Legal News

The Monsanto pension decision of the Supreme Court of Canada: implications for BC employers

There has been a significant amount of press coverage recently regarding the July 29, 2004 decision of the Supreme Court of Canada in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services) et al, which dealt with the following issue: where there is a partial wind up of an Ontario defined benefit pension plan, must the actuarial surplus be distributed at that time? The Court answered this question in the affirmative, and ruled that under Section 70(6) of Ontario’s Pension Benefits Act, 146 employees of Monsanto Canada Inc. who were dismissed as a result of a reorganization were entitled to receive a pro rata share of the surplus that existed in their pension plan at the time it was partially wound up.

Critics of the Monsanto decision* have suggested that it fails to properly recognize the nature of defined benefit pension plans, and provides employees with an opportunity to obtain an unexpected windfall in circumstances where their pension plan could later be faced with a deficit. The critics have argued that this may cause employers to re-examine whether they should be supplying defined benefit pension plans at all.

In British Columbia, provincially-regulated employers need not be concerned about the Monsanto decision, as Section 53(2) of BC’s Pension Benefits Standards Act specifically provides that a person affected by the partial termination of a pension plan is not entitled to share in any surplus assets on the partial termination, unless the plan expressly provides for such an entitlement. However, Monsanto will affect federally-regulated employers, as Section 29(12) of the federal Pension Benefits Standards Act (1985) is virtually identical to Section 70(6) of the Ontario statute.

Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services) et al, [2004] S.C.J. No. 51, 2004 SCC 54.

* See, for example Chevreau, Jonathan, “Pension Consultants Urge Action to Fight Monsanto Ruling,” National Post, Friday, August 6, 2004, FP 4.