Recent Ontario Financial Services Tribunal decision finds lump sum payments did not qualify as pensionable earnings.
April 25, 2022
Do payments intended to compensate an employee for pension and other benefit changes qualify as pensionable earnings?
That was the question posed to Ontario’s Financial Services Tribunal in a case involving a 2012 decision by Coca-Cola Refreshments Canada Company (CCRC) to terminate an employee’s car allowance. To compensate for the lack of reasonable notice, the company chose to pay the employee, Russell Coburn, a lump sum car loss payment of $8,100.
Fast forward to 2017, when the company changed its pension plan — implementing a soft freeze of defined benefit accruals for non-union employees. Coburn, like certain other non-union employees, was paid a one-time transition payment to compensate him for losses due to the soft freeze.
In 2018, CCRC was sold and ceased to be a participating employer in the pension plan. After Coburn filed a complaint with the pension regulator, the Financial Services Regulatory Authority issued a Notice of Intended Decision (NOID) stating that it would make an order requiring the car loss payment and transition payment be included in Coburn’s pensionable earnings.
The new administrator of the plan — Coca-Cola Ltd. — applied to the Tribunal to review that decision and the NOID was ultimately dismissed. According to the Tribunal, to qualify as earnings, the terms of the plan (prior to 2018) stated that a payment had to be considered “remuneration.” But remuneration is “payment for services rendered or work performed”— and neither the transition payment, nor the car loss payment, aligned with this definition, despite the fact they were considered employment income for tax purposes.
Read the full Tribunal decision here:
