Welcome to the 30th issue of the Blakes Pensions Newsletter. This newsletter provides a summary of recent jurisprudential developments that affect pensions and is not intended to be legal advice.
For additional information or to discuss how any aspect of these developments may affect you, please contact a member of the Blakes Pensions, Benefits & Executive Compensation group.
IN THIS ISSUE
PENSION PLAN ADMINISTRATION
Re OPSEU and Ontario (Minister of Government & Consumer Services), 2021 CanLII 19542 (ON GSB)
Under collective agreements between the union (Union) and the employer (Employer), active employees were required to pay one half of the pension contribution under the Union’s pension plan (the Plan), which was matched by the Employer. Prior to the 2015-2017 renewal collective agreement, there was a special exemption for disabled employees who were receiving or were qualified to receive benefits under the Long-Term Insurance Plan (the LTIP). The LTIP provided 66 2/3 per cent of an employee’s annual salary amount until the age of 65, provided the employee remained “totally disabled”. Under this exemption, the Employer paid the entire pension contribution for those eligible for LTIP payments. In the absence of an exemption, an LTIP employee would have been required to contribute approximately 10 per cent of his or her pensionable earnings to fulfill the employee’s share of the pension contribution. However, provisions (the Impugned Provisions) in the 2015-2017 renewal collective agreement between the Union and Employer created an exception to the LTIP exemption — where an employee had a minimum of 30 years of credit and was eligible to retire and receive an actuarially unreduced pension, the employee must pay his or her portion of employee contributions if he or she did not retire but elected to continue to accrue benefits.
Under the Plan, an employee was entitled to receive an unreduced pension upon retiring at the age of 65. An employee could retire early and still receive an unreduced pension if he/she met one of three eligibility tests: (1) eligibility for a disability pension (which required the employee to have more than 10 years of service, be considered “totally and permanently disabled”, and terminate employment); (2) eligibility under Factor 60/20 (which required the employee to be at least 60 years old and have at least 20 years of pension credit); or (3) eligibility under Factor 90 (which required the employee’s age plus years of pension credit to total at least 90).
The Union argued that the Impugned Provisions created a discriminatory adverse impact on LTIP employees who were between ages 54 (the minimum age to be eligible under Factor 90 with 30 years of pension credit) and 65 (the age at which LTIP benefits ceased). The Union argued that this violated the protection against age discrimination under section 15(1) of the Charter of Rights and Freedoms (Charter) and section 5(1) of the Ontario Human Rights Code (Code). The Impugned Provisions forced affected employees to choose between retiring early despite still being eligible for LTIP, or paying their share of the pension contribution.
The Employer argued that the Impugned Provisions were the result of agreement in collective bargaining. Any distinction made was based on the amount of pension credit, not based on age. The Employer also argued that the impacted employees were not deprived of their choice. The LTIP employees could choose to (i) stay on LTIP and pay the employee share of their pension contribution (and suffer a financial burden), (ii) stay on LTIP without paying their pension contribution (and suffer a freezing of their pension credit status), or (iii) take the option of early retirement (and suffer the loss of LTIP benefits). Furthermore, the Employer argued that the LTIP employees were simply losing access to a special benefit that was not available to non-LTIP employees, as employees on other forms of leave were required to continue pension contributions in order to continue pension accruals.
The Ontario Grievance Settlement Board (Board) found that the Impugned Provisions were indeed in violation of the equality protections in the Charter and the Code. The fact that the Impugned Provisions were agreed to by both the Employer and the Union did not make the bargain Charter-compliant, as the parties are not permitted to contract out of the Charter or Code. While the Employer had no intention to discriminate and the Impugned Provisions did not expressly draw a distinction based on age, the Impugned Provisions acted as a proxy for age, and they had a disproportionate adverse impact on older LTIP employees. These employees were forced to make a choice between three options, each with its own negative consequences. As compared to younger LTIP employees who were not required to pay their share of the pension contribution, the older LTIP employees suffered an adverse impact. Citing the Supreme Court’s decision in Fraser v. Canada (Attorney General), 2020 SCC 28, the Board wrote that the discriminatory effect was not negated by the fact that the affected employees had a choice. The Board further found the Employer had not established a bona fide occupational requirement to support the Impugned Provisions. While the Impugned Provisions may have reduced costs for the Employer, the only evidence available established that the number of employees impacted would be small, so the cost savings would have been modest.
The Board found that under the Oakes test under section 1 of the Charter, the Employer had failed to establish that revoking the pension contribution subsidy from the impacted employees was “pressing and substantial”. Therefore, the Board struck down the Impugned Provisions.
