SHARE. 10th Annual BC Pension Forum February 28, Murray Gold, Partner Tel: ; Fax:

Transcription

1 SHARE 10th Annual BC Pension Forum February 28, 2014 Murray Gold, Partner Tel: ; Fax:

2 LEGAL UPDATE Post-retirement benefits: Reservation of rights clauses. Pension Funding Models: Going concern plus. Pension Conflicts in AB and NB: Reduction of benefits, conversion to target benefit plans. Canadian Securities Class Actions: Green v. CIBC. 2

3 POST RETIREMENT BENEFITS LITIGATION Recent litigation concerning the employer s ability to unilaterally change post-retirement health benefits for salaried employees: Lacey v. Weyerhaeuser Company (2013 BCCA 252 (Canlii)). O Neill v. General Motors of Canada (2013 ONSC 4654). 3

4 POST RETIREMENT BENEFITS LITIGATION Lacey: The employer unilaterally reduces its contributions to the post-retirement benefits of retired employees; The B.C. Court of Appeal examines the contractual language between the employer and its employees, and finds that the post-retirement benefits were a significant form of compensation ; from an objective point of view, the provision of post-retirement benefits was a contractual right (rather than a gratuitous term). 4

5 POST RETIREMENT BENEFITS LITIGATION O Neill: The employer unilaterally reduces post-retirement health benefits; Again, the Court considers that post-retirement benefits were deferred compensation and formed an important part of the employees compensation agreement ; Reservation of rights clause does not clearly permit changes to retiree health benefits. 5

6 GOING CONCERN PLUS: Discussion paper from Alberta Treasury dated March 11, 2013; Proposal for collectively bargained multiemployer plans ( cbmep ); Alternative to solvency funding. 6

7 GOING CONCERN PLUS: Key elements: Best estimate going concern assumptions; Mandatory PfAD (provision for adverse deviation): Minimum level of PfAD is prescribed: PfAd level targets 85% probability of full funding in 3 years. Target PfAD is 15% of liabilities for plans with: 50% equity asset allocation. Discount rate tied to AA Corp long bond rate and 4% equity premium. Target PfAD increases with higher equity allocation, higher discount rate. 7

8 GOING CONCERN PLUS: Stated PfAD objectives: Balance benefit security against contingent nature of benefit regulatory balance (vs trustee balance); PfAD is plan specific; PfAD is countercyclical, i.e. funded by positive experience ; PfAD Offsets: excess contributions, smoothing reserve (i.e. actuarial value of assets is less than market value). 8

9 GOING CONCERN PLUS: Benefit improvements: Not permitted unless, after benefit improvement + PfAD, plan has buffer of 5%; Certain benefit formulae not permitted 9

10 GOING CONCERN PLUS: Additional rules regarding: Reduction of future/accrued benefits; Termination benefits; Amortization of unfunded liabilities; Stress testing; Disclosure to members; Conversion from DB to collectively bargained multi-employer pension plans. 10

11 GOING CONCERN PLUS: Summary: Benefit security based on actuarial model; PfAD is prescribed risk tolerance is mandated, not disretionary; PfAD sensitive to market interest rates, asset allocation; Permits conversion of DB to cbmep, including for accrued benefits; Reduced termination benefits; Mandatory 5% buffer before benefit improvements; Increased disclosure to members including solvency basis disclosure; (Probably) more detailed regulatory oversight than at present. 11

12 PENSION CONFLICTS NEW BRUNSWICK AND ALBERTA Unilateral initiatives in Alberta, New Brunswick and PEI to change public sector pension plans: Imposition of a contribution cap; Reduction/elimination of early retirement benefits; Change of basic benefit from FAE5 to career average; Reduction of indexation benefits; Conversion of future (and, in some cases, past) service benefits to target benefits. 12

13 PENSION CONFLICTS NEW BRUNSWICK AND ALBERTA Responses: Cost/risk v. pension adequacy; Management of funding risk - assumption of risk in exchange for (surplus) benefit: Funding analysis politics or reality; Political/organizational response; Bargaining strategy; Legal/constitutional challenges. 13

14 GREEN v. CIBC Limitations Act Ontario Court of Appeal reverses its earlier decision in Timminco and holds that a securities class action under the Ontario Securities Act is timely if the claim is filed within the limitation period (rather than if leave is granted within the limitation period). 14

15 GREEN v. CIBC The leave test Leave is to be granted unless the plaintiffs case is so weak or has been so successfully rebutted by the defendant that it has no reasonable possibility of success. 15

16 GREEN v. CIBC Common law misrepresentation In Ontario it is possible to bring a statutory claim for misrepresentation under the Ontario Securities Act, and, as well, a common law claim for misrepresentation in the securities context. Courts may consider inferred reliance as a common issue, and certify common law negligent misrepresentation claim. 16