Indalex Two Years Later: Underfunded Pension Liabilities In The Financing Context

It's been almost two years since the Supreme Court of Canada (SCC) decision in Indalex Ltd., Re.¹ Currently, Canada's lower courts are being challenged to interpret the decision in a variety of different contexts. The purpose of this article is to review the Indalex decision within the broader context of pre- and post-Indalex case law and to briefly comment on its impact in the lending marketplace. 

1. Regular payments vs. special payments

Under typical pension benefits legislation, an employer with a defined benefit pension plan will ordinarily be required to make regular payments of the following amounts into the plan: (i) pension amounts deducted from employee wages, and (ii) normal cost contributions, i.e., the cost of plan benefits that accrue during the current plan year.² If the plan experiences an underfunding of some sort, special payments may also be required.³ Special payments can include additional amounts payable as a result of a plan wind-up.⁴