April 15, 2011
On April 7, 2011, the Ontario Court of Appeal released its decision in Re Indalex Limited. In this decision, the Court considers and revisits fundamental and established Canadian pension and insolvency law principles, making this decision required reading for members of pension committees, human resources professionals involved in pension plan administration, and members of boards of directors who sponsor and administer pension plans.
While a successful appeal of this decision remains possible, employers who maintain defined benefit pension plans must be aware that:
- When an Ontario registered pension plan is wound up, the employer’s assets are now subject to a deemed trust equal to the entire wind up deficiency under the plan.
- If the employer is insolvent and under Companies’ Creditors Arrangement Act protection, pension deficiencies may have priority over all secured debt, whether the pension plan is wound up or ongoing.
- Employers may have fiduciary obligations to plan beneficiaries relating to functions not previously identified as fiduciary in nature and for which they may be found liable. Employers should therefore review existing governance procedures related to funding and other plan related decisions in light of this decision.