Growing-into Grow-In Benefits?
The Financial Services Tribunal’s decision in Del Grande et al v. Shoppers Drug Mart Inc. (PDF) has added a further layer of complexity to partial wind-ups by allowing employees to seemingly grow into their grow-in benefits.
In this case, the Superintendent of Financial Services ordered the partial wind-up of the Shoppers plan with respect to members who had been terminated over a period of time, as a part of a corporate reorganization. Thus, the partial wind-up, consistent with prior Pension Commission of Ontario decisions which applied a purposive analysis, was found to have taken place over a period of time.
An employee who was excluded from the partial wind-up group applied to the Tribunal for a hearing. Shoppers viewed her dismissal as performance-related, and did not include her in the partial wind-up group. The Superintendent was of the view that the employee need not be included, as she did not meet the requirements for grow-in benefits, being the only benefit to be derived from inclusion in the wind-up. (At the time of her termination, the employee was 46 years old and had been employed as a Shoppers’ executive for eight years, and, therefore, could not meet the “55 points test” as of her dismissal date.)
The Tribunal held that the employee’s continuous service should be determined as of the effective date of the partial wind-up, which was at the end of the partial wind-up period, rather than as of the date of the employee’s dismissal, which occurred during the partial wind-up period. By allowing the employee to continue to accrue service well beyond her termination date, she accumulated enough service to qualify for grow-in benefits, and, therefore, be included in the partial wind-up group.
The Tribunal’s decision flies in the face of previous partial wind-up reports, which have traditionally calculated grow-in benefits as of an employee’s termination date. As a result, this case adds to the already-existing complexity and uncertainty regarding partial wind-up criteria, and threatens to further increase the number of former plan members entitled to grow-in benefits – an entitlement which can be costly to sponsors of Ontario registered pension plans. It will be interesting to see whether the Ontario government will clarify the partial wind-up provisions as a part of the pension reform package expected to be introduced in response to the report of the Ontario Expert Commission on Pensions.
