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BC Information and Privacy Commissioner Orders Release of Union Pension Plan Information

31 Jan

The British Columbia Information and Privacy Commissioner (IPC) recently released a decision ordering the provincial pension regulator (Financial Institutions Commission or FICOM) to release certain information about union-run pension plans to the Independent Contractors and Business Association (ICBA), an employers’ association.  What is interesting about this case is the basis upon which the unions and trustees of the union pension plans attempted to avoid disclosure; they argued that release of the requested information would harm the business interests of the pension plans.

ICBA requested copies of pension plan filings for 16 pension plans that the trade unions had sponsored.  The information requested related to the following issues: the average annual pension paid; the average accrued monthly pension; the surplus or unfunded liability from the previous valuation report; and the surplus or unfunded liability from the current valuation report for each of the pension plans.  ICBA has asked for this information to be extracted from the filings made with FICOM, rather than copies of the actual documents which were filed with FICOM.  FICOM withheld some of the information under s. 21 of the Freedom of Information and Protection of Privacy Act (FIPPA) on the grounds that disclosure would harm the business interests of the pension plans.   FICOM subsequently changed its decision to apply s. 21 of FIPPA and gave the trustees of the 16 pension plans formal notice under FIPPA that it would release the information in full.  Trustees of 13 of the 16 pension plans (“Objecting Trustees”) objected to the disclosure of the information about their pension plans and requested that the IPC review the decision of FICOM to release the information.

The pension plans were all registered under the Pension Benefits Standards Act (PBSA) which includes a provision allowing any person to request pension plan documents (generally understood to be the plan texts and amendments, rather than filings regarding funded status).  This is unlike most other provinces, which limit access to pension information to employers, members and other beneficiaries of pension plans.  (As an aside, British Columbia will be enacting new pension legislation in 2014 and has not carried this broad right of access through to the new legislation.)

In opposition to the disclosure, the unions and Objecting Trustees made the following arguments:

1. The Objecting Trustees asserted that despite being averages, two pieces of requested information “provide personal information about the members of the plans, being the income plan members draw in retirement and the amount Plan members accrue each year before reaching retirement.”  The Objecting Trustees referred to this as “sensitive personal information about its members”.

The IPC found that because the information consists of only average amounts, the information at issue was not about identifiable individuals and the information would also not reveal information about identifiable individuals, and therefore did not constitute “personal information”.

2. The Objecting Trustees argued, with the support of FICOM, that they submitted the filings from which the requested information would be obtained in confidence.  Both the Objecting Trustees and FICOM took the position that s. 22 of the PBSA did not apply to financial filings, only pension plan documents, and the financial filings were submitted in confidence.

The IPC accepted that the filings were submitted in confidence and also found that just because the filed documents may be available to pension plan members does not make such documents widely or publicly available.

3. The Objecting Trustees and the unions argued that ICBA’s motives were tainted with anti-union malice and that the ICBA’s goal is to promote an “open-shop” workplace.  The unions focused on the fact that the ICBA offers retirement savings plans (group RRSPs) that directly compete with the union pension plans.  The Objecting Trustees argued that FIPPA is not intended to give a competitive advantage, and that it is relevant that the ICBA is not seeking the information in order to ensure that FICOM is accountable, but to assist its own members in their competition for labour.

With respect to the harm to the pension plans or the unions, the IPC held that the ICBA’s motivations in seeking release of the information cannot be relevant to the outcome of the FIPPA analysis and specifically stated that whether the ICBA was motivated by a legitimate desire to promote government accountability or by its opposition to unions was not a matter which needs to be adjudicated. 

4. The Objecting Trustees also argued that  the information at issue would be used to  “undermine political and economic support for the pension plans” by allowing ICBA to generate a comparison between the pension benefits paid and accrued under the plans and the benefits paid under RRSP arrangements, with a particular focus on the under-funded status of the union pension plans.  Similarly, the unions also argued that disclosure would harm their financial interests in collective bargaining on the basis that if an employer was aware of the actual funded status of the pension plan, this would significantly and negatively affect the bargaining position of union with respect to negotiating employer contributions to the pension plan.

FICOM also recognized that the type of information requested “could reasonably be expected to harm significantly the competitive position of the union, and interfere significantly with the negotiating position of the sponsoring union and other union and non-union employers when negotiating work rates since the financial information is key to establishing competitive wage or bid rates and securing business contracts”.  However, it decided to release the information because “the date of the data is no longer such that it would place the union sponsors under a competitive disadvantage or interfere with labour relations to the extent that significant harm might reasonably result from the disclosure of the records.”

