Section 21 of the Pension Benefits Standards Act, 1985 (Canada) – This section outlines the requirements for the termination of a pension plan, including the distribution of assets and the rights of plan members.

Section 21 of the Pension Benefits Standards Act, 1985 (Canada) is a crucial provision that outlines the requirements for the termination of a pension plan, including the distribution of assets and the rights of plan members. This section applies to all federally regulated pension plans in Canada and is designed to ensure that plan members are protected in the event of a plan termination.

The factual background of this provision is that it was introduced in response to concerns about the vulnerability of pension plan members in the event of a plan termination. Prior to the introduction of this provision, there was no clear guidance on how pension plan assets should be distributed in the event of a plan termination, which left plan members at risk of losing their retirement savings.

The relevant laws that apply to Section 21 of the Pension Benefits Standards Act, 1985 (Canada) include the Pension Benefits Standards Regulations, 1985, which provide additional guidance on how pension plan assets should be distributed in the event of a plan termination. In addition, case law such as Schmidt v. Air Products Canada Ltd. and Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services) have provided further interpretation of this provision.

The application of the law to the facts is straightforward. Section 21 requires that a pension plan can only be terminated if certain conditions are met, including obtaining the consent of plan members or obtaining an order from the Superintendent of Financial Services. In addition, the provision sets out specific requirements for the distribution of plan assets, including ensuring that plan members receive their vested benefits.

The key legal issues or questions that arise in relation to Section 21 include whether a plan can be terminated without the consent of plan members, and what happens to plan assets in the event of a plan termination. These issues have been addressed in case law such as Schmidt v. Air Products Canada Ltd., which held that a plan cannot be terminated without the consent of plan members unless certain conditions are met.

The likely outcome of a dispute involving Section 21 will depend on the specific facts of the case and the interpretation of the law by the court or regulator. However, based on previous case law, it is likely that courts will interpret Section 21 in a way that protects the rights of plan members and ensures that they receive their vested benefits in the event of a plan termination.

There are alternative interpretations of Section 21 that could be advanced, such as arguments that plan sponsors should have more flexibility in terminating plans or that plan members should not be entitled to their vested benefits in certain circumstances. However, these interpretations are unlikely to be successful given the clear language and purpose of the provision.

The risks and uncertainties associated with Section 21 include the potential for litigation if there is a dispute over the termination of a pension plan or the distribution of plan assets. In addition, there may be reputational risks for plan sponsors if they are seen to be acting in a way that is not in the best interests of plan members.

The advice to clients in relation to Section 21 is to ensure that they comply with the requirements of the provision and obtain the necessary consent or orders before terminating a pension plan. In addition, clients should ensure that they distribute plan assets in accordance with the requirements of the provision and any applicable regulations.

There are potential ethical issues associated with Section 21, particularly in relation to conflicts of interest between plan sponsors and plan members. Plan sponsors have a fiduciary duty to act in the best interests of plan members, which can create ethical dilemmas if there is a conflict between the interests of the sponsor and the members.

In terms of related case law, Schmidt v. Air Products Canada Ltd. is a key decision that provides guidance on the interpretation of Section 21. Other relevant cases include Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), which addressed the distribution of surplus assets in the event of a plan termination, and Buschau v. Rogers Communications Inc., which dealt with the issue of consent in relation to plan terminations.