The administrator of a pension plan can be the employer, a pension committee or a board of trustees, said Paul Dimitriadis, a lawyer with Blake, Cassels & Graydon, speaking at the Dominion Club in Toronto today. But no matter who the administrator is, the role of the administrator carries with it a large number of duties. These duties, said Dimitriadis, derive from three sources: legislation, common law, and trust and contract.
Legislation
Under the Pension Benefits Act(PBA)– the pension legislation in Ontario–plan administrators must administer according to the plan’s terms as well as the PBA’s terms and use discernment in administering and investing the pension fund. Similarly, in accordance with the Income Tax Act(ITA), the plan administrator must ensure that the pension plan is administered not only under the plan’s terms but also those of the ITA. And, the administrator must file all plan changes with the Canada Revenue Agency.
Common Law
Under common law, an administrator, under its fiduciary duties, must act wisely and prohibit any personal interests to conflict with the beneficiaries’ interests. The administrator must also ensure it does not take advantage of its fiduciary position.
Trust and Contract
And finally, the pension plan terms essentially create a contract between the employer and plan members. This contract is then documented, detailing the rights and duties of both the employer and plan members.
But a key area of pension plan administrators, said Dimitriadis, is the distinction between the administrator and the employer/plan sponsor. Under a single employer pension plan, the plan sponsor usually plays two roles, he said, that of employer and plan administrator.
When the plan sponsor is acting as the employer, it can act in its own interests. In this role, the sponsor is not a fiduciary and therefore does not have any fiduciary duties. But when the plan sponsor acts as administrator, the sponsor is now a fiduciary, and any self-interests explored as the employer must be put aside.
Despite the defined roles of the administrator, confusion arises when beneficiaries are unclear when the plan sponsor is acting as an employer or acting as an administrator. But the law will not always rule in favour of the beneficiaries. “Case law has confirmed that the employer is not bound by a fiduciary obligation when not acting in its capacity as a plan administrator,” said Dimitriadis.
Dimitriadis cites the case for Imperial Oil. Imperial Oil passed changes to its pension plan making it more difficult for employees to qualify for enhanced early retirement benefits. Plan members said that the company breached its fiduciary duty. But the tribunal held that the company, in passing these changes, was not acting as administrator in this case. The tribunal also held that the PBA recognizes that the employer may play two roles. Therefore, as the employer, Imperial Oil was in its right to change the plan. In the role of employer, Dimiatriadis stressed, a company is able to create, change and wind up its pension plan.
To avoid potential confusion over administrator roles, Dimitriadis suggests reviewing and/or implementing the guidelines from the Canadian Association of Pension Supervisory Authorities(CAPSA).
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