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New Brunswick Premier David Alward, left, meets with Ontario Premier Kathleen Wynne, at the Ontario Legislature in Toronto, April 15, 2013. Mr. Alward’s government introduced controversial pension reforms, which a group of pensioners have launched a lawsuit over.J.P. Moczulski/The Globe and Mail

A group of 13,000 retired public sector workers filed a lawsuit against the province of New Brunswick Monday, claiming the province violated their human rights under the Canadian Charter of Rights and Freedoms.

After suffering severe investment losses during the 2009 financial crisis, New Brunswick faced a $1-billion pension shortfall. It subsequently passed sweeping reforms in December, converting traditional indexed pension plans into a new shared-risk model.

This lawsuit alleges that the province is discriminating against pensioners who are vulnerable because of their old age and that the province's legislation is not "justifiable in a free and democratic society."

That pensioners are challenging the cash-strapped province is not altogether surprising. Since New Brunswick pushed through controversial new legislation regarding pensions in December, tensions have run high.

Many private companies are already abandoning defined-benefit plans, but New Brunswick is the first jurisdiction in North America to switch to a shared-risk plan, making it a case study as the federal government considers similar changes.

Most radical about the plan is that it applies retroactively to retirees, not just current employees.

"This is retroactive reduction of wages," said Ari Kaplan, a partner at Koskie Minsky LLP who represents the retirees. "This is their own money, that the province has legislated a confiscation of, in order to balance the budget."

Moreover, private employers, who usually offer less generous pension plans than the government, cannot reduce accrued pension benefits under provincial law, making New Brunswick's legislation "outrageous," said Mr. Kaplan.

A spokesperson from New Brunswick's Attorney General's office would not provide comment ahead of an initial court hearing scheduled for August 5.

New Brunswick's pension reforms are based on the Dutch model of a target benefit plan, considered to be one of the best schemes in the world. The target benefit plan is seen as a compromise between the more generous defined benefit plans seen in the public sector, and defined contribution plans, that are becoming more and more popular in the private sector. Under a target benefit plan, both employers and employees would increase contributions based on the financial performance of the fund, and employers are not obligated to top up a fund if returns are lower than expected.

Pensions remain a hot topic as steep losses rocked pension funds around the world in the wake of the financial crisis. Ottawa and Alberta are both looking to switch to a shared-risk model, compounding the importance of this case.

"It sends the wrong message to both public and private employers across the country," said Mr. Kaplan, arguing that the financial services industry could be encouraged by the controversial reforms and seek similar legislation allowing them to adjust pensions, or even annuity products, retroactively, to make up for financial difficulty.