As to whether the release of the information requested regarding the pension plans would cause harm to the business interests of the pension plans or the unions, the IPC was not persuaded that disclosure of the information at issue could reasonably be expected to cause the pension plans to lose members.  The IPC also accepted that the under-funded status of the pension plans was widely and publicly known, as it has been the source of public news and information for some time.  The IPC also did not accept that the release of the information would enable ICBA to develop significantly more attractive retirement vehicles than the registered pension plans offered by the unions.  Finally, the IPC found that past disclosures of similar information have failed to evidence the harm argued by the Objecting Trustees and the unions and the IPC found that the assertion the pension plans would lose members was merely speculative and was not supported by objective evidence. 

As a result, the IPC ordered FICOM to release the requested information to the ICBA.

Federal Court Upholds Pension Regulator’s Refusal to Order Disclosure of Member Information

11 Aug

On July 21, 2011, the Federal Court released a decision in a long running pension fight.  The applicants in Buschau v. Rogers Communications Inc., 2011 FC 911 have been pursuing access to the surplus in their pension plan since 1995.  This decision has been to every level of Court, and sometimes twice.  Most recently, the applicants requested that the Federal Superintendent of Financial Institutions (the “Superintendent”) order that Rogers be required to disclose the following information:

  • the employment and pension data of any new members it proposes to add to the Pension Plan…
  •  the information Rogers has, or should have, as to which members of the Pension Plan it has offered a “buy-out”, the value of such “buy-out” and the members’ acceptance or rejection of such offers…

The applicants purported to require this information to be able to identify potential new members of the Pension Plan to inform them of Rogers’ past actions allegedly taken in bad faith (notwithstanding existing decisions indicating that Rogers has been acting in compliance with legislative requirements) and to determine what happened to any applicable surplus relating to members who accepted a buy-out.

The Superintendent refused to order the disclosure.  The Superintendent determined that the Pension Benefits Standards Act, 1985 (“PBSA”) (the legislation governing the Pension Plan), specifically section 28 and the associated Regulations, set out Rogers’ disclosure requirements and the requested information did not fall within the legislative requirement.  The Superintendent also indicated that Rogers’ was obliged to comply with the provisions of the Personal Information Protection and Electronic Documents Act.  The applicants sought judicial review of the Superintendent’s decision.

The Federal Court agreed with the Superintendent’s determination and found that she decision was reasonable.  Of particular note for plan administrators facing disclosure requests from members, the Federal Court stated the following:

[100]      I find that the Superintendent’s decision in this regard was reasonable. Section 28 of the PBSA sets out the members’ “Rights to Information”. It also indicates that the plan members are entitled to certain information as set out in the Pension Benefits Standards Regulations, 1985, SOR/87-19 [Regulations]. Neither section 28 of the PBSA nor the associated Regulations mandate that the respondent, in the current circumstances, is obligated to disclose the type of information that the applicants are seeking.

This decision is one of the first examining the scope of a plan administrator’s disclosure obligations under the Federal pension legislation.  Plan administrators will likely take comfort in the finding that their disclosure obligations are limited to the specified documents (such as plan texts, amendments, trust agreements, valuation reports, financial statements) and there is no obligation to disclose information outside of the scope of the PBSA requirements if requested to do so by other members.

Administrators Have No Place in the Bedrooms of Plan Members

5 Aug

When a pension plan member divorces his or her spouse, often the accrued pension benefits are the single largest family asset.  H0w a pension benefit is divided varies by jurisdiction, with some jurisdictions entitling the former spouse to all of the benefits accrued during the period of marriage.  What’s more is that some jurisdictions allow former spouses to “unlock” the divided interest prior to the member’s retirement, rather than requiring the monies to continue to be used only for pension benefits.

But what happens when a couple decides they want to access the accrued pension benefits and are willing to go through with a divorce to get access?  What if the couple just happens to reconcile shortly after the benefits have been transferred?  Can an administrator investigate and question the validity of the divorce?  Apparently not.

In 2009, Continental Airlines filed a lawsuit against nine of its pilots claiming that the pilots filed fake divorces in order to receive early distribution of their pension benefits.  Many of the pilots continued to cohabitate with their ex-spouses, and in many instances they did not inform any of their family or friends that they had gotten a divorce.  Continental sought restitution to the pension plan of the benefits that were distributed to the spouses on the basis that the divorces were “shams”.  The trial court dismissed Continental’s claim, holding that Continental did not have the right to investigate employees’ divorces in order to decide whether those divorces were authentic.

