>
Pour consulter le document en français
SAMPLE QUESTION AND ANSWER SHEET
What is the chronology of the corporate transactions affecting
Montreal Trust?
Scotiabank acquired Montreal Trust in 1994. Since that time, various pieces of
the Montreal Trust business have been sold. On April 1, 1997, the pension
business was sold to Royal Trust. The stock transfer and corporate trust
business was sold to Computershare in 2000. In addition, parts of the Montreal
Trust business have been merged or incorporated into Scotiabank, including the
mortgages department, the savings operations, personal services, income
property lending, and corporate and government lending. In conjunction with
those various corporate transactions, there have been three partial wind ups of
the pension plan.
The Montreal Trust Pension Plan Pension Committee administers the Montreal
Trust Pension Plan.
Are there any employees left at Montreal Trust? What is the
status of the Montreal Trust Pension Plan?
Montreal Trust and its affiliates still have a work force of nine or ten active
employees some of whom are involved in the administration of existing financial
instruments. Those employees are still active in the Montreal Trust Pension
Plan - contributions are being made by those among them who are contributory
members. There are also some disabled employees who continue to accrue service
in the Plan even though they are not working.
As well, there are about 160 individuals in the Montreal Trust Pension Plan who
are now employed by Scotiabank, and whose pensions for their service with
Montreal Trust are still growing as a result of their continued employment with
another Scotiabank Group company. Their future salary increases with Scotiabank
will affect their pensions out of the Montreal Trust Plan, and this factor will
be considered by the Montreal Trust Pension Surplus Sharing Committee on any
wind up so as to protect these members and others still in the Plan.
It remains a possibility that the business of Montreal Trust will be expanded
some time in the future at which point there would be more employees added to
the Plan.
The Montreal Trust Pension Plan continues to provide pensions to approximately
700 retirees or their surviving spouses. In addition, there are just under 500
"deferred vested" former members or suspended members of the Plan who have a
benefit in the Plan which they will be entitled to collect when they retire or
when they terminate their employment with the successor employer.
Why must the pension plan be wound up?
The only way to access the surplus in the Plan is to wind it up. The pension
legislation in Quebec, one of the jurisdictions in which the Plan is
registered, does not permit surplus payments from an ongoing pension plan. When
a pension plan is wound up, the plan is terminated, no further contributions
are made to it, all the vested and accrued rights and benefits are calculated
and crystallized, pensions in pay are insured through annuities purchased from
one or more insurance companies, and any leftover assets, following the payment
of expenses, may be distributed as surplus.
Why has there been conditional agreement to a 50/50 split
already?
The Surplus Sharing Committee has been actively organizing since the Fall of
2000, and has been engaged in discussions and negotiations with Montreal Trust
and its lawyers to try and get a surplus settlement since the Spring of 2001.
For years Montreal Trust has been using the surplus in the pension plan to fund
its contributions through contribution holidays, which it is lawfully entitled
to do. This will continue unabated for as long as there are members in the Plan
(including any new members Montreal Trust may decide to admit).
The only way to stop the contribution holidays and use some of the surplus for
the members of the plan is to wind it up. A wind up of a pension plan is the
process whereby the plan is terminated, no further contributions are made to
it, all the vested and accrued rights and benefits are calculated and
crystallized, and any remaining assets are distributed as surplus, following
the payment of expenses. We believe that the Plan members would have a good
claim for the entire surplus if the Plan were wound up, but Montreal Trust does
not agree.
However, we cannot easily force a wind up of the Plan - we would have to
commence lengthy and risky litigation where we might not succeed. Further, the
regulatory authorities in Ottawa and Quebec might not approve such a wind up.
On the other hand, if the Plan were to be wound up, Montreal Trust would need
the support of the Plan members to access any of the surplus. In the face of
these factors, a 50/50 sharing of the surplus is a compromise that avoids years
of litigation and the risk of getting nothing. We believe that this is the best
settlement available.
Why did the Credit Foncier employees get a better deal?
The employees of Credit Foncier received a 62% share of the pension surplus in
their plan when it was wound up. This was the result of a long and drawn-out
legal battle over the surplus in that plan. The Credit Foncier plan was wound
up in 1986. At the time, the employees were unable to persuade the company to
share the surplus with them and they eventually commenced legal proceedings.
