$100M judgment against Bell may signal uptick in pension indexing litigation

The Ontario Court of Appeal has ruled that Bell and its related companies, including Bell Canada, Bell Media Inc., Expertech Network Installation Inc. and Bell Mobility Inc., have been miscalculating the cost-of-living adjustment due to their 35,000 pensioners since 2017.

The judgment could cost the telecommunications company up to $100 million and signal the beginning of a new wave of pension indexing litigation. For employers, the decision underscores the importance of carefully drafting indexing provisions, says Mark Zigler, a senior partner in the pensions and benefits group at Koskie Minsky LLP, who represented the pensioner class.

The judgment, released on Friday, overruled a 2019 ruling from Justice Edward Morgan of the Superior Court of Justice that dismissed the class action brought by Leslie Austin on behalf of the Bell pensioners.

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The dispute centred on the pension plan’s definition of the ‘pension index’ and how that definition worked in the context of the provisions governing the calculation of the cost-of-living adjustment.

Bell argued that it was entitled to round up the annual percentage increase in the consumer price index, calculated as 1.49371 per cent for 2017, to two decimal points, or 1.49 per cent. The pensioners argued that the plan required Bell to follow Statistics Canada’s policy of rounding to only one decimal point, or 1.5 per cent.

The difference was significant because the plan also provided that the pension index was to be rounded to the nearest whole number. “If [the pensioners] are right, 1.5 per cent is rounded to two per cent. If Bell is right, 1.49 per cent is rounded to one per cent,” the Court of Appeal wrote. “The difference to the class members between a two per cent and a one per cent increase in the 2017 is over $10 million for the first year, and over the long term, over $100 million.”

The plan defined the pension index as “the annual percentage increase of the consumer price index, as determined by Statistics Canada.” It went on to provide that members under age 65 were entitled to have their pensions augmented by the pension index, to a maximum of two per cent, and that these increases “shall be rounded to the nearest whole number.”

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The plan also provided for the calculation of older members’ entitlement and for the calculation of prorated amounts in the first year of retirement. But in this case, the plan stipulated that increases “shall be rounded to the nearest two decimal points.”

As the Court of Appeal saw it, the plan required that Statistics Canada determined both the “annual percentage increase” and the “consumer price index.”

“In our view, having regard to the grammatical meaning of [the definition of pension index) and the evidence regarding accepted statistical convention for rounding, a strained definition of [the definition] would be required to make it mean that Statistics Canada determines only the increase in the consumer price index and leaves it to Bell to adopt a different rounding policy to determine the pension index,” wrote the court.

Ari Kaplan, a pension lawyer and mediator at Kaplan Law in Toronto, believes that indexing disputes are a sign of the times. “Indexation fights are the new frontier in pension litigation partly because there are no surpluses anymore,” he says. “And surpluses were a buffer in the indexing debate as there has always been a connection between the availability of excess assets and whether they should be used for future indexing.”

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As well — and as the Bell decision demonstrates — each case turns on its own facts. “Pension plans have differing language and so these cases will be about what the particular employer promised and what the particular pensioners reasonably expected given the terms of the plan,” he says.

“And because the reality is that most employees almost never even see the pension plan, let alone sit down and negotiate with the employer, the document is almost always a unilateral one that the court will read against the employer’s interpretation if there is any ambiguity at all.”

Bell declined to comment on the case, and it’s unclear whether the company will seek leave to appeal to the Supreme Court of Canada.

“I have no idea whether Bell will take this any further,” says Zigler.

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