It is often assumed that the financial obligation of an employer
which participates in a Multi-Employer Pension Plan
("MEPP") is limited to making contributions at the fixed
rate specified in the collective agreement. To the surprise of some
employers, that is not always the case and reality is not as
clear-cut as one would expect or like to see.
The major concern of an employer which participates in a MEPP is
its funding obligations which may arise in 3 different situations:
when the MEPP is continuing, when the MEPP is wound up and when the
employer ceases to participate in the MEPP.
Ongoing MEPP. The Pension Benefits Act
(Ontario) (the "Act") and its regulations require
employers to make normal cost and solvency contributions when a
pension plan is continuing. The only exception is a MEPP where an
employer's obligation to contribute is limited to a fixed
amount set out in a collective agreement and where the MEPP sets
out the obligation of an employer to contribute. If this exception
applies, the employer is required only to pay the MEPP
contributions received from employees and the required employer
contributions set out in the applicable collective agreement.
Sometimes a MEPP does not fall squarely within the exception (e.g.,
it does not expressly set out the funding obligation). The
contribution set out in the Act is the minimum statutory
requirement. If the MEPP contains a higher funding obligation, the
employer is required to comply with the higher funding obligation.
Therefore, if a MEPP includes a general funding provision (e.g., it
includes a provision which requires employers to fund benefits
generally), in addition to, or instead of, fixed rate
contributions, it imposes a general contribution obligation on the
employers which exceeds the statutory minimum requirement. In such
circumstances, a participating employer will be exposed to a
general funding obligation which may be different from what it
MEPP Wind-Up. The Act also sets out the
obligations of the employer to fund any deficiency when a pension
plan is wound up in whole or in part. The Act does not have an
exception to this general rule. In practice, when the assets of a
MEPP are insufficient to pay all the accrued benefits on the
wind-up of the MEPP, the MEPP will be amended to reduce accrued
benefits so that there will not be any deficiency which requires
additional funding. Such amendment is permitted under the Act
(unlike a single-employer pension plan for which amendments cannot
reduce accrued benefits) and, as a matter of regulatory practice,
the pension regulator in Ontario does not require further funding
by participating employers unless the pension plan requires such
Ceasing As Participating Employer. A MEPP may
sometimes impose additional funding obligations or other conditions
on an employer when it ceases to participate in the MEPP (e.g.,
requiring the consent of all employees). Some of these conditions
or obligations will cause difficulty for an employer in withdrawing
The rules under the Quebec pension legislation relating to an
employer's funding obligations in respect of MEPP are
Ask The Right Questions
In light of the above potential issues, an employer should
closely review the relevant MEPP plan documents to determine its
potential exposure and obligations before participating in a MEPP.
The following are various questions that will assist an employer in
determining its liabilities:
Is the MEPP exempted from the general statutory funding
What are the funding provisions in the MEPP documents (e.g.,
plan text, participation agreement, trust agreement, collective
agreement)? Is there any general funding language?
What is the amendment power? Is there a power to amend the MEPP
to impose additional contribution obligations on the
What are the plan termination and participation cessation
provisions? Are there any restrictions on the amendment power which
limit the ability to amend the MEPP to reduce accrued
The above questions are not exhaustive but are helpful in
fleshing out potential issues for an employer's
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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