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National Trust
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NATIONAL TRUST SURPLUS SHARING PROPOSAL FREQUENTLY ASKED
QUESTIONS ("FAQ")
Please note that the FAQ have been developed to provide general information
only concerning the proposed pension surplus transaction. These answers are not
designed to answer questions about your individual pension situation or
possible surplus entitlement. The answers are based on the current information
available and should not be relied upon as legal advice. If you have any
additional or specific questions that are not answered below, you may contact
Koskie Minsky LLP's National Trust Hotline at 1-800-451-3225 (toll-free).
If you have any questions about your entitlements under the Scotiabank Pension
Plan for Former Employees of National Trust Company (the "Plan"), you may
contact the Pension Services Call Centre for Former National Trust Employees at
1-888-895-9933 (toll-free).
What is AFTER?
What is the National Trust Pension Surplus Member Group Committee?
In 1999, a group of individuals with an interest in the Plan formed the
Association for the Equitable Recovery of the National Trust Pension Surplus
("AFTER") to seek a distribution of the surplus to Plan members and to
generally advance the rights and interests of Plan members in relation to the
surplus. One of the mandates of AFTER was to advocate for a distribution of the
surplus in connection with the 1999 partial Plan wind up. Given that it
involved legal issues concerning the distribution of surplus on a partial wind
up, AFTER became involved in the court case of Monsanto Canada Inc. v. Ontario
(Superintendent of Financial Services) ("Monsanto") and ultimately
intervened in this matter before the Supreme Court of Canada. National Trust
also intervened in the Monsanto case. The Supreme Court of Canada issued its
decision in July 2004, and confirmed that, as a matter of Ontario law,
if there is a partial wind up of a registered pension plan affecting members
under Ontario jurisdiction, any existing surplus attributable to the Ontario
portion of the wound up part of the plan must be paid out (although the
decision did not state how or to whom the surplus must be paid).
National Trust had agreed, prior to and notwithstanding the result of the Monsanto
case, to commence negotiations to share the Plan surplus. AFTER formed the
National Trust Pension Surplus Member Group Committee (the "Committee") with a
view to a global settlement to cover all Plan members, not just those
affected by the 1999 partial wind-up of the Plan (who would participate in the
global settlement instead of having to separately pursue their rights under the
partial wind up). Consequently, National Trust and the Committee began
negotiating to terminate the Plan and share the surplus in an equitable manner.
Why will the Plan be wound up and what will happen to the pensions?
Pursuant to applicable legislation, in order to distribute all the surplus from
a pension plan, the plan must be wound up. Only an employer can voluntarily
wind up a pension plan, however. Therefore, the Committee has negotiated with
National Trust that, if the surplus sharing proposal receives sufficient member
support and proceeds as planned, the Plan will be wound up. A wind up of a
pension plan is the highly-regulated process whereby the plan is terminated, no
further contributions are made to it and no further service is accrued, all
vested rights and benefits are calculated as at the "wind up date" and all
accrued pension benefits are distributed from the plan. For example, pensions
currently being paid to pensioners are insured through annuities purchased from
one or more Canadian insurance companies. Any remaining "surplus" assets, after
discharging all pension benefits, making other applicable adjustments, and
paying all wind up expenses, may then be distributed, after the necessary court
and regulatory approvals are obtained. This process can be very time consuming.
When a pension plan is wound up with surplus assets, members' accrued pension
benefits are not at risk since there is more money in the plan than is needed
to pay out all accrued pensions. As required by law, if the surplus sharing
proposal proceeds and the National Trust Plan is wound up, accrued benefits
will be secured through the purchase of annuities or the transfer of the lump
sum value of the earned benefits to a member's individual locked-in retirement
vehicle. As stated, pensions would be purchased through annuities with
Canadian insurance companies. Annuities may be guaranteed to some extent
through "CompCorp", an insurance fund that the insurance industry maintains to
make sure that these annuities are paid even if the insurance company becomes
insolvent. Any non-pension post-retirement benefits, such as group life,
medical, dental or accidental insurance, or any other non-pension
post-retirement benefit to which members may be entitled, would be unaffected
by any Plan termination.
