The Government of Ontario has launched a sneak attack on the pension rights of workers in that province, and if the raid is successful, the effects could spill over to the rest of Canada. On November 1, the Eves government introduced into the Ontario Legislature an omnibus bill (Bill 198) containing changes to thirty-odd different pieces of legislation. Hidden among various housekeeping amendments are provisions that would amend the province’s Pension Benefits Act to allow employers greater access to pension surpluses.

According to the law firm Nelligan O’Brien Payne, the proposed legislation will affect pension entitlements and access to pension surpluses in several ways.

It would, for example, allow employers to avoid paying out a share of pension surplus in the event of a "partial windup" of a pension plan. A partial windup occurs when an employer lays off a large portion of the employees covered by a pension. As matters now stand, if the pension plan has a large surplus, and the trust document that defines the pension deal states that surpluses belong to the employees, a partial windup would distribute part of the total pension surplus to laid off employees.

Under the provisions of Bill 198, however, surplus would not be distributed on a partial windup. This means the entire surplus would stay in the plan as long as even a few employees remained. Under certain circumstances, employers could then use this surplus to give themselves a contribution holiday, thus effectively grabbing the surplus out of the pension plan.

One provisions of the proposed legislation would make it harder for employees to access pension surplus, even when a plan’s trust agreement clearly says the surplus belongs to the retirees and employees. Another would make it easier for employers to reduce their contributions to a pension plan under certain undefined conditions.

Bill 198 is just one of a growing number of employer-driven attacks on defined benefit pension plans. When these plans are in surplus, companies want to raid those surpluses. When, on the other hand, plans have unfunded liabilities, employers want to abandon the plans rather than face rising costs in the future.

As a result of this year’s stock market crash, many large pension plans now have funding shortfalls. In the U.S., for example, the plans of the big three auto makers all have substantial unfunded liabilities. The Chrysler division of Daimler Chrysler has a plan shortfall of $3 billion. The Ford Motor Company pension was underfunded to the tune of $6.2 billion by the end of the third quarter of this year. General Motors, however, faces the biggest challenge – a $21 billion dollar unfunded liability!

Whichever tack employers take: to grab surpluses or abandon underfunded pension plans, pro-business governments are always ready to lend their assistance. Unions and workers will have to keep a close eye on pensions and pension legislation, and be prepared to fight to preserve these hard-won benefits.