Holiday Gift From Supreme Court Of Canada To Public Sector Pension Plan Members - A Lump Of Coal. Members Not Entitled To Pension Surplus

Author:Mr Lyle Teichman
Profession:Stikeman Elliott LLP

In Professional Institute of the Public Service of Canada v. Canada, the Supreme Court of Canada (SCC), was asked to examine whether plan members had an equitable interest in the defined benefit surpluses in three federal government pension plans. The SCC held that plan members did not have an equitable interest in the plans' surpluses under the plans and that the employer did not owe a fiduciary duty to plan members with respect to surplus. Further the SCC held that the plan sponsor was not unjustly enriched by its application of surplus amounts and there was therefore no basis for the imposition of a constructive trust.

This decision is interesting as it involved an analysis of the considerations applicable to statutory pension plans. While the case may specifically apply to a limited number of statutory public sector plans, the analysis of the SCC underlying some of the issues will have broader application.

The plans in question (covering federal public sector employees, members of the Canadian Forces, and members of the RCMP) were not subject to collective bargaining. Contributions made to the plans were held in the Consolidated Revenue Fund. Prior to April, 2000, the contributions were reflected as credits to the "Superannuation Accounts" established for each plan. As a result of the introduction of Bill C-78 in 1999, on and after April 1, 2000 contributions were deposited to a pension fund that replaced the Superannuation Accounts for post-March, 2000 service. Bill C-78 also required to federal government to debit from the Superannuation Accounts certain amounts in excess of a specified surplus ceiling.

For many years prior to April, 2000, the federal government "amortized" the actuarial surplus in the Superannuation Accounts, which had the effect of reducing the government's annual budget deficit (or increasing the annual budget surplus). After March 31, 2000, pursuant to Bill C-78 the federal government debited amounts from the Superannuation Accounts in excess of the surplus ceiling. As a result of these actions, the federal government amortized a total of $18.6 billion during the 1990s, and debited a further $28 billion from 2001 to 2004.

The plan members (through a number of unions and associations) brought an action claiming, in essence, that they had an equitable interest in the balances in the Superannuation Accounts as of March 31, 2000 and that Bill C-78 did not authorize a reduction from the Superannuation Accounts of any...

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