Although the Plan is registered in Ontario, the pension benefits legislation of
all jurisdictions where the Plan has members also applies.
Why is the Surplus Being Split 50/50?
The Committee believes that a 50/50 split is a fair deal. Although the
Committee believes that the Plan members would have a good claim for the entire
surplus on Plan wind up, National Trust claims surplus ownership as well.
Unless a surplus sharing deal is negotiated with National Trust, the Plan
members cannot compel National Trust to wind up the Plan and distribute the
surplus without undertaking lengthy and risky litigation, with no guarantee of
success. Further, even if the Plan members were to request it, the
Superintendent of Financial Services (the Ontario pension regulator) might not
approve such a wind up. In the face of these factors, a negotiated agreement to
share surplus 50/50 is seen as a fair compromise that avoids years of expensive
litigation. The Committee believes that this is the best settlement available.
Who will be in the surplus sharing group?
The composition of the surplus sharing group is still being finalized and is
not 100% definite yet. However, the current intention is for the surplus
sharing proposal to include all Plan members, former members (as defined in the Pension
Benefits Act of Ontario) and other persons with an entitlement in the
Plan on and after June 24, 1997 (including all members affected by the partial
Plan wind up effective June 30, 1999), and any applicable surviving spouses and
beneficiaries.
What is the significance of the June 24, 1997 cut-off date?
June 24, 1997 is the date on which Scotiabank publicly announced its purchase
of National Trust.
How much surplus am I going to receive?
The amount of surplus each sharing group member may receive if the proposal
proceeds is not known at this time. The method by which the members' surplus
share will be allocated to the sharing group members will be finalized as part
of the surplus sharing agreement between National Trust and the Committee.
National Trust has agreed that it will support the Committee's decision
regarding a reasonable final method of allocating the members' surplus share,
which will be determined in consultation with the Committee's actuary. Sharing
group members will receive a further information package in 2006 that will
include an estimate of the individual surplus share they would receive if
sufficient member support is obtained and the surplus sharing proposal
proceeds.
What will happen if the surplus assets decrease?
Pension surplus on wind up is an actuarial calculation of the excess of the
assets in the pension fund over and above the amounts required to satisfy all
earned pension obligations to the Plan members. Surpluses rise and fall for any
number of reasons including fluctuations in the equity markets, changes in bond
and annuity purchase rates, and the application of different actuarial
assumptions and methodologies, among other reasons. If the surplus goes down,
then there will be less surplus available for distribution. The "gross" surplus
at October 31, 2004 was estimated to be approximately $145 million, but this
amount will no doubt change (go up or down) before any surplus distribution
occurs. Ultimately, the surplus amount that will be divided between National
Trust and the sharing group if the proposal proceeds will be based on the
"gross" surplus available at the time of distribution.
In looking at how much of the surplus will actually be shared between the
surplus sharing group and National Trust, we must point out the fact that the
surplus will be shared 50/50 only after provision for a number of adjustments,
such as for the substantial cost of future benefits for active employees, for
which National Trust would receive a credit to reflect its claim to the surplus
to fund future benefits in the Plan, and for applicable expenses. It is
estimated that after these adjustments, approximately $70 million in "net"
surplus (estimated as at October 31, 2004), will be available for 50/50 sharing
between the sharing group and National Trust. Again, it is important to
note that this is an estimate only, and the actual amount of surplus available
for sharing can only be determined at the actual date of distribution.
Why must the Plan be wound up as opposed to leaving the Plan ongoing?
Pursuant to applicable legislation, in order to distribute all of the surplus
from a pension plan, the plan must be wound up. As a result, as part of the
negotiations to share the Plan surplus, the Committee and National Trust have
agreed that, if sufficient member support is obtained and the surplus sharing
proposal proceeds, the Plan will be wound up so that the surplus can be shared
between the surplus sharing group and National Trust.
What will happen to active members?
If sufficient member support is received and the surplus sharing proposal
proceeds, active members of the Plan will be transferred to another Scotiabank
Group pension plan and will begin to earn pension benefits under that plan, the
terms of which will be similar to those of the Plan as at the Plan wind-up
date. Once the Plan is wound up, the liabilities for active members' pension
entitlements which they have earned since they have been employed by Scotiabank
will be calculated by the Plan actuaries and, subject to regulatory approval,
that amount will be transferred to the same Scotiabank Group pension plan.
