Insight

Ontario Court of Appeal Addresses Interplay of SERP Entitlements and Grow-in Benefits

The case serves as a reminder of the importance of carefully drafting the benefit provisions in supplemental plan texts where members of the underlying registered plan are subject to pension legislation that provides for grow-in benefits on termination of employment.

Ontario Court of Appeal
CM

Caroline Helbronner and Sean Maxwell

January 3, 2017 12:00 AM

A recent decision by the Ontario Court of Appeal affirming a decision of the Ontario Superior Court has provided comfort in that carefully drafted benefit provisions can exclude the value of any grow-in benefits that may be triggered in the event of an employee termination under the Ontario Pension Benefits Act (PBA) in calculating benefits payable under a supplemental pension arrangement.

Shoppers Drug Mart Inc. (Shoppers) sponsored both a registered defined benefit pension plan (Registered Plan) as well as a supplemental pension arrangement (Supplementary Plan) that provided “top hat” benefits to Registered Plan members whose benefits were limited by Income Tax Act (Canada) (ITA) limits on benefits payable from a registered pension plan.

A restructuring of Shoppers triggered a partial wind-up of the registered pension plan and grow-in benefits under section 74 of the PBA to those terminated as a result of the restructuring. (We note that the restructuring pre-dated amendments to the PBA removing partial wind-ups; the PBA now in effect extends grow-in benefits to any employee who meets the age and service qualification requirements and is terminated without cause.) Owing to the enhanced early retirement benefits of the Shoppers plan, the grow-in benefits were, in many cases, quite significant and provided benefits to plan members that exceeded the aggregate benefits that would have been paid to the members under the Registered Plan and Supplementary Plan had the grow-in benefits not applied.

Shoppers argued that the Supplementary Plan benefit excluded any grow-in provisions under provincial legislation, and by subtracting the grow-in amounts provided by the Registered Plan, the Supplementary Plan benefits (according to the formula for calculating the supplementary benefit) were in some cases negative, with no benefit owing under the Supplementary Plan as a result. Shoppers’ interpretation of the Supplementary Plan was contested by the applicants in the litigation, who were included in the partial wind-up group and denied enhanced Supplementary Plan benefits.

The case serves as a reminder of the importance of carefully drafting the benefit provisions in supplemental plan texts where members of the underlying registered plan are subject to pension legislation that provides for grow-in benefits on termination of employment.

Despite conflicting actuarial evidence regarding the reasonable interpretations of the Supplementary Plan benefit provisions, the Superior Court found that it was clear that the Supplementary Plan was intended to top-up the Registered Plan benefits impaired by the ITA limits when considering the entirety of the Registered Plan and Supplementary Plan. The Supplementary Plan was not, however, intended to provide benefits in excess of statutory benefits created by provincial grow-in rules. The Court determined that Shoppers had correctly interpreted the Supplementary Plan by calculating the supplemental benefit as the benefit that would have been paid from the Registered Plan but for the ITA limits and disregarding any grow-in benefits, less the benefit actually paid from the Registered Plan (including grow-in benefits imposed by statute). The applicants’ claim was therefore dismissed.

The applicants appealed that decision to the Ontario Court of Appeal. The appeal was denied on the grounds that the Superior Court judge’s interpretation was reasonable as it: (1) correctly applied principles of contractual interpretation; (2) was alert to Shoppers’ exclusive right reserved under the Supplementary Plan text to interpret the Supplementary Plan and make conclusive determinations with respect to benefit entitlements; (3) was supported by the Supplementary Plan text; and (4) in the face of conflicting actuarial testimony, reasonably accepted the testimony of the administrator’s actuary. The Court of Appeal also upheld the verdict of the lower court, which stated that the applicants’ costs of litigation were not properly payable from the Registered Plan fund, notwithstanding the applicants’ contention that the litigation involved the interplay of the Registered Plan and Supplementary Plan texts and had conceivable application to a broader class of Registered Plan members.

The case serves as a reminder of the importance of carefully drafting the benefit provisions in supplemental plan texts where members of the underlying registered plan are subject to pension legislation that provides for grow-in benefits on termination of employment. Given the reasonableness standard applied by the Court of Appeal, an opposite determination by the lower court regarding the proper interpretation of the benefit provisions may well also have been upheld, stressing again the importance of careful drafting. By explicitly excluding grow-in benefits from the supplemental plan benefit calculation (while including such benefits in calculating the benefit payable from the underlying registered plan), administrators can significantly reduce the cost of (typically unfunded) supplemental benefits while managing litigation risk.

Related Articles

IN PARTNERSHIP

Breaking Down Criminal Conviction in Canada


by Mass Tsang

Statistics Canada’s annual breakdown of adult criminal court data provides an eye-opening review of how the country’s court system resolves its hundreds of thousands of cases annually.

Canada's Criminal Court Patterns Are Changing

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

IN PARTNERSHIP

Understanding Your Rights: What to Do If You’re Arrested


by Richard Posner

Toronto-based criminal defense lawyer Richard Posner offers his expert opinion on actions to take during an arrest to avoid further legal complications.

