In the Sutherland et al. v. HBC et al. case, the Ontario Superior Court of Justice has endorsed Hudson Bay Company’s right to expand membership in its pension plan to include Zellers and Kmart employees.

According to a bulletin from Blakes, the Court found that it is permissible to add employees of related companies to a company’s pension plan if the plan and trust originally contemplated such addition.

There was also a reaffirmation of the Kerry Court of Appeal decision that defined contribution(DC)benefits can be added to a defined benefit(DB)plan and the surplus in the plan used to fund both types of benefits.

The Court made clear that the fact that benefits were on a DC basis—as opposed to a DB basis—was irrelevant.

“The principal issue in this case was whether HBC, as plan sponsor, was allowed to amend the Dumai Pension Plan in 1994 and 1998 to expand the class of membership to include employees of Zellers and, later, employees of Kmart, to provide for these employees to receive pension benefits on a DC basis and to fund the employer contributions required from the accumulated surplus in the plan,” states the bulletin.

The plaintiffs argued that the plan was irrevocably closed by HBC as of January 1, 1988 and the company breached its trust and fiduciary duties by admitting Kmart and Zellers employees into the plan, and using surplus in the plan to pay the required employer contributions.

The plaintiffs have until August 30, 2007 to determine whether to appeal the decision to the Ontario Court of Appeal.

To read the decision on the Canadian Legal Information Institute’s website, click here.

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