Surplus Distribution on the Partial Wind-Up of a Pension Plan:

Article by Susan Rowland and Jana Steele

On July 29, 2004 the Supreme Court of Canada released its long-awaited decision in the matter of Monsanto Canada Inc. v. Superintendent of Financial Services. This decision has major funding implications for companies with defined benefit pension plans.

In the Monsanto case, the Court considered whether the Ontario legislation requires surplus to be distributed on a partial pension plan wind up which usually occurs when a company sells part of its business, or when it lays off a "significant number" of its employees. The decision does not deal with the full wind up of a pension plan because the law is clear that any surplus in such a plan must be distributed to its rightful owners.