A recent decision of the Ontario Superior Court (Court) illustrates complexities that can arise where a pension plan is partially wound up, triggering a requirement to settle surplus entitlements on the partial wind-up, and the surplus subsequently vanishes.
In Kidd v. The Canada Life Assurance Company et al, Canada Life had declared a partial wind-up of the Canada Life Canadian Pension Plan (Plan) in 2003 in relation to members who were terminated or retired as a result of the integration of Canada Life and Great West Life Assurance Company (the Integration Group). The Integration Group had commenced a class to determine, amongst other issues, the ownership of surplus on a partial windup of the Plan. The parties settled the action and under the terms of settlement Canada Life agreed to distribute approximately 70% of the estimated partial wind-up surplus to, amongst others, the Integration Group. The Integration Group members were informed that their estimated share of the surplus was worth approximately $55 million. As part of the settlement, Canada Life would in effect restart its pension plan under a new trust (the Ongoing Plan), which would receive the assets from the wound-up portion of the Plan. The plaintiffs in the class action and Canada Life successfully campaigned to secure the support of the class members for the proposed settlement and the settlement was ultimately approved by the court (the Approved Settlement). Class counsel was to receive approximately $5 million in fees and disbursements under the Approved Settlement.