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Putting pension cases in perspective

Posted by on Feb 1, 2008 in Employee Benefit News, Retirement | 0 comments

By: Sheryl Smolkin

Read this article and comments at HRInsider.ca  

I must confess that since I morphed from a pension lawyer to a benefits journalist three years ago, the annual legal issue has become one of my favourites.

So it seems fitting that the issue in which we preview the new EBNCdesign is the one in which the focus is on significant legal developments.

This year I asked prominent lawyers from across the country what they thought were the most important legal decisions in 2007, and why.

Ontario lawyers pick Kerry 
For the four Ontario lawyers I spoke to, the Court of Appeal decision in Kerry won hands down. And with the Supreme Court of Canada subsequently granting the plaintiff’s application for leave to appeal, the case also earned a spot at the top of everyone’s list for 2008.

Two of the key issues in the SCC appeal, which will likely be heard before the end of the year, include:

· Whether Kerry Canada can use the surplus in the defined benefit plan – which they converted into a defined contribution plan – to pay ongoing contributions in the DC part of the plan; and

· To what extent, if any, the employer is entitled to pay expenses out of the pension trust, when doing so is not specifically permitted by the trust documents.

Although many lawyers viewed the well-written, unanimous CA decision by pension expert Madame Justice Eileen Gillese as virtually impregnable, the members’ lawyer, Koskie Minsky LLP partner Ari Kaplan, says he is not surprised the SCC agreed to hear the lower court’s decision.

“The case met the necessary very high standard,” he says. “It is of national importance.”

Ron Walker, Kerry Canada counsel and a partner at Fasken Martineau DuMoulin LLP, says he was always hopeful the case wouldn’t have to be reargued, but agrees with Kaplan.

“It’s a major decision in the area that will provide a great deal of guidance to pension administrators and the profession at large, so it didn’t surprise me the SCC wanted to deal with it,” he says.

MEPP decisions in B.C. and N.S.
In contrast, lawyers interviewed from British Columbia and Nova Scotia believe that several 2007 decisions relating to multiemployer plans will have the greatest impact on their clients.

In Neville v. Wynn the litigation was focused on benefit cuts implemented by trustees in order to comply with the B.C. solvency rules. The B.C. Court of Appeal upheld their decision to reduce benefits of active members more severely than retirees.

“This is the most thoughtful, nuanced Canadian decision yet about the duty of impartiality,” says Lawson Lundell LLP partner Murray Campbell. “The CA said if you have a rationale and principled reason for treating one [class of employees] better than the other, you can.”

Yet on the other side of the country, McInnes Cooper LLP partner Hugh Wright says the whole issue of the extent of liability of MEPPs or plans with more than one employer is in a state of flux. He has recently filed an appeal on behalf of the Board of Trustees in Amherst (Town) v. Nova Scotia (Superintendent of Pensions).

“This municipal association plan encountered financial difficulty in the early part of the decade and the superintendent said individual employers had to make solvency payments,” says Wright. “However, because the Supreme Court reversed that decision and said that by definition the association is the employer,’ their only option is to reduce benefits.”

Government action required
It is reassuring to see that important pension issues are working their way through the courts, so ultimately all stakeholders will gain a better understanding of acceptable practice in a number of areas.

Yet in many cases, outdated, deficient legislation contributes to a lack of clarity. For example, Freya Kristjanson, a partner at Borden Ladner Gervais LLP says, “If you read through the pension benefits statutes in most provinces, you would hardly know they apply to DC plans.”

Governments in Ontario, Alberta, British Columbia and now Nova Scotia have established commissions to recommend legislative amendments that will bring their pension statutes into the 21st century.

Let’s hope that when these experts release their reports, our elected representatives don’t simply pile them on the shelf to gather dust with other previous pension studies.

Politicians must have the courage and commitment to not only amend legislation in their own jurisdiction, but to work with their counterparts nationally to develop a consistent framework that will both regulate and facilitate the continued evolution of workplace DB and DC retirement savings programs across the country.


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