A recent Ontario Superior Court decision related to surplus pension assets was a rubber stamp of the monitor’s recommendations, rather than a decision with precedential value impacting pension plan sponsors.
The judge awarded $4.7 million in surplus pension plan funds to former employees of vehicle parts manufacturer Accuride Canada Inc. who lost their jobs at a London, Ont. plant when the company went bankrupt.
According to Unifor Local 427, when Accuride declared bankruptcy and closed the plant, it left workers without access to surplus pension plan funds initially estimated between $2.7 million and $2.9 million. The final surplus amount reached $4.7 million, with an expected payout of around $4 million after administrative and disbursement costs.
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The terms of the organization’s defined benefit pension plan, clearly stated that “surplus assets shall be used to provide additional benefits to the members.” Only after members received the maximum benefit qualifying for the pension income tax credit under the Income Tax Act was the company entitled to any funds.
While the monitor — a court-appointed insolvency trustee — originally considered pursuing a claim for a portion of the surplus for the benefit of other creditors, feedback from Accuride’s pension consultants and the union revealed that, in fact, the $4.7-million surplus wouldn’t result in payments that exceeded the maximum benefits under the Income Tax Act.
Thus, the court order awarding the entire surplus to the pensioners didn’t extend beyond adopting the monitor’s recommendations. “The monitor has determined, in respect of certain defined benefit plan, that proceedings on the basis of a court-approved surplus distribution framework, incorporating feedback from the applicant’s [Accuride] actuary, represents the most cost-efficient and timely path forward for the applicant and its stakeholders,” stated Justice William Black.
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In other words, even Accuride’s actuary agreed there would be no money left after the distribution of the surplus to the pensions. “There was no dispute in court over the surplus,” says Ari Kaplan, a lawyer, mediator and arbitrator at Kaplan Law Professional Corp. who wasn’t involved in the case.
Like many pension disputes, the key to resolution in this case lay in the wording of the plans. And given the very straightforward terms relating to surplus, the case has little, if any, precedential value for other disputes.