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DB plan administrators and fiduciaries are responsible for executing pension plans, but where does that responsibility lie?
Jeremy Forgie, a partner in the Pension & Employee Benefits and Tax Groups with Blakes, set the record straight with a look at some of the issues in fiduciary risk management decision-making at the firm’s Recent Developments in Pension and Employee Benefits Law seminar, held yesterday in Toronto. Following are some of the highlights.
In terms of actuarial assumptions and methods, who is responsible for the ultimate decision? In a single employer pension plan, for example, the board or senior management (as delegated by the board) may decide on the assumptions and methods to be used. However, regardless of who makes the decisions, it is the board that’s ultimately responsible. The board won’t escape liability just because it delegated decision-making, Forgie said.
Forgie also said that there is helpful commentary in the recently released CAPSA guidelines on funding policies, in which the pension regulators state that under a single employer pension plan, decisions on funding assumptions and methods are sponsor functions that may take into account the sponsor’s corporate interests.
In the case of a funding default, a director, employee or agent who participates in or causes a breach of the funding obligations under the Pension Benefits Act could potentially be guilty of an offence under that legislation. For example, for board appointments, does the appointee need to consider the funding default of a plan before or after he or she is appointed? An appointee is not held liable for a funding violation if he or she is not on the board, but following an appointment, that person has to become aware of the funding issues and could be in breach of the pension legislation if he or she does not take any action to prevent the violation from continuing to occur. “Incoming trustees who join a board of trustees which administer the pension plan have a general duty to apprise themselves of funding issues,” Forgie said.
In terms of co-liability of trustees, trustees are generally liable for their own acts, not the acts of their co-trustees. However, if a trustee delegates a duty, that trustee must monitor the person to whom he or she delegated.
A PDF containing more detailed information on this topic is available from Blakes.