Shortly before the scheduled arbitration in 2000, the parties settled the claim
- 14 years after the wind up of the plan, and notwithstanding a strong claim to
the surplus.
The Montreal Trust situation is quite different. Unlike the Credit Foncier
plan, which was already wound up when Scotiabank purchased the company,
Montreal Trust does not have to wind up the Montreal Trust plan. So the first
step in any legal proceedings would be to try to persuade the regulator to
compel a wind up - there is no guarantee that would succeed. Then, if a wind up
was ordered, if we were unable to negotiate a satisfactory surplus sharing
agreement, more litigation would be required - all of which would take a long
time, significant legal and actuarial fees, many resources, and may not result
in more than a 50% share. Your committee has decided that 50/50 is a good deal
in those circumstances.
If the Pension Plan is wound up - what happens to the pensions?
A pension plan wind up is a highly regulated procedure. The Montreal Trust
pension plan is registered in two jurisdictions - Canada (federal) and Quebec.
It is registered federally because of the jurisdiction of the federal regulator
over banks, and provincially because the Montreal Trust plan was previously
registered in Quebec. In addition, the pension benefits legislation of all
provinces where the Plan has members is applicable to ensure that all benefits
are secure.
If the Pension Plan is wound up all of the liabilities and pensions must first
be secured before any surplus can be distributed. Pensions would be purchased
through annuities with Canadian insurance companies. These annuities are
guaranteed through "Comp Corp" - an insurance fund which the insurance industry
maintains to make sure that these annuities are paid.
What will happen to retiree health benefits if the Pension Plan
is wound up?
As was noted in Mr. Chisholm's September 2002 letter to the Plan members,
retiree benefits would not be affected by any proposed surplus sharing
agreement. The rules for retiree health benefits and life insurance would
remain the same. If Montreal Trust has the legal right now to change or remove
health benefits and life insurance benefits, they still can; similarly, if
Montreal Trust does not have the right to change or remove those
benefits, then any surplus sharing arrangement will not alter that.
The Plan members transferred to Scotiabank continue to have
"salary accruals" at the Bank taken into account for the purposes of their
pension credits earned under the Montreal Trust Plan. They also have bridge
benefits upon early retirement. Will these be protected?
Salary Accruals
The Surplus Sharing Committee will not enter into a surplus sharing agreement
unless it adequately protects the salary accrual benefits of Scotiabank
transferees. Further, because federal law requires at least two-thirds of the
active members and two-thirds of all other plan members to agree to any surplus
sharing proposal, the consent of both Scotiabank transfer members and all other
active members must be sought. Therefore, a proposal that does not properly
protect the interests of either of these groups will not succeed and will not
be acceptable to the Surplus Sharing Committee.
Bridge Benefits
Bridge benefits are provided to all active Plan members or transfers to
Scotiabank upon termination from the Plan, so they are part of the promised
pension benefit and will be provided on wind up as part of the Plan
liabilities. All individuals currently accruing benefits in the Plan will have
the bridge benefit included in his or her pension value.
Why are people who were terminated from Montreal Trust as far
back as 1993 included in the surplus sharing group?
Since 1993, after Scotiabank announced its intent to acquire Montreal Trust,
there have been sales and partial wind ups of various parts of Montreal Trust
and divisions of the business. The federal regulator requires that where a
partial wind up occurs all of the persons who were affected and lost their jobs
have a right to be included in any subsequent surplus sharing proposal.
Moreover, pension benefits legislation in Quebec provides that all persons who
were affected by a partial wind-up also have this right. It is necessary to go
back to the earliest partial wind up, which occurred in late 1993. In order to
be fair to everyone who left since that time, everyone else who had accumulated
benefits under the Plan and whose employment terminated from December 2, 1993
to the date of final plan termination, or who was a deferred vested member of
the Plan on December 2, 1993 and cashed out their benefits after that date,
even if they were not part of a partial wind up, will be included in the
surplus sharing proposal, provided they were alive on the relevant eligibility
date. Other individuals who terminated employment prior to December 2, 1993 and
took their money out of the Plan will not be included. They are not required by
law to be included, and furthermore they have had the benefit of the use of
their money since that time and have not been subject to the risks or benefits
of the Plan, while the remaining Plan members kept their money in the Plan.
