The defined benefit plan in this decision was established in 1954
and the assets of the plan were held in a trust. In 1994, following
an asset purchase transaction, Kerry Canada Inc.
("Kerry") became the administrator and sponsor for the
pension plan. Kerry continued the practice of paying various plan
administration expenses from the pension fund relating to the plan
and taking into account actuarial surplus in determining the
employer's contribution obligations. In January 2000, the plan
was amended to add a new defined contribution provision. The
amended plan text provided that defined benefit surplus could be
applied towards Kerry's contribution obligations under the
defined contribution provision. A number of former employees who
were members of the plan objected to the 2000 amendments and
requested the Ontario Superintendent of Financial Services to: (i)
order Kerry to reimburse the plan for various expenses previously
paid from the pension fund, (ii) order Kerry to reimburse the
pension fund for various previous contribution holidays, and (iii)
deny registration of the 2000 amendment to the plan. The issues
were considered by the Financial Services Tribunal, the Divisional
Court and the Court of Appeal for Ontario. The Supreme Court of
Canada issued its decision on August 7, 2009 upholding the Court of
Appeal's decision on the first two issues.
Plan Expenses Are Properly Payable from the Pension
The Court held that Kerry was able to pay most of the
administrative expenses from the pension fund. Since there are no
provisions in the Ontario Pension Benefits Act (the
"PBA") governing the payment of pension plan expenses,
the Court held that the terms of the plan documentation (the plan
text and the trust agreement taken together) must govern. The Court
also agreed that a properly administered pension plan requires a
number of services in addition to those of a trustee, including
actuarial, accounting and counsel services. It stated that the
payment of plan expenses is necessary to ensure the plan's
continued integrity and existence. In this case, neither the plan
text nor the trust agreement obligated Kerry to pay the plan
expenses. As Kerry was under no obligation to pay the plan
expenses, such expenses were the responsibility of the fund. Kerry
was accordingly justified in paying expenses from the fund so long
as those expenses were reasonable and necessary.
Contribution Holidays and Cross-Subsidization of the
Defined Contribution Provision
A number of issues arose regarding the taking of contribution
holidays through the use of pension fund surplus. The Court
reiterated its analysis in its decision in Schmidt v. Air
Products of Canada Ltd. that "unless the terms of the
plan specifically preclude it, an employer is entitled to take a
contribution holiday". The Court affirmed that the plan
language did not preclude a contribution holiday. The Court held
that the pension surplus originating with the defined benefit
component of the pension plan could be used to fund employer
contributions to the defined contribution provision of the same
plan. The Court also concluded that there was one plan, there could
be one trust created through a retroactive amendment, and that
contribution holidays could be taken with respect to either or both
of the defined benefit or defined contribution components of the
This decision is based on an in-depth analysis and interpretation
of Kerry's pension plan and trust documents. As each case turns
on its own facts and the terms of the plan and trust at issue, plan
sponsors should analyze their own pension plan and trust documents
to ensure that the principles set out in this decision are
applicable before paying expenses from a plan fund or using
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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