Halifax (Regional Pension Committee) v. Nova Scotia (Superintendent of Pensions)

Halifax (Regional Pension Committee) v. Nova Scotia (Superintendent of Pensions) Court Supreme Court Date 2005-01-20 Citation 2005 NSSC 13 Docket SH 222531A Judge/Registrar/Adjudicator Moir, Gerald R. P. (Honourable Justice) Document Type Decision Relations Library Sheet - Halifax (Regional Pension Committee) v. Nova Scotia (Superintendent of Pensions) - 2005 NSSC 13 - 2005-01-20 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Halifax (Regional Pension Committee) v. Nova Scotia (Superintendent of Pensions), 2005 NSSC 13 Date: 20050120 Docket: S.H. 222531A Registry: Halifax BETWEEN: The Members of the Halifax Regional Municipality Pension Committee, as Administrator of the Halifax Regional Municipality Pension Plan Appellant and Superintendent of Pensions for the Province of Nova Scotia, Joan Mahoney and Patricia Oldham Respondents DECISION Judge: The Honourable Justice Gerald R. P. Moir Date Heard: 21 October 2004 Counsel: Hugh Wright, Counsel for the Appellant Catherine Lunn, Counsel for the Respondent Superintendent of Pensions Joan Mahoney, for herself Patricia Oldham, for herself Moir, J.: [1] The Halifax Regional Pension Committee administers the municipal pension plan, a plan funded equally by the municipality and its employees. Like other administrators of government pensions, the committee has entered into reciprocal transfer agreements to facilitate movement of employees among various governments. These agreements establish common rules and procedures to work out pension credits when anyone changes plan membership from one contracting government organization to another. The amount to be transferred from the plan under the former employment to the plan under the new employment is referred to as “the Transfer Amount”. The former is referred to as the “exporting plan”. The new, as the “importing plan”. Two calculations are necessary. The exporting plan must calculate the actuarial value of the transferring employee’s credited service (and adjust the result). The importing plan must calculate the actuarial value of the employees credited service as if the service had been rendered entirely under the importing plan. The exporting plan pays the lesser of two resulting amounts to the importing plan. The agreements provide for members to request a transfer quotation and for the plans to produce the required information. [2] The Pension Committee for Halifax has been charging a $500 fee to persons who require calculations for export or import. In March 2003 the Superintendent of Pensions challenged the Committee’s authority to charge these fees. That lead to a process that culminated in a hearing before the Superintendent in March 2004 and her decision in April 2004. [3] The hearing involved presentation of relevant documents including an expert report, testimony by the expert, actuary Yves Plourde, and submissions by Mr. Wright for the Committee. Mr. Plourde explained the difference between a transfer of commuted value of a deferred pension and a transfer of service credits. For him, this distinction goes to distinguish portability transfers under s. 50 of the Pension Benefits Act, RSNS 1989, c. 340 from reciprocal transfers under the agreements. The distinction is important because it appears that pension administrators cannot charge fees for transfers under s. 50. Mr. Plourde wrote: Section 50 transfers are calculated in accordance with the Canadian Institute of Actuaries’ Recommendations for the Computation of Transfer Values from Registered Pension Plans. The process for calculation is prescribed and consistent within a plan from one transfer to the next, regardless of the identification of the importing plan. In contrast, reciprocal transfer agreements set out the means by which the funds to be transferred are actually determined. In most cases in current practice there is an actuarial basis for the calculation of the amount, but that does not necessarily have to be the case. The method of determination may be entirely arbitrary. There may be gains or losses to the plans involved in any given reciprocal transfer. Reciprocal transfer agreements are not entered for simplicity or convenience in processing commuted value transfers. Reciprocal transfers are typically considerably more complicated and onerous, and thus costly, for the plans involved than are commutated value transfers under section 50. Mr. Plourde demonstrated these opinions by providing details as to the processes for section 50 transfers, reciprocal transfers out of a plan and reciprocal transfers into a plan. The average cost of actuarial fees for a section 50 transfer for the Halifax municipal plan was $185. The average cost for a reciprocal transfer was $2,500. [4] Mr. Plourde explained the different natures of section 50 transfers and reciprocal transfers by reference to transfer of money and transfer of service. Section 50 transfers convert value of service into money. A “commuted value” is transferred to a new plan, an RRSP or an annuity upon termination of employment. In the former case, the money is almost always accounted separately by the new administrator and is almost never converted to service for blending into the new plan. In most cases the money is transferred to an RRSP. Obviously, with RRSPs and annuities there is no issue of service credits. Reciprocal transfers, on the other hand, transfer service credits from one plan to another. They “allow...for the integration of the benefits transferred into the benefit structure of the importing plan.” That is, “...service under the benefit formula of the exporting plan is re-created as service under the benefit formula of the importing plan.” “The transferred ‘value’ never loses its character as actual service.” [5] For Mr. Plourde these different transfers serve different purposes