Can you explain the National Trust credit for the cost of future benefits?
Because National Trust does not have any obligation to wind up the Plan and
would be entitled to take contribution holidays indefinitely if the Plan were
not wound up (that is, it would be entitled to use Plan surplus to pay for
future pension benefit accruals for active Plan members), the cost of future
pension benefit accruals for active Plan members (who are being transferred to
another Scotiabank Group pension plan) is being set aside before the remaining
surplus is shared 50/50 . In other words, this lump sum for future service is
being set aside in recognition of National Trust's entitlement to use the
surplus in the Plan to pay for the future cost of pensions for active members.
Therefore, before the remaining surplus is split 50/50, a portion of the Plan
surplus equal to the cost of these future pension accruals will be transferred
out of the Plan to the other Scotiabank Group pension plan (to the extent
permissible by law) or to National Trust or Scotiabank.
Why are only some benefits being transferred from the Plan to another Scotiabank
Group plan? What will happen to the benefits that are not being transferred?
The active Plan members (and a portion of their earned benefits) will be
transferred to another Scotiabank Group plan so that the active members can
still be part of a pension plan and continue to earn pension benefits. The rest
of the Plan members (that is, pensioners and other former members who are no
longer earning pension benefits) will not be transferred. Benefits for these
members will be secured through the purchase of annuities or the transfer of
the lump sum value of the earned benefits to the member's individual locked-in
retirement vehicle. Note that any annuities purchased may be guaranteed to some
extent through "CompCorp", an insurance fund that the insurance industry
maintains to make sure that these annuities are paid even if the insurance
company becomes insolvent.
It is important to note that even for active Plan members, not all of the
benefits they have earned under the National Trust Plan will be transferred to
another Scotiabank Group plan. Only those benefits earned since they have
become employed by Scotiabank will be transferred. This means that benefits
earned for all Bank service would be combined, with the remaining benefits
earned under the Plan transferred to the member's individual locked-in
retirement vehicle or used to purchase a deferred annuity for the member.
Will the replacement Scotiabank Group plan be as good as the National Trust
plan?
Yes, this successor plan will contain terms and benefits which are similar to
those of the Plan at the Plan wind up date.
What will happen to disabled members?
Details of the proposal still have to be worked out so we cannot say, at this
time, what will happen. The Committee and National Trust will, however, ensure
that disabled members' interests are protected.
What is a partial wind-up?
Under section 1 of the Ontario Pension Benefits Act, a "partial wind up"
means the termination of part of a pension plan and the distribution of the
assets of the pension fund related to that part of the pension plan. In other
words, a partial wind up is a wind up of part of a pension plan and a
distribution of the pension assets in regards to the wound up part of the plan.
In 1999 a partial wind-up of the Plan was declared, related to restructuring
activities following Scotiabank's purchase of National Trust. All members
affected by that partial wind-up will be included in the surplus sharing group
under the current proposal.
Why would someone who was in the partial wind up group support this proposal?
In the Monsanto decision, the Supreme Court of Canada found that if
there is a partial wind up of a registered pension Plan affecting members under
Ontario jurisdiction, any existing surplus attributable to the Ontario portion
of the wound up part of the plan must be paid out. The Court did not say,
however, how that should happen, or who should receive the surplus. Therefore,
although a portion of the surplus related to the 1999 partial wind-up of the
Plan must be paid out, it is not obvious who is entitled to receive it. In
order to avoid costly litigation over who owns the surplus, with no guarantee
of success, the Committee feels the best option is to reach an agreement with
National Trust to share all of the surplus in the Plan with all members and
eligible former members, including all those affected by the 1999 partial
wind-up. If sufficient member support is received and the surplus sharing
proposal proceeds, the members affected by the 1999 partial wind-up will
receive a surplus distribution, without having to resort to a lengthy and
costly legal battle over their possible rights to surplus under the partial
wind-up.
Who is paying the expenses? What about the financial support already provided to
AFTER?
Assuming sufficient member support is received and the surplus sharing proposal
proceeds, reasonable legal, actuarial and other fees and expenses will be paid
"off the top" out of the surplus in the Plan prior to the splitting of the
remaining surplus.
