Ontario government under fire over proposed pension surplus changes

(November 14, 2002) The Ontario government is on the defensive over the issue of surplus pension funds after quietly introducing legislation to amend the province’s Pension Benefits Act. The proposed legislation, introduced two weeks ago as part of a larger budget bill, provides for negotiated surplus sharing agreements between employers and pension plan members.

However, employers can now choose whether or not to pay out surplus funds in cases of a partial pension plan wind-up resulting from a mass layoff.

Critics say Ontario is retroactively changing the rules so that employers can deny employees their rightful share of surplus funds. Pension lawyer Mark Zigler of Toronto law firm Koskie Minsky has called the legislation “draconian” and “heavy-handed.”

“Employees and pensioners are the losers under the Ontario government’s cynical rewriting of Ontario’s pension surplus legislation,” he said. Zigler represents 1,000 former employers of National Trust who are fighting for a share of $160 million in pension surplus inherited by Scotiabank when it purchased National Trust.

In the case of a full plan wind-up, the employers must get the consent of two-thirds of members to get a surplus distribution approved.

Current regulations prevent employers from unilaterally removing a pension surplus without a sharing agreement. “The Ontario government now proposes to wipe out these important protections for employees and pensioners and at the same time grant a big surplus gift to employers,” said lawyer Susan Philpott, also with Koskie Minsky.

But the province says the proposed amendments allow employers to make applications for surplus only in limited cases where the employer is clearly entitled to the surplus based on existing plan agreements. “The amendments add the right for employees to make a similar application on full plan wind-up,” the ministry of finance said in a statement issued last week.

The proposed legislation is retroactive to 1988. Zigler says that means past surplus sharing arrangements negotiated between employers and employees could be void. But Ontario’s Finance Minister Janet Ecker has said existing agreements will be respected. The bill specifically excludes surplus sharing cases that have gone to court.

Zigler says the legislation makes Ontario “the least favourable jurisdiction in Canada” for pensioners and employees when it comes to pension plans and surplus rights.

The Ontario government says the bill brings the province in line with other Canadian jurisdictions and restores the legislative landscape to pre-1998, when Monsanto first went to court to appeal a ruling ordering it to share its surplus. That case is still pending.

“Nothing in this legislation affects the earned pension benefits of plan members and retirees,” the province said. “Any surplus withdrawal must be approved by the pension regulator, as has been the case for many years.”

The Association of Canadian Pension Management, which participated in the consultation process with the Ontario government, is happy with the proposed amendments. “We’re pleased to see the government moving forward on this issue,” ACPM Ontario regional council chair Scott Perkin told Benefits Canada. “I think what they’ve tried to do with the Monsanto case is deal with the issue head on.”

Koskie Minsky is calling for an immediate withdrawal of the pension surplus proposals. The law firm also wants the province to conduct a “proper” review of the province’s pension laws to ensure that the pension assets of Ontarians are protected.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca with files from Anna Sharratt, Benefits Canada.

(11/14/02)