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THE QUESTION
My employer’s HR department made a mistake and never enrolled me in our pension plan even though I’d completed all the steps on my end. A year later, I noticed that I didn’t see any pension plan deductions on my paycheck. I was getting 4 per cent in lieu instead.
Had I enrolled, I would’ve had $10,000 of deductions going toward my pension plan and the employer would’ve matched it. So now I’m down $20,000 in potential contributions to my pension. My employer told me that my only option is to contribute $10,000 directly to my pension provider, but my employer would not match that. I’m pretty upset because they acknowledged it was a mistake on their end. What are my options? Should the company be on the hook for the $10,000 of missed contributions, minus what they paid me for the 4 per cent in lieu?
THE FIRST ANSWER
Balraj K. Dosanjh, partner, Cavalluzzo LLP, Toronto
Pension plans are heavily regulated by provincial and federal laws. Pension legislation imposes certain duties on employers and pension plan administrators. If the pension plan is an employer provided plan, they have legal duties in how they administer the plan, which can include avoiding negligence in the enrollment of members to the pension plan.
If the employer was negligent with how they handled your enrollment, which resulted in your missed enrollment, you may have a claim for the value of any losses arising out of their negligence. The loss would be the difference in the pension plan benefit you would expect to receive had they enrolled you correctly, less the compensation you did receive for pension contributions. For example, it would be the value of your pension benefit had you received the $20,000 in pension contributions, less the value of the 4 per cent pay in lieu of pension you did receive.
Since the missed enrollment occurred a year ago, it is important you act on this quickly as there are strict timelines for bringing claims. For any questions about pension plans, you can always reach out to the pension plan regulator in your province. They can help you determine if the employer’s conduct breached the legislation or the expected standard of care. You can also reach out to a lawyer to determine if you have a viable claim based on the specific facts of your situation.
THE SECOND ANSWER
Mike Cashion, employment lawyer, Cashion Legal, Calgary
Assuming that your participation in this plan was a term of your employment contract, your employer faces potential liability for this error.
Given that you completed all the required steps and your employer admitted fault for the error, they may be required to compensate you for their oversight. This could include the employer’s matching contributions, less the 4 per cent paid in lieu, and potentially even the investment gains those contributions would have earned in the plan.
It is worth reviewing the terms of your contract and the pension plan to assess the extent of your employer’s potential liability.
However, it is not guaranteed that the missed contributions can be made retroactively to your pension. There are complex rules that govern corrective contributions to a registered pension plan, and the analysis changes again if the arrangement is a group RRSP rather than a registered pension plan.
Anyone in this situation should confirm the tax treatment with the plan administrator and a tax or pensions professional before making or accepting any catch-up contribution.
If your employer refuses to address the situation, you can complain to the appropriate financial services or employment standards regulator, which varies depending on your province. These regulators may be able to impose a corrective remedy.
You could also consider civil action against your employer and potentially even a constructive dismissal claim. These are serious steps and shouldn’t be taken without the benefit of legal advice.
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