Pension Plans: Risk Management – Part II

September 10, 2018 | Kim Ozubko

In our most recent blog post, we discussed some of the risks for directors, officers and other stakeholders in the administration of a registered pension plan. In this blog post, we focus on the risks to sponsors and administrators of registered pension plans.

Legal Risks

An organization that sponsors and administers a registered pension plan has duties under both legislation and the common law. A breach of any of those duties can result in legal liability.

Statutory Risks

Under pension standards legislation, the sponsor and administrator have a number of duties. For example, among other duties, under the Pension Benefits Act (Ontario) (“OPBA”), the administrator has a duty to act with a certain standard of care, a duty to provide information to members and other persons, and a duty to submit employer and member contributions within the time prescribed under the legislation.

Under the OPBA, every person who violates the legislation is guilty of an offence and liable on conviction to a fine of up to $100,000 for the first conviction and up to $200,000 for each subsequent conviction. As discussed in our earlier blog post, effective January 1, 2018, administrative monetary penalties of up to $25,000 may now be imposed on sponsors and administrators of plans registered under the OPBA for non-compliance with certain provisions of the OPBA and related regulations.

Risks at Common Law

In addition to the risk of penalties that may be levied under applicable legislation, a plan sponsor or administrator may face claims from members and other plan beneficiaries under the common law.

Claims of negligent misrepresentation and breach of fiduciary duty are often made against plan administrators. Claims of negligent misrepresentation may arise in the context of member communications.  For example, a member may allege that the plan administrator provided inaccurate information about the amount of benefits payable under the plan and that the member relied on that information to his or her detriment. A claim of breach of fiduciary duty may arise when a member believes that the plan administrator did not act in his or her best interests under the plan. Such claims have been made in the context of surplus distribution under defined benefit plans and, more recently, in respect of  the conversion of defined benefit plans to defined contribution plans.

Reputational Risk

Reputational risk is a significant risk for many sponsors and administrators of registered pension plans. The degree to which a plan sponsor or administrator may be concerned about or impacted by reputational risk may vary. For some organizations, corporate reputation is critical; for others, it is a secondary concern. For organizations that are concerned with reputation, implementing decisions such as reducing benefits or terminating a plan should be carefully managed, as they may have a significant impact on their reputation.

Enterprise and Economic Risk

Enterprise risk, the potential impact of the pension plan on the viability of the entire business enterprise, is another potential concern for plan sponsors and administrators. For some organizations and plans, the costs of funding the plan may become so high that they threaten the very viability of the organization.

A related risk to enterprise risk is economic risk; a risk that has the potential to impact an organization’s bottom line but is not so significant that it threatens the viability of the enterprise. Examples of economic risks include higher than expected costs of funding a plan due to investment losses and underperformance or plan design.

In future blog posts, we will discuss some best practices and common risk management strategies that administrators and sponsors of registered pension plans can adopt.

For further information, please contact Kim Ozubko at or (416-597-4338),
or subscribe to our A.M. Pension Blog and webinar series to stay informed on latest developments.


This blog sets out a variety of materials relating to the law to be used for educational and non-commercial purposes only; the author(s) of this blog do not intend the blog to be a source of legal advice. Please retain and seek the advice of a lawyer and use your own good judgement before choosing to act on any information included in the blog. If you choose to rely on the materials, you do so entirely at your own risk.