What will be the fate of the TWPP . . . UPDATE

     There was an article and a follow up in the National Post recently by a pension consultant named Malcom Hamilton. The article entitled "The horse is dead" urged employers to wind up their defined benefit (DB) pension plans and failing that find a containment strategy. The same article indicated that 80% of DB plans in Britain had no new entrants. This is called a partial wind-up.

     As previously reported here the funding for the TWPP is stipulated in the old TWU/BCTel collective agreement and is also protected somewhat by legislation. TELUS currently contributes somewhere close to 10.75% of gross payroll and TWPP members contribute on a sliding scale based on age from 3 to 6 percent. This probably averages out to about 14% of pay.

     A lot of the litigation with respect to defined benefit pension plans revolves around employers trying to scoop the surplus. But nowadays its about how to get out of funding shortfalls.

     Like much of Canadian common law, outside of the Pension Benefits Standards Act (PBSA), it is developed on a case by case basis with rulings acting as precedent for subsequent dealings. In this kind of process each case can have its own circumstances which allow it to deviate from from predecessors. Consequently, a clear understanding of the jurisprudence, a clear understanding of the PBSA, and a clear understanding of the TWPP Trust agreement are necessary to determine if the TWPP is vulnerable to a wind-up, partial wind-up or other "containment strategy".

     Going back a few years some may remember the Woodwards dispute over pension surplus. Woodwards, in financial difficulty at the time, attempted to wind-up the pension plan and scoop the surplus. The employees filed court action in which they said, first there was no surplus and second if there was a surplus that Woodwards could not have it because it was the property of the employees in the trust fund. They further argued that it was an irrevocable trust and that Woodwards could not unilaterally wind it up.

     The Woodwards plan was significantly different from the TWPP but some interesting concepts were explored in the court ruling. Without the benefit of a law degree it appears to a lay person such as myself that the courts sympathize with the concept that if employers are liable for shortfalls they should be entitled to any surplus. With respect to wind-ups it appears that there are two schools of thought. One view is that pension plans are trust funds in the traditional sense and another view suggests that DB plans are benefit contracts. If it is established that the fund is a trust then there is a greater chance the members will retain the surplus. If the plan is determined to be a benefit contract then the employer is likely to be able recover any surplus above the amount required to fulfill the benefit contract.

     The key to whether a pension plan can be wound up by the employer lies in the wording of the Trust agreement. There seems to be a debate about whether in the absence of an express provision preventing the employer from winding up a plan they can with alternate view being unless there is an express provision allowing them to wind a plan up they can't.

     TELUS' blank page contract proposals do not contain a provision for funding the TWPP. As mentioned in a previous posting, this indicates they expect the TWU to bargain back the contributions. If this is their intention then the TWU is in for another lengthy and expensive process of litigation.

     Incidently, the Canada Industrial Relations Code says that an employer must allow employees to make contributions (both employee and employer) during a labour dispute in order to continue the uniterupted operation of the plan. However, the contributions are quite expensive and people on strike will hardly be able to afford them.

Roy Olsen
Voice but no vote!
Local 9 Prince George BC