Ontario Grievance Settlement Board Decision
Kynoch v. Board of Education of School District No 58 (Nicola-Similkameen), 2021 BCHRT 45
The complainant, Ms. Kynoch, was employed by the respondent School District (District) for 25 years. Under the terms of her union’s collective agreement with the District (the Collective Agreement), an employee with accrued sick leave is entitled to a payout on retirement. The Collective Agreement also required employees to be enrolled in the Municipal Pension Plan. The “earliest retirement age” for employees in Ms. Kynoch’s category was 55. Ms. Kynoch ended her employment with the District when she was only 50 years old. In doing so, she advised the District that she was "retiring". As Ms. Kynoch was under the age of 55, the District considered her to have resigned rather than retired. As a result, Ms. Kynoch did not receive the payout of accrued sick leave.
Ms. Kynoch brought a complaint, arguing that the District's conduct in defining an age of retirement and then refusing to pay out her accrued sick leave amounted to discrimination based on her age, in violation of section 13(1) of the British Columbia Human Rights Code (Code). The District argued in response that the entitlement to accrued sick leave arises as part of a bona fide retirement plan, which is exempt from claims of age discrimination under section 13(3)(b) of the Code.
The British Columbia Human Rights Tribunal (Tribunal) dismissed the complaint finding that it had no reasonable prospect of success at a hearing. The Tribunal found that the District would be able to prove that its retirement plan was a bona fide retirement plan. It was a legitimate plan providing a comprehensive set of benefits for retirees, and its terms were negotiated by Ms. Kynoch’s union. The retirement ages set out in the plan corresponded to social norms respecting the time when people often transition from employment into retirement. The plan was adopted in good faith for the purpose of defining benefits available to eligible workers upon retirement.
British Columbia Human Rights Tribunal Decision
PENSION PLAN ADMINISTRATION
McHayle v. Ontario (CEO of FSRA), 2021 ONFST 2
Mr. McHayle became a public servant in April 1994, joining the Ontario Public Service Employees’ Union Pension Plan (the OPSEU Plan). After 21 years of service, in April 2015, Mr. McHayle was promoted to management and thus required to join the Public Service Pension Plan (the PSPP). At issue was whether Mr. McHayle was entitled to a “commuted value excess value payment” calculated at approximately C$119,250; this sum reflected the amount by which the commuted value of his pension in the OPSEU Plan at the date of his promotion exceeded the amount transferred to the PSPP pursuant to a formula agreed upon in the Reciprocal Transfer Agreement (the RTA) between the OPSEU Plan and the PSPP.
On September 27, 2013, an amendment to the OPSEU Plan (the Amendment) removed the entitlement of members to receive any excess value payments. The Amendment was agreed to by both plan sponsors on the recommendation of the plan administrator (Administrator). There was no need for advance notice of the Amendment as the Administrator had successfully applied for an exemption under subsection 26(4) of the Ontario Pension Benefits Act (ON PBA). Information about the change was circulated to the OPSEU Plan members in 2014 in the Administrator’s annual pension statement. The Financial Services Tribunal (Tribunal) noted that it would have been preferable to provide Mr. McHayle with information about the Amendment at the time of his transfer, but legally no further notice was required.
Mr. McHayle’s principal submission before the Financial Services Tribunal was that the Amendment was void pursuant to section 14 of the ON PBA. Under paragraph 14(1)(a) of the ON PBA, an amendment to a pension plan is void if the amendment purports to reduce the “amount or the commuted value of a pension benefit accrued under the pension plan with respect to employment before the effective date of the amendment”. The Tribunal found that the Amendment was not void under section 14 of the ON PBA. According to the Tribunal, a commuted value excess payment is not a “pension benefit” as defined in subsection 1(1) since it is not a periodic payment. In any event, the Amendment did not reduce the amount of pension benefit “accrued” under the OPSEU Plan as the amount of a person’s commuted value excess could not be calculated at the date of the Amendment without making assumptions about future events. Mr. McHayle’s right was at best a contingent right that would crystallize if the relevant variables, including interest rates at the time of his promotion, actually resulted in a commuted value excess.
Mr. McHayle also argued that, as someone who ceased to be a member of the OPSEU Plan, he was entitled by section 28 of the ON PBA to receive written statements from the plan administrator containing prescribed information about his benefits, rights and obligations. However, the Tribunal noted that subsection 41(1) of the Ontario Pension Benefits Act Regulations (PBA Regulations), which contains the prescribed information referred to in section 28 of the ON PBA, only requires written statements for persons who are entitled to a deferred pension. Since Mr. McHayle was not entitled to a deferred pension at the time of his promotion, the Tribunal found that Mr. McHayle was not entitled to receive the written statements.
