Supreme Court Provides Guidance on Plan Administrator and Sponsor Duties, Surplus and Expense Issues

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Pension & Employee Benefits, October 2010

The unanimous Supreme Court of Canada (SCC) decision in Burke v. Hudson's Bay Co. determines that: (1) given the plan documentation at issue, there was no obligation to transfer surplus pension plan assets on the sale of the business; and (2) the employer had the right to charge expenses against the pension plan.

FACTS

This appeal arises out of the sale of a division of the Hudson's Bay Company (HBC) to the North West Company (NWC). The employees of the division were transferred to NWC and their pension benefits were transferred to a new pension plan established by NWC. At the time of the transfer, the HBC pension plan had a projected surplus. HBC negotiated with NWC and transferred enough of the pension fund to cover the transferred employees' defined benefit liabilities but did not transfer any of the surplus funds.