SURPLUS ENTITLEMENT CASES
ISSUE
The issue of surplus is large and complex, and affects many other issues. For example, surplus distribution is at the heart of the Monsanto decision.
That said, ACPM feels the rules and laws dealing with pension plan surplus are dysfunctional and need fixing. The laws and their application are asymmetrical; they favour plan members and others able to apply political pressure.
Trust law is being interpreted by the courts in a very limited way (“classical” vs. “purpose” trust, or contract law). As a result, plan sponsors are bound by old plan/trust provisions developed many years ago under different circumstances. Often these provisions were “forced” onto plans as a result of administrative action by the Canada Revenue Agency.
Trust law interpretation makes it all but impossible to change the terms of the trusts. Regulatory authorities make it difficult, if not impossible, for plan sponsors to access surplus even when entitlement is clear. As a result, plan sponsors are not encouraged to adequately fund DB pension plans, or set up new DB plans.
Action to date
Clarity and fairness in the treatment of plan surplus has been a constant theme of the ACPM. We have advocated our position in numerous documents and forums.
The ACPM Funding Task Force has addressed plan funding principles, including the treatment of surplus, in the 2005 Report “Back From the Brink: Securing the Future of Defined Benefit Pension Plans”.
Future action
The ACPM will continue to advocate for symmetry and fairness in the laws governing pension plan surplus.