Mr. McHayle further suggested that, as a former member of the OPSEU Plan, he was entitled by section 42 of the ON PBA to a commuted value transfer from the OPSEU Plan to the PSPP. The Tribunal found that Mr. McHayle was not a “former member” because he did not meet the requirements of subsection 1.1(2) of the ON PBA: he did not terminate his employment, and though he had terminated his membership, he was not entitled to a deferred pension, nor was he entitled to receive any other payment from the pension fund. Given Mr. McHayle was not a former member of the OPSEU Plan, he was not entitled to a commuted value transfer via section 42.
Mr. McHayle also asserted negligent misrepresentation on the part of the Administrator, but the Tribunal held that it did not have jurisdiction to decide this point.
Having dismissed Mr. McHayle’s arguments, the Tribunal concluded that Mr. McHayle was not entitled to the commuted value excess value payment.
Financial Services Tribunal Decision
Armbruster v. Barrett, 2020 SKCA 140
Mr. Armbruster and Mr. Barrett settled the issues of property division and spousal support following a pretrial conference (the Judgment) in 2013. Mr. Armbruster was entitled to receive a portion of Mr. Barrett’s pension (the Pension), divided at source, from November 15, 1997 to June 25, 2010, plus interest to the date of transfer. Mr. Barrett provided a copy of the Judgment to his pension plan administrator (Administrator). The Administrator determined that Mr. Armbruster’s share of the pension was C$135,667.65, which was later transferred to Mr. Armbruster’s financial institution in 2014. Mr. Armbruster accepted those funds without objection or reservation. Shortly after receiving the funds, Mr. Armbruster’s legal counsel requested an explanation from the Administrator concerning its calculation. The Administrator responded to the inquiry, and there was nothing in the record showing that Mr. Armbruster followed up or took issue with the calculation at that time.
Mr. Armbruster then retained different legal counsel the following year, who wrote to the Administrator asserting that the Pension was a defined contribution plan and that the Administrator had erred in its calculation. In response, the Administrator informed Mr. Armbruster’s counsel that the Pension was a defined benefit plan and that it stood by its earlier calculation. Legal counsel for the Administrator provided a detailed explanation for why it used the prorated service approach to value the Pension, noting that it took particular guidance from the Supreme Court of Canada’s decision in Best v. Best,  2 SCR 868, which noted that the pro rata method yields a valuation that is fairer than the valuation produced by the value-added method.
Mr. Armbruster applied for an order directing the Administrator to divide the Pension using the value-added method of actuarial calculation, rather than the prorated service approach used by the Administrator. The Chambers judge characterized the relief sought as a request to open up or modify the Judgment. In light of the circumstances, he found himself functus officio (the doctrine where a court formally issues a final judgment, with no ongoing obligations, that court has no jurisdiction to reopen or amend the judgment except in certain limited circumstances); and, as such, decided that the court lacked jurisdiction to entertain the application. Mr. Armbruster appealed that decision.
Mr. Armbruster argued that (i) by determining his application on the doctrine of functus officio, he was denied basic procedural fairness, and (ii) the Chambers judge ignored the wording in the minutes of settlement and the Judgment that allowed for them to return to the pretrial judge and therefore the judge had no authority to override this. Mr. Armbruster also argued that the wording “divided at source” was ambiguous and, as such, he should have been given the opportunity to have its meaning refined through the judicial process. Mr. Barrett’s position was that the Judgment was final and fully implemented, and there was no applicable exception to the doctrine of functus officio.
The Saskatchewan Court of Appeal (SKCA) agreed with Mr. Barrett, specifically noting that Mr. Armbruster agreed to the wording “divided at source” and, even if the wording was ambiguous, the fact of the matter was that Mr. Armbruster acted on its terms and later argued he should be able to pursue judicial relief because he acted to his detriment. The SKCA also noted that the underlying substantive argument that the pension should have been divided using the retirement method of calculation did not strike the SKCA as being particularly strong considering the facts. Mr. Barrett’s employment had been terminated prior to separation and his rights in relation to the pension plan had ceased on termination from that employment. Mr. Barrett was only 52 at that time and was not retired nor was he eligible to retire.
Saskatchewan Court of Appeal Decision
Jeske v. Jeske, 2021 ABQB 58
Ms. Jeske and Mr. Jeske (Parties) separated in July of 2016. Residents of Alberta, both parties had accrued significant pension benefits through their respective workplace pension plans. Mr. Jeske’s benefit included both a defined benefit and defined contribution component. In October of 2018, an agreement was reached regarding the Parties’ matrimonial property including their pensions. No contract was prepared. Rather, the agreement was “reified in the form of a series of court orders”.
