The Nova Scotia Supreme Court has ruled that Michelin’s contribution holidays were valid, according to Morneau Sobeco’s News & Views.

The issue was the validity of plan amendments that allowed the company to take $268 million worth of contribution holidays from 1984 to 1988 and 1995 to 2001, when the plan was in a surplus position.

Michelin’s plan members objected to the contribution holidays on the basis that the plan—which was converted to English from French when it was first registered in N.S.—didn’t allow for holidays.

The company argued that the pension fund was in a healthy surplus position during the time periods in question and stopped making contributions on the advice of its actuary.

“The members of a DB plan have no rights to its surplus until and unless it is wound up and there is an actual, as opposed to an actuarial, surplus. It is the latter to which employees have an entitlement, but only on windup of the plan,” the Court ruling stated. “This is consistent with the concept of a DB plan where the risk falls on the employer, not on the employee as in a DC plan. There is no commercial objective to keeping or contributing an additional $268 million in a plan which is ongoing.”

Plan members also argued that the company’s use of the surplus to fund its annual contribution requirements was a breach of trust law principles.

But the Court also disagreed with that argument, ruling that “trust law does not enter into this determination. The amounts not paid by Michelin remain in Michelin’s hands and are not subject to the trust.”

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