When purchasing an existing business, many buyers are
understandably reluctant to assume obligations under a target's
defined benefit (DB) pension plan. Under a traditional DB plan,
members (i.e. plan participants) are entitled to a guaranteed
pension amount calculated by a formula. While active employees may
contribute to such plans, each Canadian jurisdiction's laws
place the employer squarely on the hook if the plan's assets
are not enough to fund the promised benefits – and, as many
of us have now seen, DB plans' current funding woes are
well-publicized. In addition, DB plans are subject to a complex
regulatory scheme and accounting rules that often have a negative
effect on financial statements. For these reasons, many buyers
undertake careful due diligence of a target's DB plans and, if
appropriate, work with their lawyers to minimize these
One alternative to the traditional DB plan is the defined
contribution (DC) pension plan. Under a DC plan, employer (and, if
applicable, employee) contributions are fixed, but the ultimate
retirement benefit is not. At retirement, members are entitled to
the sum of those fixed contributions over their working years, plus
whatever investment return their accounts have achieved. Members,
not employers, bear the investment risk and longevity risk (i.e.,
the risk that their plan account is insufficient to fund an
adequate retirement income and the risk that they will outline
Owing to their financial predictability and apparent
straightforward nature, some potential buyers may be tempted to pay
less attention to a target's DC plans than they would to a
target's DB plans in the due diligence process; however, as I
will explain in my next post, this could be a costly mistake.
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.
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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.
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.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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