Bill 198 on Pension Reform Legislation
(e-mail sent to MUFA Members on November 8, 2002)

To: MUFA Members

You have no doubt heard of the legislation that has been introduced by the provincial government that deals with pension surplus.  This legislation does not affect our proposed pension surplus distribution because we are so far along in the process.  We have both an agreement with the employer and a court order.  Moreover, the University through its counsel has indicated that it is bound by the surplus sharing agreement.  However, had the legislation been passed before we started this process, it is unlikely
that we would have been able to work out the kind of pension surplus sharing agreement that we now have.  Moreover, any decisions about future surplus disposition could well be unilateral by the University if this
legislation is passed.

I provide here two documents for your attention.  The first is a summary of the provisions of the bill, Bill 198, as viewed by the law firm which has been working with us on the surplus distribution.  The second is a draft letter that I encourage you to send to the premier to let him know we are not pleased with this surplus legislation.  The sample letter was drafted for me by Koskie Minsky.  In neither case is Koskie Minsky's time being billed to the McMaster Pension Plan.

Les Robb

Summary of Bill 198

Ontario Government Pension Surplus Grab Hurts Employees and Pensioners:  Bill 198

Hidden in Ontario's omnibus budget bill is Premier Ernie Eves' gift to large corporations that sponsor defined benefit pension plans in Ontario, namely rewriting Ontario's pension surplus legislation at the expense of pensioners and employees.  The legislation currently in effect since 1988 was enacted on the heels of Conrad Black's attempt to appropriate the Dominion Stores surplus.  Since then there has been a regime which has encouraged sharing of surpluses in pension plans between employees and employers so that no employer could have access to surplus without entering into an appropriate sharing agreement with its employees.  The system has worked well through regimes of Liberal, NDP and Conservative governments.  There were some uncertainties with respect to distribution of surplus when a pension plan was only partially wound up (usually due to a massive down-sizing, plant closures or closings of corporate divisions) where many employees lost their jobs and required protection.  The recent Court case involving Monsanto, currently pending before Ontario's Court of Appeal, upheld the rights of employees in the circumstances.  The Eves government is acting hastily, and not awaiting the Court's decision.

Ontario's Tories now propose to legislatively wipe out these protections for employees and pensioners and grant a big surplus gift to the employers.   Specifically Bill 198 requires that:

Employers can automatically apply for their share of surplus on a total or partial plan termination based on criteria to be set out in regulations of the Minister, that are secret and have yet to be published.

Any trust document, statute or "rule of law" that conflicts with the secret "prescribed" rules that the Minister has yet to make public will have no value.

Any case that is currently pending going back to 1988, even if the Superintendent of Pensions or the Financial Services Tribunal has made a
decision, is void and "wiped out", with a requirement that the matter be reconsidered by the Superintendent.

Previous rights of appeal to the Courts by employees and pensioners have been repealed.

There are dozens of surplus cases outstanding and over 200 on the partial wind up list and held up by the Superintendent of Pensions and the
government pending the decision in the Monsanto case.  Despite whatever
result the Courts determine in Monsanto, such Court decision will be irrelevant to any one but the Monsanto employees themselves because the government proposes to wipe out the rights of all others who had been told to await this Court decision.

There are no protections in Bill 198 to deal with losses of the value of pensions due to inflation, protections for employees of insolvent employers or  provisions which encourage resolution of pension disputes.  Rather than leveling the playing field between employers and employees, the pension world has now been tilted totally in favour of employers by the Eves government supporting its corporate friends.  While large employers and  their actuarial and legal advisors support this legislation, there are thousands of employees and hundreds of pension plans in Ontario who would be negatively affected.  Pensioners will also be hurt when they retire and their pension plan is wound up.  The retroactive elements of the legislation are most odious in that they go back to January 1, 1988 when Ontario's pension reform legislation was enacted.  This is truly "star chamber" legislation more reminiscent of the former Soviet Union than a democracy in Ontario.  While the legality of some of it is questionable, the public policy behind it is nothing short of offensive.  Very few laws in Ontario have ever been made retroactive, wipe out all previous administrative and tribunal decisions, and allow for determination of future cases under yet unpublished regulations which will override any other existing contractual documents, statutes or "rule of law".

This bill must be withdrawn immediately and a proper review of Ontario's
pension laws must be conducted to ensure that the pension assets of
Ontarians are protected.
 

DRAFT LETTER

The Honourable Mr. Ernie Eves
Room 281, Main Legislative Building
Toronto, Ontario
M7A 1A1

Dear Premier:

I am a Professor at McMaster University and an Ontario voter.  I am writing to you about the pension law changes in Bill 198, which can severely impact my pension and those of other voters in Ontario.

Our University Pension Plan has been the subject of much litigation over pension surpluses and ultimately we were able to reach an agreement with the University under the law as it stood prior to Bill 198.  This litigation would have continued for years were it not for the legislation changes would likely have resulted in McMaster seeking to withdraw surplus unilaterally for itself in our pension plan without our consent, thus significantly reducing the security of my pension with no additional advantage to the members of the pension plan.

I am concerned that Bill 198 permits surplus withdrawals without regard to any "pension plan documents, statute or rule of law" and leaves approval
of surplus withdrawals to the Superintendent of Pensions.  In fact the criteria for the Superintendent's approval are to be set out in a regulation that your Government has yet to make public.  It is offensive to any free and democratic society to override contractual and trust documents and rules of law for the whim of a government employee.

Not since the mid 1980s when surplus withdrawals by employers were stopped by the Province have we seen such a brash attempt to grab pension assets away from employees and pensioners. In fact your law is retroactive to 1988 and wipes out decisions of the Superintendent of Pensions or the Financial Services Tribunals that are pending.  The electorate of Ontario deserves better legislation.

Bill 198 should be withdrawn and a comprehensive study by a respected
mutual party should be undertaken of our pension laws so that we know that our pension assets are secure.  Ontario voters deserve prompt action from your Government, especially in view of a forthcoming election.

Yours truly,

cc:     Local MPP