The Quebec Court of Appeal has struck down a lower court’s decision on multi-employer pension plans that denied plan sponsors a provision which linked funding to a plan to the delivery of agreed benefits.

The April 2 decision overturned previous rulings by the Quebec Superior Court, the Administrative Tribunal of Quebec and the Review Board of the Régie des rentes du Québec, which had all rejected the idea of a provision allowing plan sponsors to offer benefits contingent on the sufficiency of negotiated contributions under a multi-employer pension plan. This could have resulted in other plan members and participating employers subsidizing benefits payable to employees of withdrawing employers where there was a shortfall in the part of the plan applicable to the withdrawing employer.

“It’s a good decision in that it basically confirms the right to have a more typical multi-employer defined contribution and defined benefit plan,” says Natalie Bussiere, a partner with Blakes, Cassels & Graydon in Montreal. She says the decision brings Quebec in line with the majority of provinces on the issue. “In other Canadian provinces it’s a well established principle that you can have benefits which are granted in relation to the funding of the plan, and in Quebec that was contested by the Régie des rentes. The decision of the court of appeal is to the effect that it does not support the conclusion that in multi-employer defined contribution and defined benefit pension plans that you cannot have this kind of provision.”

Bussiere adds that the ramifications for employees will depend on whether or not they work in a unionized environment. “Multi-employer defined contribution and defined benefit plans are usually in the context of unionized enterprises, so what the court of appeal reminded us was that this was union-negotiated plan,” she says. “So what the employees are getting was negotiated by the union.”

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