In many respects, a pension plan represents the archetype of age discrimination. By its very definition, a pension plan consists of contractual and trust arrangements designed to provide working Canadians with a fixed source of income upon reaching a certain age. The notions of normal retirement date or early retirement, for example, are primarily age-driven. The rights and benefits of participants in pension plans are typically tailored to the age category to which they belong. And age 65 is still largely considered a magic threshold under pension legislation, and in numerous private and public plans.
For the most part, pension plans appear to be immune from attacks based on age discrimination in this era of the Canadian Charter of Rights and Freedoms. Today, we have seen the rapid progression of human rights laws, the steady enforcement of anti-discrimination provisions and the rise of the duty to accommodate. Pension plans have managed, by and large, to coast freely in this complex legal environment.
Parliament and the legislatures have generally sheltered the legislative framework that supports pension plans from challenges based on age discrimination. Another reason may be that tribunals understand that pension plans fulfill a vital economic function in society and that age plays a pivotal role in their stability. In 2004, the Supreme Court of Canada stated that “the voluntary nature of the private pension system requires the interventions in this area to be carefully calibrated. This is necessary to avoid discouraging employers from making plan decisions advantageous to their employees.”
Plan sponsors today can safely conclude that the legal concept of age discrimination has not disturbed the fabric of pension plans. However, two recent cases illustrate that determined participants—and their creative lawyers—are using age discrimination to attempt to nibble away at certain features in pension plans and advance novel age discrimination claims.
Case #1 – In Welk v. McGill University, a group of eight McGill professors argued that the university pension plan was discriminatory. They alleged age discrimination because no amendment was made to allow plan participants to continue to make contributions and accrue benefits until age 71. (In late 2007, the federal tax rules were changed to increase the mandatory age at which participants must start collecting their pensions from 69 to 71.) Plan sponsors could henceforth amend their plans to allow employees to continue their participation in plans from age 69 to age 71 without adverse tax
consequences. McGill University, however, decided to leave the mandatory pension commencement age at 69.
In essence, the professors argued that by not changing the pension plan to reflect the new tax rules that permit them to accumulate two additional pensionable years of service beyond age 69, the university was maintaining an unlawful exclusion based on the age of 69. The Superior Court ultimately dismissed these arguments on the grounds that distinctions based on age were justified under provincial legislation and that it was not discriminatory to refuse to give two years of additional benefits. The court also pointed out that, historically, the age of mandatory pension commencement had actually been increased from 65 to 69 without any opposition by professors at the time.
Case #2 – Two lawyers in the federal Ministry of Justice went even further than the McGill professors. In Gill v. The Queen, the lawyers challenged the federal civil service pension plan regulations, which fixed the mandatory pension commencement age at 71, in line with the new tax rules. However, given that the federal civil service plan otherwise allows eligible civil servants to accrue 35 years of pensionable service, these lawyers argued age discrimination because they reached age 71 before accumulating this maximum length of service. As a result, they were deprived of the possibility of obtaining the full pension benefits available under the plan. The Federal Court of Appeal rejected the challenge in February 2009, citing the earlier Supreme Court of Canada precedent in McKinney v. Guelph University (1990) and stressing that it is necessary to make distinctions based on age in a pension plan.
While the outcomes of these two cases are not surprising, they indicate that age discrimination remains on the radar screen for pension plans. As society and demographics evolve in Canada, we can expect further attempts to test the boundaries of age discrimination in benefits. Sponsors and administrators may want to re-examine the age limitations within their plan documents, validating their purpose and legality.
Dominique Monet is a partner and the national labour employment and human rights practice group leader with Fasken Martineau DuMoulin LLP. He is also a member of the Ontario and Quebec Bars.
dmonet@fasken.com
> click here for a PDF version of this article
© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the September 2009 edition of BENEFITS CANADA magazine.