Defined Benefits

The decision taken by the Liberal government that preceded the current Conservative-led Government of Canada to remove excess funds from the federal pension fund to the tune of $28-billion largely to help pay off the national debt was a controversial one.  Although the government pays the lion's share of pension funds with civil servants paying into the fund at a more modest rate, the money is generally held to 'belong' to the civil servants.

That, in any event, is the outraged interpretation of the civil service unions.  And in the years since that surplus was peremptorily removed from the fund and used by the federal government the unions have awaited their day of legal victory.  This is a case that the Supreme Court of Canada agreed to hear and adjudicate upon.

To validate their stance of inappropriate appropriation of funds that belong to civil servants/union members and not the government, there was a protracted leapfrog from an original court challenge in Ontario that rejected the union position, then on to the Ontario Court of Appeal that also ruled civil servants were not entitled to any of the $28-billion surplus - to the point where the unions turned finally to the Supreme Court.

"We took this case to the Supreme Court because we believe the government did not have a right to just appropriate the surplus in the pension plan.  Our members' contributions helped create that surplus, which should have been kept in the plan to provide future pension benefits", complained Robyn Benson, president of the Public Service Alliance of Canada.

Public servants, it should be remembered, have a gold-plated pension plan that is the envy of all workers, with its COLA clause that ensures the cost-of-living will always be reflected in their superannuation cheques.  It is a hugely generous compensation.  The federal government in its move to cut back on the deficit has enacted new legislation that would impair civil servants from retiring early as many were wont to do without penalty if they qualified.

Despite those generous pensions amounting to roughly 70% of the highest earning five years' of annual salary average, people tend to be greedy.  As though the parting gift of one week's salary for each year worked, on leaving the civil service weren't enough.  And the sugar-plum thought of retirees that they might gain from the Supreme Court awarding that $28-billion back to the pension fund does not reflect the best of human attributes.

The Supreme Court of Canada rejected federal unions and retirees claims to at least a portion of the $28-billion surplus in their pension plans.   Photograph by: John Major , Ottawa Citizen

The union's insistence that plan members be recognized to an entitled "equitable" interest in the surplus that should be returned to the pension accounts was, however, not to be. The unanimous decision written by Justice Marshall Rothstein was a rejection of union and pensioners' claims that the government had been in breach of its fiduciary duty to public servants.

The Court has upheld earlier lower court rulings, finding the pension accounts were "...accounting ledgers used to track pension payments", to estimate government's future pension obligations, and as such not separate funds with assets.  


And there it stands; finis.