There are different categories of members of the Plan - why is
that, and what are the criteria for determining which category a person falls
into?
The reason for assigning a status to each individual in the group arises at
least in part from the requirements of the applicable legislation. In order for
a surplus sharing proposal to be approved, federal legislation requires at
least two-thirds of the active plan members and two-thirds of the inactive plan
members to approve it. Active members are those who are still accruing
benefits in the Plan, namely, the 9 or 10 active employees, the employees on
disability leave, and the employees who were transferred to Scotiabank.
Individuals who were transferred to Scotiabank may be considered active members
because, although they are not working for Montreal Trust, they still are
accruing some benefits in the Plan. That accrual is based only on salary
increases and not on additional service in the Plan - their service in the Plan
has been frozen for accrual purposes.
Inactive members or former members are pensioners (or their surviving
spouses) and anyone who is no longer accruing benefits but is entitled to a
pension out of the Plan at some future date. These latter individuals are "deferred
vested" members - members who are entitled to a pension when they reach
retirement age and have left their money in the Plan rather than transfer it
out upon leaving the employment of Montreal Trust.
The "deferred vested" category may also include members who have yet to make an
election as to whether they want to transfer their money out of the Plan or
take a deferred vested pension. In the process of the wind up, an election will
have to be made by those individuals. Pensioners are those who are in
receipt of a pension from the Plan and surviving spouses are those in receipt
of a surviving spouse's pension.
There are a couple of other categories of individuals who are in the surplus
sharing group. A suspended member is a member whose employment with
Montreal Trust ceased in conjunction with a past sale of part of the business,
whose service with the purchaser is still being accounted for in the Plan for
benefits' eligibility (not accrual purposes by law). Suspended members cannot
cash out their pension benefits while still employed by the purchaser.
Partial wind up members are those whose employment with Montreal Trust
ended as part of the partial wind ups of the Pension Plan that have occurred
since December 2, 1993 as a result of shutting down or merging part of Montreal
Trust's operations, a sale of those operations or otherwise terminating the
business of Montreal Trust, and whose benefits were paid out of the Plan.
Those individuals who cashed out their pension entitlement after
December 2, 1993 are those who were not part of a partial wind-up and who
simply took a transfer of their pension monies after they left the Plan.
What is the timing for a surplus distribution?
There are still discussions and negotiations to go through to finalize a
proposal that people will be given the opportunity to approve. We don't
anticipate being able to go to the membership for approval until some time in
the latter part of 2003. Assuming that there is sufficient support for the
proposal, the surplus sharing process applicable in all relevant jurisdictions
must be complied with. In addition it may be necessary to get a Court Order to
satisfy the regulatory authorities. All eligible Plan members will receive
notice of these proceedings.
As a result, we don't anticipate that the regulatory and court process will be
completed until sometime in 2006 after which a distribution would take place.
If there are challenges or delays, this could take longer.
What will happen to the ad hoc increases to current pensions in
pay?
The fact is that ad hoc increases to pensions over the past few years have been
quite small. The increases in the years 1998 to 2000 were for 1.5%, 0.6% and
1.1% respectively. In some years, there was no increase at all; there certainly
has not been a consistent pattern of increases for pensioners. The company has
made no commitment for future increases, and has no legal obligation to grant
them. The issue of indexing is under review by the Surplus Sharing Committee -
the value of any potential future ad hoc inflation increases will be considered
by the Committee in developing the surplus allocation formula. It must be
remembered that support of a significant proportion of the eligible members and
former members of the Pension Plan, including the retirees, is required for any
surplus sharing agreement to proceed.
The stock market has decreased recently. What will happen if
the surplus goes down?
If the surplus goes down, then there will be less available for distribution.
The surplus at July 31, 2002 was approximately $35 million, but that amount
will change before any surplus distribution takes place. Ultimately, the
surplus amount that will be split is the surplus available at the time of
distribution.
I am a former Credit Foncier or Canada Trust employee who was
transferred to the MT Plan. I was told that my pension is indexed. What will
happen to the indexing after the wind-up?
Former employees of Credit Foncier or Canada Trust have guaranteed indexation
of the lesser of the CPI and 3%. That indexation is part of their promised
pension benefit and will be included in their Plan liabilities on wind up.
|