Individual with hands on head is detained by police

IN PARTNERSHIP

From Allegations to Action: Navigating Legal Options for Sexual Abuse Survivors


by Wagners Law Firm

All too often, instances of sexual abuse occur within an institutional environment. Read more to find out what to do in cases of sexual and institutional abuse.

Animated woman sits with her eyes closed

IN PARTNERSHIP

How Long Can You Stay on Long-Term Disability (LTD)?


by Yegendorf Rashid Long-Term Disability Lawyers

Canadian-based firm Yegendorf Rashid break down the intricacies of long-term disability benefits and how to navigate the complex legality that comes with it.

Silhouettes of different people with disabilities

IN PARTNERSHIP

How to Protect Your Inheritance from Divorce in Ontario


by Usman Sadiq

One lawyer in Canada explains that, although division of assets does not always have to be evenly split, it should be fair, and inheritance is no exception.

Small grey house with red roof under large red umbrella on blue background

IN PARTNERSHIP

Sexual Misconduct Investigations at Work


by Carley Reynolds

Lawyer Carley Reynolds explains how to navigate sexual misconduct allegations at work and offers advice and guidance for those who have been falsely accused.

Woman in yellow shirt talking with man in blue shirt at desk

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

Vanguards of Victory: Best Lawyers: Ones to Watch in Canada 2024


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in Canada™ has been announced, and the lawyers showcased by these awards are rising to the challenge each day as advocates for clients all across the country.

Blue and black background with small squares connected by lines

IN PARTNERSHIP

How Long Can You Stay On Long-Term Disability?


by Michael Walter

Walter Law Group's team of long-term disability lawyers explains qualifications and coverage length for LTD.

Image of wheelchair accessible sign white on blue background

Canadian Women in the Legal Profession: From Non-‘Persons’ to Chief Justices


by Sara Collin

We take an in-depth look at the challenges and optimistic future of women in the Canadian legal sector.

Canadian Women in the Legal Profession

IN PARTNERSHIP

How To Prepare a Strong Personal Injury Claim in Canada


by Best Lawyers

If you suffer injuries due to an accident or other incident, you should take several steps to prepare a solid personal injury claim in Canada.

Personal Injury Claims in Canada

There’s Hope for the Canadian Real Estate Market Post COVID-19


by Steven Tulman

Clover Mortgage offers advice and predictions on the Toronto real estate market as we move on post-pandemic.

Canadian Real Estate Market Post COVID-19

Canada “Lawyer of the Year” 2022


by Best Lawyers

Richard Vachon is honored as 2022 "Lawyer of the Year" in Montréal, Canada for Defamation and Media Law.

Canada “Lawyer of the Year” 2022

Announcing the 2022 Canada's Best Lawyers Publication


by Best Lawyers

Featuring the top legal talent in Canada.

2022 Canada's Best Lawyers Publication

The Inaugural Best Lawyers: Ones to Watch in Canada


by Justin Smulison

Best Lawyers: Ones to Watch in Canada's inaugural edition is here. We talk with Kristen Greer, Best Lawyers Senior Research Manager, on the prestige of these awards.

Best Lawyers: Ones to Watch in Canada 2022

Trending Articles

2025 Best Lawyers Awards Announced: Honoring Outstanding Legal Professionals Across the U.S.


by Jennifer Verta

Introducing the 31st edition of The Best Lawyers in America and the fifth edition of Best Lawyers: Ones to Watch in America.

Digital map of the United States illuminated by numerous bright lights

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias


by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

Things to Do Before a Car Accident Happens to You


by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery


by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Tampa Appeals Court ‘Sends Clear Message,” Ensuring School Tax Referendum Stays on Ballot


by Gregory Sirico

Hillsborough County's tax referendum is back on the 2024 ballot, promising $177 million for schools and empowering residents to decide the future of education.

Graduation cap in air surrounded by pencils and money

Find the Best Lawyers for Your Needs


by Jennifer Verta

Discover how Best Lawyers simplifies the attorney search process.

A focused woman with dark hair wearing a green top and beige blazer, working on a tablet in a dimly

Key Developments and Trends in U.S. Commercial Litigation


by Justin Smulison

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money

Is Premises Liability the Same as Negligence?


by Jeremy Wilson and Taylor Rodney Marks

In today's age, we are always on the move, often inhabiting spaces we don't own. But what happens when someone else's property injures you or someone you know?

A pair of silhouetted legs falling down a hole with yellow background

Woman on a Mission


by Rebecca Blackwell

Baker Botts partner and intellectual property chair Christa Brown-Sanford discusses how she juggles work, personal life, being a mentor and leadership duties.

Woman in green dress crossing her arms and posing for headshot

Best Lawyers Celebrates Women in the Law: Ninth Edition


by Alliccia Odeyemi

Released in both print and digital form, Best Lawyers Ninth Edition of Women in the Law features stories of inspiring leadership and timely legal issues.

Lawyer in green dress stands with hands on table and cityscape in background