Report Number: 010 appendix 2

Proposed Incorporation of the Pension Office

Privileged & Confidential

TO:

Pension Committee of The Anglican Church of Canada

RE:

Proposed Incorporation of the Pension Office

Proposal:

1. Incorporate the Pension Office as a not-for-profit, non-share capital corporation.

Effective January 1, 2005, the employees of the Pension Office will become employees of a new corporation. The new corporation will be responsible for the day to day administration of all of the pension and benefit plans (the “Plans”) sponsored by The Anglican Church of Canada and will provide support to the Trustees of the Plans as required. The Trustees will continue to serve as the registered administrator of the General Synod Pension Plan and the Lay Retirement Pension Plan for purposes of the Pension Benefits Act and Income Tax Act ( Canada).

The members and directors of the newly created corporation will be the persons who are serving as the Trustees under Canon VIII from time to time. (The Trustees will continue to be appointed by the Pension Committee, subject to the transitional rules previously adopted by the Council of the General Synod (“CoGS”).)

The directors of the corporation will appoint the senior staff member of the corporation, to be known as the Executive Director (currently Judy Robinson). The Executive Director will report to the directors of the corporation. The rest of the staff of the corporation will report to the Executive Director.

The Canons, Plan documents and related agreements with third parties will be amended, as required, to reflect the incorporation of the Pension Office and its role on an on-going basis.

2. Clarify and confirm, as required, the role of the Trustees as the persons responsible for holding and investing the funds of the Plans and for recommending Plan changes to the Pension Committee.

The Trustees will be responsible for holding and investing the assets which fund the Plans other than any third-party insured plan such as the Manulife group health plan.

The Trustees will continue to make recommendations to the Pension Committee on changes to the Plans.

The Trustees will have authority to delegate responsibilities to the new corporation, investment advisors, custodians and other third parties.

The Canons, Plan documents and related agreements with third parties will be amended, as required, to reflect this role of the Trustees on an on-going basis.

3. Provide flexibility to change to an insured LTD plan.

Currently the LTD Plan is self-insured. Consideration is being given to changing to an insured plan.

The Canons will be amended to give the Pension Committee the authority to make this change if considered desirable.

Objectives of the Proposal:

  1. Continuity in Plan administration regardless of future developments affecting the Church.
  2. Security of Plan assets regardless of future developments affecting the Church.
  3. Independence from the Church in the administration of the Plans and funds.
  4. Limitation or reduction of potential liability of Trustees and Pension Office staff, if possible.
  5. Updating of Canons and Plan documents and agreements to more accurately reflect Plan and fund responsibilities.
  6. Flexibility in providing LTD benefits in the most desirable manner.

Process:

  1. Complete detailed legal review of Proposal to confirm that there are no impediments to proceeding.
  2. Amend Canons to support Proposal and to revise outdated provisions.
  3. Amend Plan documents, trust agreements and related agreements to be consistent with Proposal.
  4. Incorporate new pension corporation.
  5. Implement operational changes as of January 1, 2005 (e.g., transfer of employees, lease, insurance, equipment, new banking arrangements, etc.).
  6. Attend to all necessary notices and filings.

Advantages:

Events affecting The Church over the past few years have focussed attention on the need to ensure that the security of the assets of the Plans, and their on-going administration, will not be jeopardized by any possible disruption or financial difficulties of The Church.

Interim steps have been taken in this regard, i.e., transitional rules were introduced to permit the Trustees to continue in their roles even if The Church ceases to exist; the Pension Office staff have been documented as employees of the Trustees rather than The Church. However, a complete strategy could not be implemented because much of what was desired to be done is, obviously, not contemplated by the Canons and thus is inconsistent with a number of the provisions in the Canons which deal with the management and operation of the Plans.

Furthermore, when reviewing the Canons for purposes of achieving better continuity and security, it was determined that provisions of the Canons dealing with other aspects of the Plans are out-of-date in many respects and do not accurately reflect how the Plans are being operated. For these reasons, changes to the Canons and related Plan documents are required, whether or not the Pension Office is incorporated.

Incorporation of the Pension Office has some additional advantages which cannot be achieved only by changing the Canons and related Plan documents. Incorporation should re-inforce a sense of continuity and security among the Plan members and participating employers, i.e., a legal entity will exist and function independent of any problems which The Church may encounter in the future.

Also, a very important advantage is that incorporation is designed to decrease the risk of personal liability to the Trustees. If the Trustees are employers of the Pension Office staff, they are exposed to a greater risk of personal liability for the day-to-day administration of the Plans. This is inconsistent with their position as part-time volunteers, who cannot be expected to take an active role in day-to-day administration. With incorporation, they will assume responsibilities as directors of the corporate employer, rather than the more detailed day-to-day responsibilities of a direct employer. It is important to note that the Trustees will still have important obligations as directors of this new corporation, including oversight of the Pension Office’s operations.

The Trustees will also continue to be the registered “administrator” of the pension plans and this gives them responsibilities under the Pension Benefits Act which they cannot abdicate to the Pension Office. Furthermore, the Trustee will continue to have responsibility for the assets of the various Plans. They will continue to set investment policy, appoint investment managers and custodians, and otherwise have oversight over the assets that fund the various Plans.

In the absence of incorporation, it would be possible to cover much of the Trustees’ potential liability with insurance, but not necessarily all liability. Additional protection might be sought through indemnities from The Church, but this will not protect the Trustees if The Church itself has financial difficulties. As noted, incorporation of the Pension Office reduces their exposure; however, insurance is recommended in addition to incorporation.

Disadvantages:

A legal review is still in process, but the following disadvantages have been identified to date:

Recommendation Sought:

The Trustees request that the Pension Committee recommend to CoGS the approval of the Proposal and necessary Canon changes, subject to satisfactory legal review and receipt of any necessary regulatory approvals. The Trustees and Pension Office staff are to have the responsibility for settling all documents necessary to carry out the Proposal, subject to approval by CoGS of all documents requiring CoGS approval, and subject to approval by the Pension Committee of all documents requiring Pension Committee approval.