Four orders were prepared—a comprehensive Consent Matrimonial Property Order (the Consent MPO), and three subsidiary orders which were attached to it as Schedules A through C. The Consent MPO and Schedules A and C were to take effect immediately upon presentation to and approval by the Court. Schedule B was an order that Ms. Jeske was entitled to obtain in the future. It would divide Mr. Jeske’s workplace pension at source on a 60/40 basis in Mr. Jeske’s favour.
On January 16, 2019 Mr. Jeske died. Ms. Jeske’s survivorship rights under Mr. Jeske’s pension were engaged because Ms. Jeske had not yet applied for or obtained the division at source order. She had been receiving a monthly pension benefit under the terms of the defined benefits pension program in which Mr. Jeske participated, and also requested and received a transfer of funds held in a LIRA in respect of Mr. Jeske’s defined contribution entitlements.
Ms. Jeske had no intention to act on her entitlement to obtain an order dividing the defined benefits pension at source, choosing instead to continue to receive a lifetime monthly pension as Mr. Jeske’s joint annuitant and survivor. Mr. Jeske’s Estate (on behalf of Nathan Jeske, its sole beneficiary) applied for an order varying the Consent MPO so as to compel the division of Mr. Jeske’s defined benefit pension at source.
The Court of Queen’s Bench of Alberta (AQBQ) agreed with Ms. Jeske that the wording of the order clearly granted Ms. Jeske the entitlement to obtain an order in the future dividing Mr. Jeske’s pension at source, but did not compel her to do so. The AQBQ declined to vary the terms of the Consent MPO.
Court of Queen’s Bench of Alberta Decision
Carvalho v. Amorim, 2021 ONSC 2940
Subsection 44(1) of the Ontario Pension Benefits Act (ON PBA) provides that every pension paid to a retired member who has a spouse on the date that the payment of the first installment of the pension is due shall be a joint and survivor pension. There is an exception for pension benefits paid in respect of a member who is living separate and apart from his or her spouse on the date that payment of the first installment of the pension is due (former subsection 44(4)(b) of the ON PBA, the precursor to the current subsection 44(1.1)). At issue in this case was whether the parties were living separate and apart for the purpose of this exception to subsection 44(1), and whether a spouse had provided a waiver in respect of her entitlement to this pension.
Mr. Carvalho and Ms. Amorim, both Portuguese residents, were married in 1980 and had a child in 1984. Mr. Carvalho moved to Canada in 1985 and remained there for four years, returning to Portugal briefly before returning to Canada. In 1990, Ms. Amorim moved to Canada, but returned to Portugal within one or two months. The parties’ evidence over what transpired next conflicted. According to Mr. Carvalho, the two had a telephone conversation around 1996/1997 and agreed their marriage was over. According to Ms. Amorim, there was no such conversation in 1996/1997; the parties had an arrangement that Mr. Carvalho would work in Canada and send money to her and their son, when necessary, visiting each other in six months. Divorce proceedings were initiated in 2008 and they were formally divorced in 2009.
Mr. Carvalho applied to The Labourers’ Pension Fund of Eastern and Central Canada (Fund) for a disability pension in August 2002. In his application he stated that he was legally married, but he provided a waiver which was purportedly signed by Ms. Amorim. On the basis that Ms. Amorim had appeared to have waived her right to a spousal pension, Mr. Carvalho received a pension higher than the joint and survivor benefit rate. In 2010, Ms. Amorim advised the Fund that she did not execute the spousal waiver. The Fund reduced Mr. Carvalho’s pension to the joint and survivor benefit rate.
On the “separate and apart” issue, the Court noted that the parties were physically separated at the time the pension benefit was first payable in August 2002. The parties had a joint bank account for Mr. Carvalho to deposit money and support Ms. Amorim and their son, but the evidentiary record was unclear as to the extent to which Ms. Amorim used this account. Mr. Carvalho asserted that there was little phone communication between the parties, and Ms. Amorim could produce no evidence of written communication between the parties. Although parties can be in a marital relationship even if they live in separate locations, the Court said that there must be evidence of a common purpose among the parties, involvement in each other’s lives, and communication. The evidence in this case did not show any sustained or significant interaction between the parties as of August 2002.
On the waiver issue, the Court thought that the circumstances surrounding the execution of the waiver were highly suspicious. The Court ultimately found that Ms. Amorim did not sign the waiver.
The Court found that given the parties were living separate and apart by August 2002, Mr. Carvalho was entitled to receive from the Fund pension benefits on a “life-only” basis. However, he was not awarded costs as he had falsely represented to the Fund that Ms. Amorim had executed a spousal waiver.
Ontario Superior Court of Justice Decision