Tories freeze bill in wake of court decision, will hold consultations on changes that would make it easier for employers to keep surpluses
The Ontario government has temporarily frozen changes to legislation that would have made it next to impossible for employees to get their hands on pension surpluses.
Ontario Finance Minister Janet Ecker said the province is going to hold consultations before proclaiming the parts of the legislation dealing with pension surpluses. This comes in the wake of a decision by the Ontario Court of Appeal in the Monsanto case that will give 146 laid-off employees of Monsanto Canada Inc. some portion of the surplus in their plan. The employees were seeking $3.1 million of an estimated $19.1 million surplus — or about $21,000 each.
The court didn’t address the issue of who owns the surplus, but declared money relating to the laid-off Monsanto employees cannot simply be put back into the plan. It also said Ontario law has been very clear on this point for decades. The surplus must be paid out, which under current law generally means a negotiated split between the employees and the employer. The employer generally uses its share of a pension plan surplus to reduce future contributions.
The Monsanto decision has raised a red flag for many organizations who feel that since they are on the hook for any pension shortfall they should be entitled to any potential surplus. It also angered the chair of advocacy and government relations for the Association of Canadian Pension Management.
“It is not equitable to distribute surpluses to one particular group of members at a point in time,” Priscilla Healy told the Toronto Star. “Conditions may change with time and a subsequent group of members may not share in surplus, or even worse, there could be a deficit at the time of a subsequent wind up.”
This is an issue because many plans which had large surpluses at the time of partial wind up have been battered recently and have lost significant amounts as the stock market dived. Employees want to get their hands on surpluses that existed at the time they were laid off. Bill 198 states than no surplus need be paid out in a partial wind up, except in cases where the plan’s own documents require it to be done. The amendments would be retroactive to 1988.
If the bill is passed as is, thousands of laid-off workers from about 200 companies in Ontario will never see a cent from pension surpluses they are fighting to get their hands on. They all stood to benefit from the Monsanto ruling, but if the proposed amendments are passed by the Tories these workers would have to wait until their former employer proposed to withdraw funds or wound up the pension plan entirely.
“The Ontario government will not proclaim the sections of Bill 198 pertaining to this issue until we complete the consultations on measures to ensure the rights of pensioners are protected,” said Ecker. “We are looking forward to further discussions on this issue. We are committed to ensuring that people’s concerns are addressed.”
The legislation wouldn’t affect the Monsanto decision — or any other cases currently before the courts. But opposition critics want the province to pull the pension legislation out of Bill 198, a 163-page omnibus budget bill covering dozens of topics.
“The bottom line is you can’t just say you won’t proclaim it,” Liberal critic MPP George Smitherman told the Star. “It’s flawed. It’s deeply flawed. The government needs to pull the pension stuff out, (have) a consultation that involves a broad array of players and bring it back as a piece of stand-alone legislation.”
Ontario Finance Minister Janet Ecker said the province is going to hold consultations before proclaiming the parts of the legislation dealing with pension surpluses. This comes in the wake of a decision by the Ontario Court of Appeal in the Monsanto case that will give 146 laid-off employees of Monsanto Canada Inc. some portion of the surplus in their plan. The employees were seeking $3.1 million of an estimated $19.1 million surplus — or about $21,000 each.
The court didn’t address the issue of who owns the surplus, but declared money relating to the laid-off Monsanto employees cannot simply be put back into the plan. It also said Ontario law has been very clear on this point for decades. The surplus must be paid out, which under current law generally means a negotiated split between the employees and the employer. The employer generally uses its share of a pension plan surplus to reduce future contributions.
The Monsanto decision has raised a red flag for many organizations who feel that since they are on the hook for any pension shortfall they should be entitled to any potential surplus. It also angered the chair of advocacy and government relations for the Association of Canadian Pension Management.
“It is not equitable to distribute surpluses to one particular group of members at a point in time,” Priscilla Healy told the Toronto Star. “Conditions may change with time and a subsequent group of members may not share in surplus, or even worse, there could be a deficit at the time of a subsequent wind up.”
This is an issue because many plans which had large surpluses at the time of partial wind up have been battered recently and have lost significant amounts as the stock market dived. Employees want to get their hands on surpluses that existed at the time they were laid off. Bill 198 states than no surplus need be paid out in a partial wind up, except in cases where the plan’s own documents require it to be done. The amendments would be retroactive to 1988.
If the bill is passed as is, thousands of laid-off workers from about 200 companies in Ontario will never see a cent from pension surpluses they are fighting to get their hands on. They all stood to benefit from the Monsanto ruling, but if the proposed amendments are passed by the Tories these workers would have to wait until their former employer proposed to withdraw funds or wound up the pension plan entirely.
“The Ontario government will not proclaim the sections of Bill 198 pertaining to this issue until we complete the consultations on measures to ensure the rights of pensioners are protected,” said Ecker. “We are looking forward to further discussions on this issue. We are committed to ensuring that people’s concerns are addressed.”
The legislation wouldn’t affect the Monsanto decision — or any other cases currently before the courts. But opposition critics want the province to pull the pension legislation out of Bill 198, a 163-page omnibus budget bill covering dozens of topics.
“The bottom line is you can’t just say you won’t proclaim it,” Liberal critic MPP George Smitherman told the Star. “It’s flawed. It’s deeply flawed. The government needs to pull the pension stuff out, (have) a consultation that involves a broad array of players and bring it back as a piece of stand-alone legislation.”
