Thousands of pensioners have seen their retirement incomes shredded and millions more are seeing their benefits squeezed or threatened. These setbacks are fuelling prolonged and confusing legal battles over pension surpluses and deficits.
What can workers do to check the health of their pension plans before it is too late? What rights do employees have to monitor pension plan performance? Are employers entitled to pension surpluses? Why are courts allowing companies in bankruptcy protection to delay fixing pensions deficits? What are employee rights when companies move to cancel or freeze defined benefit pension plans? Do pension class actions make sense?
Simon Archer is a member of the Koskie Minsky Pension and Benefits Practice Group. He was a Senior Research Associate with the Ontario Expert Commission on Pensions, and he represents workers and unions in a number of lawsuits relating to pensions.
He took reader questions in an online discussion.
Mr. Archer is also a Research Fellow of the Centre for Comparative Research in Law and Political Economyat York University. He has published and spoken in the area of pensions and benefits, financial institutions, capital markets and corporate governance.
Questions and answers from the discussion
Claire Neary: Simon, you were a senior research associate with the Ontario expert commission on pensions. Can you tell us a little bit about your findings? (http://www.pensionreview.on.ca/english/report/)
Simon Archer: The work we did at the Commission was to investigate and describe the current state of the occupational pension system in Ontario, and to investigate factors affecting the system, and identify options for reform. I think one of the most striking findings was the long-term decline in the provision of occupational pensions. We estimated that about 34 or 35% of the paid labour force in Ontario participated in an occupational pension plan, down from about 40% or so 25 years ago. To put that in context, in 1961, the Committee on Portable Pensions was established to address problems in the same pension system, and they thought that 40% coverage was a serious problem, even then.
Steve: How can I inform myself that a pension is adequately funded? Is the company required to publicly disclose financials on the financial health of the pension to some regulatory agency?
Simon Archer: A good question Steve. Sponsors and administrators of pension plans -- employers in many cases -- are required to file reports with the regulator, the Financial Services Commission of Ontario. Members of pension plans -- employees and retirees -- may review those documents at FSCO. Those documents include several reports, some of which are funding reports, the most important of which are actuarial valuations. Companies are also required to disclose pension liabilities on their financial statements, and public companies (listed on an exchange) must disclose financial information. But the problem for employees has always been access to those documents, particularly historical documents, in a cheap, easy way. For that reason, unions and other employee groups have advocated having key financial information sent directly to them, or being made available on a website, or some other more cost-effective electronic dissemination.
Barry from Nova Scotia: Good Morning, My employer froze my Defined Benefit Pension and increased my normal retirement age. As my Defined Benefit Pension was no longer going to grow and was actually going to decrease due to inflation, I opted to leave the employment of the company as this was the only way I could get my commuted value and hopefully get my pension back on track. However, the pension plan was only 67% funded, and when I received my commuted value I only received 67% of the value and would receive the rest of the monies owed to me within the next 5 years. As I am no longer a member of the pension plan, is this Legal?
Simon Archer: Barry, it is difficult to give legal advice through a forum like this. What you describe is not unusual in my experience, as employers have sought to freeze or eliminate defined benefit plans. When an employee elects to transfer his pension benefits out of a plan (a lump-sum transfer) and a plan is under-funded, it is usually permissible to pay some of that lump sum up front, and the remaining amount over a period not exceeding five years. This is intended to ensure all members are treated equally when a plan is under threat.
It is a very common question you have, and the Ontario government recently amended the Ontario legislation to require that the regulator -- the Superintendent -- gives permission to lump-sum transfers.
