Pensions Law - Kerry Case Considers Key Pension Issues

Originally published May 1, 2006

Has your pension plan changed from a defined benefit to a defined contribution formula? If so, a recent Ontario case may be of considerable interest to you with respect to your funding practices.

In the Kerry decision, the Ontario Superior Court of Justice examined an employer’s funding practices for a previously converted pension plan. The defined benefit portion of the plan was in a surplus position, and the employer used this surplus to fund its contribution obligations for the defined contributions.

The Ontario Court held that this was not permissible on the basis that the converted plan was, in effect, two pension plans (a DB and DC plan), each with its own pension fund and members.