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DC Pension Plans are a Ticking Litigation Time Bomb

Posted by on Jan 19, 2011 in Retirement | 0 comments

Jim Middlemiss, Financial Post · Wednesday, Jan. 19, 2011

Defined-contribution pension plans are a ticking litigation time bomb just waiting to blow up on employers, pension lawyers say.

Randy Bauslaugh, a pensions lawyer at McCarthy Tetrault LLP in Toronto, said that is because “they carry so much legal risk” compared to defined-benefit plans, which carry financial risk……..

…….Mark Zigler, a pensions lawyer at Koskie Minsky LLP in Toronto, acts for employees and unions. “There is a misconception that by putting in place a defined-contribution plan you get out from layers of legal issues,” he said. “They really do carry a lot of legal risk.”

Lawyers say everything from the way the plan is structured to the disclosure of risk, the adequacy of the investments offered, the fees charged and the information communicated to employees about how the plan works and its likely performance can provide the basis to a future lawsuit.

As well, conversions from DB plans to DC plans can also result in litigation.

Since many DB plans were only recently converted, it may take years for the litigation to emerge, as Canadians start retiring in droves and realize that their DC plans didn’t perform as expected.

Doug LeFaive, a pensions lawyer at Sack Goldblatt Mitchell LLP in Toronto, which acts for unions and employees, said: “I think a lot of employers converted on the assumption that [DC plans] would be a solution to all the pension problems. That was a mistake. A lot of employers were sold a bill of goods. Read more:

 

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