has satisfied all of the eligibility requirements to receive a bridging benefit or if a retired member is receiving a bridging benefit, the amount or value of the bridging benefit shall not be reduced simply because the member, former member or retired member is eligible or entitled, under the Canada Pension Plan, the Quebec Pension Plan or the Old Age Security Act (Canada), to receive actuarially reduced payments before reaching 65 years of age.

(2) If a pension plan provides a bridging benefit without specifying the age at which the benefit is reduced or ceases, the plan is deemed to specify that the bridging benefit is reduced or ceases when the member, former member or retired member reaches 65 years of age.

(3) However, subsection (2) does not apply if the pension plan is amended after December 31, 1986 to specify that the bridging benefit is reduced or ceases in one, or both, of the following circumstances:

When the member, former member or retired member reaches a specified age that is younger than 65 years of age.
When a specified event occurs.”

30Under section 51(2) of Regulation 909, a bridging benefit is deemed to cease at age 65 if the pension plan does not specify the age at which the bridging benefit ceases. In the present case, the Plan indicates that the bridging benefit ceases at age 65 which, in any event, is consistent with the deemed default in section 51(2).

31Furthermore, section 51(3) of the Regulation allows a bridging benefit to cease at an age prior to age 65 or when another specified event occurs. Even if a date for the cessation of the bridging benefit other than the age 65 was specified in the Plan, the Plan would not contravene section 51.

32Section 51 does not require that a bridge benefit continue until payments under OAS and CPP commence. That section does not mandate any particular cessation date for bridging benefits. It simply provides clarity as to the cessation date if the pension plan text is silent.

33Accordingly, we have concluded that the PBA and Regulation 909 do not alter the conclusion that the Applicant has been paid the appropriate bridge benefit as provided under the Plan.

34The Applicant also relied on the definition of “bridging benefits” in section 8500(1) of the Income Tax Regulation.² We agree with the submissions of the Superintendent and Tembec that this definition does not require nor specify any particular date for the cessation of bridge benefits. It simply requires that benefits which fall within the definition of “bridging benefits”, terminate “no later than a date determinable at the time the benefits commence to be paid.” Accordingly, the provisions of the Plan text are not inconsistent with section 8500(1) of the Income Tax Regulations and we need not address what would be the effect of any inconsistency with that section.

VI. ORDER

The Application is dismissed and the NOID of the Superintendent, refusing the order under section 87 of the PBA requested by the Applicant, is upheld and should be carried out.

Dated at Toronto, this 21st day of May, 2013.

“John Solursh”

John Solursh

Chair of the Tribunal and Chair of the Panel

“Heather Gavin”

Heather Gavin

Member of the Tribunal and Member of the Panel

“Shiraz Bharmal”

Shiraz Bharmal

Member of the Tribunal and Member of the Panel

Footnotes

C.R.C., c. 945.
The facts set out in this section are contained in the Agreed Statement of Facts (“ASF”).