The March 5 Supreme Court of Canada decision to deny with costs the plan members’ application for leave to appeal from the decision of the Federal Court of Appeal in Dana P. Cousins et al. v. Attorney General of Canada et al.—known as the “Marine Atlantic” case—is a positive development for sponsors of federally regulated pension plans, according to Blakes, Cassels and Graydon LLP.

The Federal Court of Appeal originally found that the Pension Benefits Standards Act, 1985 (PBSA) does not require a portion of the actuarial surplus in a defined benefit pension plan to be distributed at the time of a partial termination. The subsequent Supreme Court ruling means that the Court of Appeal’s decision remains law, explains Blakes in a report.

The Federal Court of Appeal distinguished the decision of the Supreme Court of Canada in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services) based on the difference in wording between the Ontario Pension Benefits Act and the federal legislation.

The Court held that plan beneficiaries affected by a partial windup are entitled to “rights and benefits that are not less than the rights and benefits they would have on a full windup of the pension plan on the effective date of the partial windup.”

While the federal PBSA provides that on a “partial termination” of a pension plan the rights of affected members “shall not be less than what they would have been if the whole of the plan had been terminated on the same date as the partial termination,” a “termination” is not defined to include or require the distribution of pension assets. The federal PBSA defines “termination” and “winding up” separately, with only the latter including the distribution of assets, explains the report. Under the federal legislation, therefore, “termination” and “winding-up” occur at different times.

The Marine Atlantic and Monsanto cases are distinguishable since the latter was based on different legislation that requires the distribution of surplus on a full windup of a pension plan and therefore grants beneficiaries affected by a partial windup an equivalent right to share in a portion of any actuarial surplus existing at the time. By contrast, members affected by a partial termination under the federal PBSA are entitled only to rights equivalent to those they would have on a full termination of the plan, not on a full windup.

To comment on this story, email jody.white@rci.rogers.com.