The 5th U.S. Circuit Court of Appeals recently dismissed Continental’s appeal of the lower court decision.  The Court of Appeal agreed with the lower court that the relevant legislation (ERISA) does not authorize an administrator to consider or investigate the subjective intentions or good faith underlying a divorce.  On the contrary, the legislation requires benefits be divided in satisfaction of a qualifying marriage breakdown order that has met the necessary prescribed criteria, of which the divorce being done in good faith is not a factor.  Therefore, the administrator could not interfere by investigating the bona fides of the divorces.  Only where a court finds that a divorce is, in fact, a sham could an administrator refuse to pay out the divided pension.

Counsel for the pilots are championing the decision as a victory for employee privacy rights, given the restrictions on administrator’s abilities to investigate plan members’ family relationships.

Employee benefits…there’s an app for that!

26 May

It was only a matter of time before app-mania struck the pension and benefits industry.  In the past few weeks, it seems like  industry publication has an article about another service provider launching an app or using social media as a communications tool.

In recent years, we’ve seen the rise of auto-enrollment, online planning tools, employee websites and portals, but the introduction of apps may bring employee engagement and access to their benefit or retirement savings information to a new level.  For example, Sun Life Financial has announced that it plans to offer a free mobile application for group benefits and group retirement and savings plan members.  The app will allow plan members to submit benefit claims or check the balance of their retirement plan accounts.

At a time when defined contribution plan sponsors are concerned about the lack of engagement by members responsible for investing their plan assets, the advent of apps has the potential to increase participation and interaction.  The ability to see your pension plan account balance at the press of a button (or tap of the screen as the case may be) also enhances transparency and may help increase member awareness and education.

Other benefit providers are also jumping on the app-bandwagon, capitalizing on the increasing number of people with smartphones.  For example, Morneau Shepell has launched “My EAP”, which will provide users with access to interactive tools, support resources (such as e-counselling) and other employee assistance programs.  Many of these features are already available on Morneau’s website, but the app enhances the ease of access for people on the go, giving access to EAP services anywhere and anytime they are needed.

The use of apps and other social media technology is creating new opportunities for communication and disclosure with pension and benefit plan members.  However, as always, apps and social media must be integrated into an overall communications strategy.  Consideration must also be had to ensuring the privacy and security of such sensitive personal information.

Specifically with reference to pension plans, plan administrators must also make sure they are complying with any applicable rules regarding the use of electronic communications.  Governments have implemented a number of rules regarding when and how electronic communications can be used in the administration of a pension plan.  I will discuss this in more detail in an upcoming post.

The Far Reach of the CRA

21 Mar

When employers provide employee benefits, they are required to include the value of the taxable benefits in the income of employees.  If an employer does not properly report the taxable benefit, the Canada Revenue Agency (“CRA”) has considerable power to require employers to disclose the names and related information of the taxpayers who enjoyed the taxable benefit.  As discussed in Minister of National Revenue v. Lordco Parts Ltd., this also applies if a business provides taxable benefits to its customers.

Following an audit of Lordco, the CRA noted that Lordco established an incentive program, which included a bi-annual cruise for its customers who had earned rebates based on the volume of their purchases of Lordco products.  The customers could purchase tickets for the cruise using the rebates.  Corporate customers nominated individuals to attend the cruise as representatives.  Only 30% of the cruise related to business activities.

According to the CRA, Lordco was required to report the benefits enjoyed by the individual attendees.  When Lordco failed to complete such reporting, the CRA issued a “named requirement” requiring Lordco to provide a list of the individuals who attend the cruise.  Lordco refused to provide any names, addresses or registration forms, on the basis that the information related to unnamed third party individuals.  The CRA applied, without notice , for an order of the Federal Court requiring Lordco to produce “information and documents relating to certain persons whose identities are unknown to the Minister”, being the individual representatives of customers of Lordco.

The Federal Court granted the order, recognizing that obtaining information relevant to the tax liability of some specific person(s) whose tax liability is under review is a purpose related to the administration or enforcement of the Income Tax Act (“ITA”) and does not violate any rights of taxpayers under section 8 of the Charter of Rights and Freedoms (the Supreme Court of Canada has previously stated that taxpayers do not have a high expectation of privacy in relation to documents concerning tax matters).

The CRA is permitted to request third party information related to unknown persons with the authorization of a judge.  Two conditions must be met for an order to be made: (i) the individual or group is ascertainable; and (ii) the production is necessary to verify compliance with the ITA.  Finding both conditions met in this case, the Federal Court ordered that the CRA was authorized to impose a requirement to produce the information regarding the customers who went on the cruise, failing which Lordco could be subject to fines under the ITA up to $25,000 or both fine and imprisonment up to 12 months.

This is a reminder of how far the CRA’s reach can be extended when it comes to obtaining information for the purpose of identifying tax payers and ensuring compliance with the ITA.  Employers and businesses are not able to refuse production on the sole basis that the information pertains to unidentified third parties (e.g., representatives of corporate customers) when the CRA is attempting to verify compliance with the ITA.

