Amherst (Town) v. Nova Scotia (Superintendent of Pensions) (Amherst) is the first case to address the issue of who is considered an “employer” for the purpose of funding a pension plan. The plan in question involved multiple employers participating in a defined benefit (DB) plan subject to the mandatory funding requirements of a single-employer plan. As such, Amherst not only provides a useful framework in determining who is deemed an employer but also reflects the reality that there are often multiple employers participating in a single-employer pension plan funding model.
The Police Association of Nova Scotia (PANS) is a union that represents municipal police officers and related employees. In 1981, PANS established a DB pension plan. The participants included nine towns, each of which had entered into collective agreements with PANS locals for the provision of police services in those municipalities. The terms of the collective agreements required the towns to remit contributions to the plan on behalf of the employees and the towns. However, a separate written contribution agreement did not exist, and no participation agreements existed with respect to the towns’ participation in the plan. Under the plan terms, PANS was the sole administrator and retained the unilateral right to amend the terms.
In 2003, a plan valuation disclosed a solvency deficiency. The towns refused to contribute to the solvency payments, arguing that they had not agreed to be employers within the terms of the plan and therefore weren’t liable for unfunded deficiencies. The Superintendent of Pensions found that the towns were employers under the Nova Scotia Pension Benefits Act and ordered the towns to make the solvency payments. The Nova Scotia Supreme Court overturned the Superintendent’s order on the basis that the towns were not employers under the plan. PANS appealed that decision.
The Nova Scotia Court of Appeal restored the original order, requiring the towns to fund the solvency deficiency. In assessing whether or not the towns were employers participating under the plan, the Court of Appeal found that even though the towns were not parties to the plan, they had made contributions to the pension fund pursuant to the collective agreements. Based on the conduct of the towns over the past 24 years, the towns had agreed to—and were thus required to—contribute as employers under the plan. The court ruled that the absence of a written agreement did not negate the towns’ obligations and rejected the towns’ submission that they were “contractual strangers” to the plan.
Subsequent to the Amherst decision, in Victorian Order of Nurses for Canada v. Superintendent of Financial Services (VON Canada), the Ontario Financial Services Tribunal addressed the issue as to whether VON Canada, the plan sponsor and administrator, was responsible to fund solvency deficiencies arising with respect to former local branches participating in the plan. Similar to the PANS plan, the VON Canada pension plan involved multiple employers participating in a single-employer funding model. However, as the umbrella organization serving the aforementioned local branches, VON Canada never paid salaries to employees of the branches. Therefore, it was not the organization from which the members received remuneration to which the pension plan was related. As such, the tribunal found that VON Canada was not an employer for the purpose of engaging the funding duties of the Ontario Pension Benefits Act.
The Amherst and VON Canada decisions, when read together, provide an analytical framework to assess who is deemed an employer liable to fund a DB pension plan. While both decisions involve the application of the statutory definition of “employer,” the conduct and expectations of the parties are critical to the assessment.
Peter Driscoll is a benefits and pension lawyer with McInnes Cooper in Halifax.
peter.driscoll@mcinnescooper.com
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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the December 2009 edition of BENEFITS CANADA magazine.