Former forestry executive loses fight for additional pension funds after termination

A machine picks up logs at a forestry operation. Photo: HR Law Canada/Canva

A former forestry executive in British Columbia has lost his fight for additional pension funds in the wake of his termination.

BR was the president of Canfor Pulp Ltd. and was terminated on March 5, 2018. He sued for wrongful dismissal and that action was settled. But there remained one outstanding issue between BR and Canfor around his pension.

BR was entitled to participate in two registered pension plans, as well as a supplementary unregistered pension plan Canfor offered to certain executives. The supplemental plan is a defined contribution (DC) plan known informally as the Supplemental Executive Retirement Program (SERP).

The SERP was designed to supplement pension benefits for executives above the statutory earnings limits applicable to registered pension plans so the size of their pensions reflected their full salary while working.

How the SERP works

Canfor set up a “notional account” for executives who qualified for the SERP. Canfor credited them annually with various sums including, among other things, “notional earnings” which were designed to serve as a percentage return (i.e., interest) on the principal amount already accumulated in the account.

When the balance of the SERP ultimately becomes payable to the executive, the funds are not segregated and administered separately as they are with registered plans. Instead, they are drawn from Canfor’s general revenue as the need arises.

BR took the position that his notional account should have been credited with notional earnings until it was paid out to him on Oct. 26, 2022. Canfor stopped crediting the account as of Sept. 5, 2019, the date of his termination after adding an 18-month notice period.

Canfor argued BR’s claim was barred by the terms of the release he signed in settling the wrongful dismissal action. And, in any event, Canfor said it should also fail on its merits because BR had no right under the SERP to have notional earnings accrue after Sept. 5, 2019.

The settlement

Canfor gave BR 18 months’ notice, but he said he was entitled to 24 months. The action was settled in January 2021 for a lump-sum payment of $536,077.

Counsel for Canfor asked BR whether he wanted to have the notional account paid out immediately, and he responded – via his counsel – that he had not yet decided.

BR’s notional account had a balance of $848,187.42 accrued as of Aug. 31, 2019, based on a termination date of Sept. 5, 2019.

The settlement agreement was put in writing and was signed on Feb. 4, 2021 by BR. He signed a release and the settlement was concluded.

The court’s ruling

The first question the court tackled was whether or not BR’s claim was barred by the release he signed to settle the wrongful dismissal action.

It ruled it was not. It then turned to the second question, which was when the accrual in the notional earnings account should have stopped under the SERP.

The court said the plan made it clear that “the right of the terminated participant is to have Notional Earnings determined as at the date of termination, not the date of payout. The indulgence granted by Canfor to allow for additional delays beyond the… timelines is beside the point.”

“In other words, the fact that Canfor agreed to accommodate (BR) so that he could spread out the payments he was getting over more than one tax year and so reduce his tax burden does not change the meaning of the SERP Terms,” it said. “I agree with Canfor that it is antithetical to the scheme to expect Notional Earnings to continue accruing after the date of termination.”

It dismissed the action and said the parties have leave to speak to costs if they are unable to agree on the appropriate amount.

For more information see Robinson v Canfor Pulp Ltd., 2023 BCSC 581 (CanLII)

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