Enhanced Access To Information on Marriage Breakdown

8 Mar

The long awaited Family Law Matters Regulations supporting Bill 133, the Family Statute Law Amendment Act, 2009, have been released for comment by the Ontario Government.  Bill 133, once in force, will radically alter the marriage breakdown pension division regime in Ontario.  In addition to expediting the division process by moving to an immediate division system (currently spouses must wait until the member of the pension plan retires or terminates employment before the pension can be divided), Bill 133 and the Regulations provide for greater access to information for non-member spouses.

Under the current system, a spouse is not automatically entitled to information regarding a member’s pension.  Plan administrators are required to protect a member’s personal information – including the quantum of his or her pension accruals.  For the spouse to obtain information regarding the member’s pension, the member must consent in writing.  Where that is not possible (e.g., the member is unwilling), often a court order is necessary.  The only statutory right to information arises once a separation agreement or court order dividing the pension has been filed with the administrator, in which case the spouse is entitled to notice when the member is terminating and the same options as the member with respect to the transfer or payment of the pension.

Once Bill 133 is in force, either spouse will be permitted to apply to a plan administrator for a statement of the value of the member’s pension (for family law purposes).  The statement will be required to be in the prescribed form and contain specified information:

  • particulars identifying the pension plan;
  • the name and birth date of each spouse;
  • the employment and membership status of the member;
  • the date of marriage or co-habitation;
  • the date of separation;
  • the value of the pension benefits determined for family law purposes; and
  • any related financial information (e.g., whether the member has accumulated additional voluntary contributions).

The statement must also set out general information regarding the plan, including its funded status and whether there is a wind up or surplus related event that would impact the member’s entitlement. Administrators will be permitted to charge a small fee for the creation of these statements (no more than $500 if the plan provides defined benefits).

Ontario has lagged behind other jurisdictions with respect to spousal rights to access pension-related information.  Bill 133 “equalizes” the playing field for spouses dealing with marriage breakdowns by ensuring that both spouses have easy access to the information required to understand and address the division of the pension in the family law case.

Retaining Pension Records: New Regulatory Policy

4 Feb

As one can imagine, pension plans can operate for years.  Over the life of a pension plan thousands of documents are generated containing information vital to the operation of the plan itself as well as the personal information of members (and their spouses and beneficiaries).  One question has always been – how long must an administrator retain plan documents and records?

That question has been answered in part by a new policy of the Ontario pension regulator, the Financial Services Commission of Ontario (“FSCO”).  FSCO has finalized a new policy — Management and Retention of Pension Plan Records by the Administrator – containing rules regarding the manner in which plan administrators retain and manage all of the information and records of a pension plan, both current and historical.  The new policy is important given that new pension legislation will expressly require plan administrators to retain records for prescribed periods.

The policy generally divides the records relating to a pension plan into three categories: (i) records pertaining to legislated requirements, (ii) records pertaining to the day-to-day operation of the plan, and (iii) member specific information.  Falling into the first two categories are all documents that create and support the pension plan (i.e., plan texts and funding documents), as well as financial documentation (i.e., actuarial reports and financial statements) and documents relating to governance and administration (i.e., committee meeting minutes and advisor reports).  Member specific information includes personal information used to determine benefit entitlements (i.e., age, years of employment) and details regarding spouses and beneficiaries.

The policy requires administrators to retain documentation pertaining to legislated requirements indefinitely.  The Pension Benefits Act does not currently contain a limit on the retention period for such records.  Administrators are permitted to make decisions regarding the retention period for documents relating to day-to-day administration.

The retention period as it relates to member specific information is contingent on whether the member retains an entitlement under the plan or the entitlement has been paid out in full.  All member specific records must be retained until the last dollar has been paid out to the member and his or her spouse or beneficiary (which could be decades after the member starting participating in the plan).  Following the final payout, administrators are still expected to retain a summary of the member’s information in case a challenge is raised in the future.  Other legislation regarding personal information may also apply to these records (i.e., Freedom of Information and Protection of Privacy Act), but the other legislation will not overrule an administrator’s duties under pension laws.

Clearly, the FSCO policy results in administrators retaining records and information for many, many years.  Even where a plan terminates, it is important for the administrator to retain a summary of all vital information regarding the plan and its members long after the plan is wound up.  Thankfully, the policy permits electronic record retention and allows administrators to convert records into electronic form subject to certain conditions.

This policy is an important read for anyone who sponsors or administers a pension plan or provides services to a plan administrator.  As a matter of good governance, plan administrators should consider whether they have sufficient policies regarding the retention of plan and member information and records and consider preparing a written guideline that complies with the FSCO policy.