For many, the word fiduciary could be an elusive answer to an impossible crossword puzzle clue, or abstract legal and ethical considerations they’ve never given deeper thought to, unless they’ve taken on the role and the responsibility it carries.
In their article on the “Fiduciary Responsibility” featured in the Employee Benefits in Canada toolkit, authors Roberto Tomassini and Mark Zigler explain that the word fiduciary comes from the Latin fiducia, meaning trust or confidence. In law, a person in whom trust or confidence is reposed is termed a fiduciary when the relationship is such that the fiduciary is impressed with a duty of loyalty to those placing their trust in them.
“The classic example of a fiduciary relationship is that of a trustee vis-à-vis a trust. When a trust deed or agreement vests legal title to property to a trustee, the trustee is required to use the property for a certain purpose that serves the best interest of the trust beneficiary,” they write.
The authors point out that the Canadian courts have held employers, corporate trustees and boards of trustees affiliated with benefit plans as fiduciaries accountable to benefit plan beneficiaries.
Source of Fiduciaries’ Duties and Responsibilities
In Canada, the administration of trusts and employee benefit plans is primarily governed by common law standards of fiduciary conduct for trustees and professional advisors. However, legislation, plan provisions and trust agreements can also have an influence on the administration of a trust, including but not limited to the following.
- Pension plans: Federal/government and each of the ten provinces have pension benefits legislation, except Prince Edward Island. The decision in Indalex confirmed the fiduciary obligations of trustees and other administrators to plan members and beneficiaries. These duties and responsibilities arise both from common law and by virtue of the pension benefits statutes, which impose “fiduciary-like” standards of care on plan administrators and the administrator’s agents.
- Other benefits: There is no legislative parallel to that for pension benefits for health and welfare benefits, vacation pay trust funds, training trust funds or supplementary unemployment insurance benefits. There is, however, legislation respecting trustees in general that may apply. Because this general legislation also concerns the trustees of estates for minors, executors appointed under a will and so on, it does not address employee benefit plan administration in the same detailed manner as pension benefits legislation.
- Labour law: In some jurisdictions, the administration of employee benefit plans is affected by provisions in labour relations legislation. The authors cite the example of the Alberta Labour Relations Code, which limits the personal liability of trustees and the joint board of trustees of an employee benefits plan, except in cases where the trustees fail to act honestly or in accordance with the intent and purpose of the trust instrument. This provision is expressly stated to be paramount over any provision in the Trustee Act.
“Finally, all employee benefit plans in Canada are affected by the provisions of the Income Tax Act,” Tomassini and Zigler conclude in the article. “For example, this legislation places a ceiling on the amount of pension benefit payable to a retiree annually without tax consequences to the sponsor. Trustees of any pension plan need to consider compliance with the tax regulations and tax consequences when making fiduciary decisions with respect to a pension plan.”
For an in-depth exploration of fiduciaries and their responsibilities, read this article in full and explore recently updated resources, visit https://www.ifebp.org/EBIC.
