Even though post-retirement benefit (PRB) plans are not
the same as registered pension plans, and are not subject to
pension standards legislation, the recent arbitration decision in
Regional Municipality (Durham) v. Canadian Union of
Public Employees, Local 1764 is an important reminder to
both employers and employees that benefits under pension plans and
PRB plans can often be linked, with the result that a decision to
take a transfer of the lump sum value (commuted value) of pension
benefits could render a former employee ineligible for
The case involved a grievance filed by CUPE on behalf of a
former (unionized) employee of Durham. As an employee of Durham, he
was a member of the OMERS pension plan and also entitled to PRBs
under a plan sponsored by his employer, if he qualified for such
benefits on his retirement. The collective agreement in question
provided that in order to qualify for PRBs (extended health and
dental benefits), employees must meet three criteria:
they must retire before age 65,
they must achieve a factor of 90 or have at least 15 years
they must take a retirement pension.
In this case the employee retired in 2009 and met the first two
criteria. On his retirement, the employer (Durham) advised him that
if he elected a commuted value of his pension, he would not be
considered a retiree within the meaning of the collective
agreement, and therefore would not be eligible for the (extended
health and dental) PRBs. Nevertheless, on his retirement the
employee elected to take a commuted value of his OMERS pension
entitlements, rather than electing to be a pensioner and receive
monthly pension payments. On learning of his election, the employer
took the position that he did not meet the third criteria above and
terminated his PRBs. The union filed a grievance, claiming that the
form or manner in which the pension is taken is of no relevance to
entitlement to the PRBs.
The arbitrator focused on the proper interpretation of the words
"retirement pension" used in the collective agreement,
and whether the commuted value elected could qualify as such. The
arbitrator noted that both the pension plan in question (OMERS) and
the Ontario Pension Benefits Act define a pension as a
periodic payment, and make a clear distinction between a pension
and the commuted value of a pension. As a result, he ruled that the
intention of the collective agreement was to provide PRBs only to
employees who elect a pension, and not to those who take a commuted
value, dismissing the grievance.
This decision should be contrasted with the result and reasoning
in a court decision involving OMERS (Berthiaume v. City of Windsor) in which
the court ordered the employer to provide post-retirement health
benefits to a retiree who was not yet in receipt of a pension.
While at first glance the results of these two decisions may appear
to be difficult to reconcile, what they really demonstrate is how
each case is very much dependent on its facts and the wording and
terms of the PRB plan in question. Employers would be well served
to review the terms of their PRB plans to ensure that conditions
for eligibility for PRBs are clearly and precisely defined.
Paul Litner is Chair of the Pensions &
Benefits Department. His practice relates exclusively to pensions,
benefits and compensation plans and their related investment
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
A former teacher at Bodwell High School has learned a valuable lesson from the B.C. Human Rights Tribunal— it is not discriminatory for an employer to offer child-related benefits to only employees with children.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).