Any financial support already provided to AFTER will be refunded to you as part
of any settlement.
I already joined AFTER and signed a retainer -- why do I have to sign another
form?
The purpose of the two retainers is different. Most significant is that when
you joined AFTER, you did not retain Koskie Minsky LLP
to represent you in the discussions with National Trust regarding a possible
surplus sharing arrangement and related wind up of the Plan. Once you return
the retainer included in the communications package to Koskie Minsky LLP,
Koskie Minsky LLP can represent you in regard to negotiating the surplus
sharing proposal.
How were the Committee members chosen?
The Committee members are all members of the AFTER Negotiating Committee and
were chosen by AFTER in consultation with AFTER's membership. The Committee is
designed to reflect a broad cross-section of the Plan membership. All of these
individuals are volunteers and have not been paid for their time and efforts.
The Committee is comprised of the following individuals:
My relative was a Plan member but has died. Will his/her estate get surplus?
Should we send back the form?
The composition of the surplus sharing group is still being finalized and is
not 100% definite yet. However, the current intention is for the surplus
sharing proposal to include all Plan members, former members (as defined in the Pension
Benefits Act of Ontario) and other persons with an entitlement in the
Plan on and after June 24, 1997, including all members affected by the partial
Plan wind up effective June 30, 1999. If such a person has died on or after
June 24, 1997, then it is likely that their named beneficiary, surviving
spouse, or estate will receive a surplus share, if the proposal proceeds.
You should return the Authorization and Membership Form with all relevant
details and documentation, such as a death certificate, so that we can look in
to the matter. All forms should be sent back to Koskie Minsky LLP as soon as
possible and, in any event, no later than 21 days from the date of the
Committee letter sent in the communications package. If you have questions
regarding any pension entitlements or death benefits following the death of the
Plan member, contact the Pension Services Call Centre for Former National Trust
Employees at 1-888-895-9933 (toll-free).
My former colleague got the communications package about the National Trust
surplus sharing proposal but I didn't - why not?
The communications package was sent only to members of the proposed surplus
sharing group. It is possible that you do not fit into the definition of the
proposed sharing group (all individuals entitled to benefits under the Plan on
or after June 24, 1997, including all members affected by the 1999 partial Plan
wind up, and any applicable surviving spouses or beneficiaries). Of course,
administrative errors can occur. We suggest that you contact the Pension
Services Call Centre for Former National Trust Employees at 1-888-895-9933 to
find out if a package should have been sent to you.
If there is $145 million in surplus, why is only $70 million being shared?
The $70 million which would be shared 50/50 between National Trust and the
surplus sharing group if the proposal proceeds is the amount of surplus
expected to be remaining after provision for a number of applicable
adjustments. The overwhelming majority of these costs are the estimated costs
of future benefits for active employees, for which National Trust would receive
a credit to reflect its claim to the surplus to fund future benefits in the
Plan. There are other adjustments also, such as to pay applicable expenses. It
is estimated that after these adjustments, approximately $70 million in surplus
(estimated as at October 31, 2004) will be available for 50/50 sharing between
the sharing group and National Trust, if sufficient member support is received
and the proposal proceeds. Again, it is important to note that this is an
estimate only and the actual amount of surplus available for sharing can only
be determined at the actual date of distribution.
I don't understand why we are only getting 50% of the surplus.
The Committee believes that a 50/50 split is a fair deal and the best
settlement available. Although the Committee believes that the Plan members
would have a good claim for the entire surplus on Plan wind up, National Trust
claims surplus ownership as well. In an effort to avoid a lengthy, costly, and
risky legal battle, where the Plan members could end up with nothing, the
Committee believes that a 50/50 sharing of the surplus is a fair compromise
that avoids years of expensive litigation.
Why is this process taking so long?
Negotiating and effecting a surplus sharing agreement is a lengthy legal and
actuarial process that requires a great deal of work on the negotiation,
regulatory and court fronts. The Committee, National Trust and their lawyers
and actuarial advisors are working, and will continue to work, very hard to
ensure that each step of the process is completed properly and in as timely a
fashion as possible.
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