and, while they overlap in one sense, they are never in conflict. Reciprocal transfer agreements have the purpose of facilitating mobility between the workforces associated with the contracting plan administrators. Section 50, on the other hand, protects portability. Its protection is available whether or not administrators contract for reciprocal transfers. And, s. 50 is always an option even where reciprocal transfers are offered. [6] When he testified, Mr. Plourde explained the difference most succinctly. “A section 50 transfer is really a transfer of a commuted value on a pension entitlement out of the pension plan.” “A reciprocal transfer agreement is an agreement between two [or more] employers...to exchange service between their respective pension plans.” [7] The Superintendent of Pensions rejected Mr. Wright’s submission on behalf of the Pension Committee that a transfer under a reciprocal transfer agreement is substantially different from a transfer under section 50. The Superintendent expressed her conclusion on this subject as follows: Therefore, while I agree that the RTAs expand the rights provided under Section 50 of the Act, in my opinion, the right to transfer nevertheless arises out of Section 50 of the Act. A plan receiving a Section 50 transfer may provide that the transferred amounts may be used to purchase service for the member under the receiving plan. An RTA transfer merely uses a greater basis for determining the transfer value than the minimum prescribed under Regulation 19(2). I do not accept the argument that because a different method is used to determine a transfer value under an RTA, an RTA transfer is a substantially different type of transfer from a Section 50 transfer. As a result, although a former member may utilize a reciprocal agreement to transfer to another plan, the right to transfer under that reciprocal agreement arises out of Section 50 of the Act. Her conclusion in that regard controlled her decision that the Pension Committee could not charge fees for calculating the transfer amount under a reciprocal transfer agreement: Although I agree that a pension administrator is not permitted to charge a fee for the provision of the rights and standards provided under the Act, unless the Act so provides, I do not accept that an RTA transfer is anything other than a transfer under Section 50 of the Act. In my opinion, the right to transfer to another plan is a legislated right pursuant to Section 50 of the Act and there is no provision in the Act which permits the Committee to charge a former member for exercising that right. [8] Subsection 89(9) of the Pension Benefits Act confers a right of appeal from decisions of the Superintendent of Pensions to this Court and the text suggests broad responsibilities upon review: “the Court may confirm the decision or substitute any decision the Superintendent was authorized to make”. Mr. Wright and Ms. Lunn both cited Central Guarantee Trust Co. v. Spectrum Pension Plan (5), [1997] N.S.J. 324 (CA) and both counsel submitted that the four factors under the pragmatic and functional approach to the interpretative question of review continue to indicate correctness as the standard of review. I agree that I must assess the correctness or otherwise of the Superintendent’s decision and this Court must interfere if the decision was incorrect. [9] The issue that confronted the Superintendent of Pensions was one of statutory interpretation. As Ms. Lunn points out, the decision of the Supreme Court of Canada in Rizzo and Rizzo Shoes Inc., [1998] S.C.J. 2 endorsed the basic approach to statutory interpretation set out in the second edition of Professor Driedger’s text, explicitly preferring it to other approaches which had overemphasized the place of judicially apprehended purpose in assessing the meaning of an enactment (see para. 21). Professor Driedger’s approach has since been reaffirmed in Barrie Public Utilities v. Canadian Cable Television Assn., [2003] 1 S.C.R. 476 at para. 20 and 86. See also, Nova Scotia v. N.S.G.E.U., [2004] NSCA 106 at para. 79. Therefore, I must construe the meaning of s. 50 of the Pension Benefits Act by reading the text according to the grammatical and ordinary meaning of its words but in full context including in harmony with the scheme and purpose of the Act. [10] I agree with Ms. Lunn’s submission concerning fees that are impermissible under the Pension Benefits Act. Although the statute does not expressly forbid plan administrators from charging fees for doing things they are required to do under the statute, such is impermissible. If the statute requires administrators to transfer a sum and if administrators refuse to do so without being paid a fee, then they disobey the statute. [11] However, in my respectful opinion, the Superintendent of Pensions was wrong to conclude that a transfer under a reciprocal transfer agreement is a transfer under s. 50. In my opinion, the services provided by plan administrators in connection with reciprocal transfer agreements are not services required by the statute. Let us begin with the immediate text before moving out to the broader context of the surrounding statutory text and the other elements of context. Subsection 50(1) reads: A former member of a pension plan who, on or after the first day of January, 1988, terminates employment or ceases to be a member of the pension plan and who is entitled to a deferred pension is entitled to require the administrator to pay the commuted value of the deferred pension (a) to the pension fund related to another pension plan, if the administrator of the other pension plan agrees to accept the payment; (b) into a prescribed retirement savings arrangement; or (c) for the purchase for the former member of a life annuity under which payments will not commence before the earliest date on which the former member would have been entitled to