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January 30, 2013
Supreme Court sides with government on federal pension surplus

The Supreme Court of Canada has ruled that the unions representing members of the federal public service, the RCMP and the Armed Forces are not entitled to the $28 billion pension plan surplus appropriated previously by the federal government.

In a 9-0 decision, the Court ruled that the government does not have to return the funds it took from the pension plans to meet its deficit reduction goals.  

The case dates back to 1999 when the government passed bill C-79, allowing it to take the accumulated surplus in the three federal pension plans and direct the funds to help pay down the government’s deficit.

The move was strongly opposed by the federal public service unions and other groups, who maintained that the government violated its fiduciary duties by appropriating the funds and using them for purposes other than providing pension benefits to plan members and retirees. (See the March 2012 issue of the Coughlin Courier for background.)

However, Canada’s highest court disagreed, stating that “plan members’ interests are limited to their interest in the defined benefits to which they are entitled under the plans.”

While the funds were used by the government to reduce its deficit, it had no effect on plan members, the Court said.

“They did not suffer any detriment as a result of the government’s accounting treatment. The government did not expropriate any property of plan members.”

The federal government maintains that the surplus was simply part of the accounting entries summarizing contributions and deductions that form part of its consolidated revenues.  Since the surplus did not contain or invest in equities, properties, cash or securities, it had no hard assets that required traditional fiduciary governance.

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