Background
The employer currently has two supplementary executive retirement plans (being unfunded plans) for the Company’s CEO and for its VPs, which had been defined benefit plans.
Proposed transactions
The two SERPs will be amended to provide benefits on a defined benefit basis based on eligible service after the effective date, but subject to some grandfathering for existing plan members.
In respect of each month of service for which the member is making the maximum contributions under the Company registered pension plan (RPP), the Company will make notional contributions to the member’s account in an amount equaling the excess of 10%of the member’s targetcd compensation for such month (including 1/12 of the targeted year-end bonus) over the amount of the Company contributions made for such month to the member’s RPP, except that if such amounts for the year prove to exceed 18% of the actual compensation of the member for the year over the RPP limit of the member for that year, the employer will pay, as soon as possible, the excess in a lump sum to the member (or, if the member has died, to the member’s spouse).
The notional contributions in respect of a member will be credited with notional investment returns to reflect the returns under a pooled investment fund as selected by the Company from time to time from the pooled investment fund options available under the RPP.
If a SERP member ceases service for any reason other than death, the employer will pay the SERP benefit in 10 annual instalments, unless the member has elected for a fewer number of instalments or to have the balance in the member’s account paid as one lump sum.
If the member dies before payments of the benefit have commenced, the balance in the member’s account will be paid to the surviving spouse, or to a designated beneficiary.
Rulings
Re no salary deferral arrangement or retirement compensation arrangement, inapplicability of s. 5(1) or 6(1)(a), s. 56(1)(a)(i) application to benefit payments to member, spouse or beneficiary, deductibility of employer contributions and no interest accrual to member under s. 12(4).