In the recently released case, Larkin v. Johnson, 2022 BCSC 603, the Court made several helpful comments related to the fiduciary duties of plan trustees. Of particular interest, its analysis confirmed the importance of the governance process (proper consideration of relevant issues and option, and documentation). The decision also confirmed there is no duty to warn of changes to the plan under consideration, as opposed to the requirement to inform once a plan change has been decided.
Facts
The plaintiffs were a group of members of the plan, also members of one of the unions representing employees in the plan. The plan is a multi-employer pension plan sponsored by the employers, with defined benefit and defined contribution divisions. The dispute related to the terms of one of the defined benefits divisions.
The plaintiffs claimed the plan trustees breached their fiduciary duties when they increased the normal retirement age from 62 to 65 and in selecting new trustees. Further they claimed that the plan trustees had breached a duty to warn the members of a solvency deficiency and the possibility of the increase in normal retirement age. The plaintiffs failed on all claims and the plan trustees’ application for summary dismissal was granted.
Key Takeaways
Benefit changes that reduce or delay benefits, as did this one, are often a concern for members of the plan. It is clear from the decision that the meeting minutes of the trustees in this case demonstrated how they had considered their duties and various options. The documentation of their process was thorough and important in the Court’s review of their ultimate decision. While the Court was clear that it had limited authority in reviewing the exercise of trustee discretion, the process undertaken in exercising that discretion was reviewed in detail. The analysis in this decision provides a reminder to all boards of trustees as to the importance of not only reasonably considering the relevant issues but also as to the importance of documenting that process.
The decision also addressed the “duty to warn” which has been previously considered in pension contexts, including in Hembruff v. Ontario Municipal Employees Retirement Board, 2005 CanLII 39859 (ON CA). The Court here followed previous reasoning and confirmed there is no general duty to warn of changes to a plan that are under consideration. In addition to the caselaw on this, the Court noted that the relevant legislation and regulations provide for specific disclosure of amendments once made as well as the funded status.
This blog provides some of the highlights of Larkin v. Johnson, not a full review. If you wish to discuss the case in more detail in relation to a particular pension plan, please contact one of Cavalluzzo’s experienced pension lawyers, listed below.