receive payment of pension benefits under the pension plan. This text creates an entitlement. A former member of a pension plan “is entitled to require the administrator to pay the commuted value” into any of three kinds of vehicles. The reasoning adopted by the Superintendent immediately runs into difficulty. She says “An RTA transfer merely uses a greater basis for determining the transfer value than the minimum prescribed under Regulation 19(2).” Regulation 19(2) does nothing more than adopt the actuarially approved calculation of commuted value referred to by Mr. Plourde. The Superintendent says also “the right to transfer nevertheless arises out of Section 50 of the Act.” How can a provision that creates an entitlement to something, and nothing more, be the source of a “greater” entitlement? The error becomes more clear when one considers the point made by Mr. Plourde. Even where there is a reciprocal transfer agreement in place, the former member may engage s. 50(1), cause the administrator to calculate the commuted value and require the administrator to pay the money into one of the three vehicles. That exhausts s. 50(1) as far as its text goes. The text requires computation and transfer of “commuted value”, not a greater value or another right where agreements “expand the rights provided under Section 50". In the cases of Ms. Mahoney and Ms. Oldham, the text of s. 50(1) entitled them to the $185 calculation and the transfer of commuted value. The subsection says nothing about the $2,500 calculation and the kind of transfer associated with it. [12] The text of s. 50(1), when viewed in the light that it entitles members to a calculation of commuted value and commuted value only, is consistent with its context. There is a definition of commuted value which is consistent with Mr. Plourde’s description and which authorizes the regulation that incorporates the method of calculation referred to by Mr. Plourde. Further, the statute deals separately with reciprocal transfer agreements in such a way as to show that the legislature intended the benefits under such an agreement as additional to portability rights protected by s. 50: see s. 2(h), s. 15(2)(d), s. 28, s. 44(1) and (2), s. 44(5) and (6), and s. 85(8) and (8A). [13] The statute provides a regulatory scheme. It does not attempt to usurp the role of plan administrators. Rather the scheme is one of oversight, codified duties and basic protections. Once one appreciates that a s. 50(1) transfer is always available to members even where there is a contracted right to transfer services, one sees why there is no attempt to legislate in respect of the additional right. Further, plan administrators are charged with making numerous decisions in accord with their duty of care and their fiduciary obligations and, so, it is consistent to leave to them the decision about fairly distributing the added costs of any additional right as between those who take advantage of the additional right and the rest of the membership. [14] In my opinion, a transfer under a reciprocal transfer agreement is not a transfer under s. 50(1) of the Pension Benefits Act. Thus, nothing in the statute prevents pension administrators from charging a fee for the more expensive transfer. [15] As there is no statutory basis upon which to deny a pension committee the right to recoup a portion of the actuarial expenses on a transfer under a reciprocal transfer agreement, a further question arises. What authorizes the imposition of the fee? This takes us to the plan. Section 10.12 permits the committee to enter into reciprocal transfer agreements “provided that the implementation of such agreements does not have an adverse financial effect on the Plan”. Section 6.07(2) prescribes the Committee’s general powers including “to ensure that the Plan operates so as to provide the benefits and entitlements under the Plan”. More specific powers are set out in section 6.07(3). Mr. Wright emphasizes s. 6.07 (3)(o) while Ms. Lunn submits that s. 6.07(3)(r) exhausts the present questions. Section 6.07(3)(o) allows the Committee to do whatever it “deems necessary to accomplish the general objectives and enable the beneficiaries to obtain the greatest benefits under the Plan in the most efficient and economical manner.” Section 6.07(3)(n) permits the Committee to pay expenses “out of the Plan” including “the expenses of employment of actuaries” and others. [16] In my assessment, s. 6.07(3)(n) does not have any significant impact on the present question. It allows for the payment of fees by the plan but says nothing for or against the plan recouping some or all of that expense. [17] Transfers under reciprocal transfer agreements are more than ten times as expensive as ordinary transfers. The question of whether the excess expense is to be shouldered by all members, by those who take the benefit or by some apportionment involves considerations of business and fairness, which one would expect to be within the realm of pension administrators. The question of recouping some or all of the excess expense touches upon the operation of the plan and its providing benefits and entitlements. If all members bare the expense of an extraordinarily expensive transfer available only to a few then the benefits of the plan are reduced for the majority. To charge an offsetting fee is, therefore, within the general powers of s. 6.07(2) as well as the specific discretion of s. 6.07(3)(o). [18] In conclusion, the Pension Benefits Act does not preclude the Halifax Pension Committee from charging a fee designed to partially recoup the actuarial expenses on a transfer under a reciprocal transfer agreement in excess of like expenses on a s. 50(1) transfer. The terms of the Halifax pension plan permit such a charge. Therefore, I will allow the appeal and set aside the order of the Superintendent of Pensions dated 27 April 2004. J.