Winter 2014 Issue

TEAM, Unions Win Major Pension Plan Victory

After more than 17 years, On January 30th, the Supreme Court of Canada ruled in favour of retirees and unions, including TEAM/IFPTE Local 161, reinstating a lower court ruling requiring MTS to make $43.364 million available to plan members to be used to pay for enhancements to their pension benefits. The decision was handed down on January 30th.

The lawsuit arose from the 1997 privatization of Manitoba Telecom Services (MTS) when plan member pension funds were transferred from the Government plan to the new MTS plan. Plan members contributed $43.364 million more than the employer, resulting in an Initial Surplus which plan members believed would be used to improve plan benefits and would not be used as it was, to reduce MTS's costs or contributions to, the pension plan.

A Brief History

In 1997 the Manitoba Telephone System (MTS) was changed from a government owned Crown Corporation to a private company traded on the stock market (TSX.MBT). One result of privatization was that employees and retirees were forced to change pension plans.

Prior to privatization, MTS employees were members of the provincial government pension plan established under the Civil Service Superannuation Act (CSSA). The hallmark of the CSSA plan is its unique 50/50 cost sharing arrangement that funds benefits. Employee contributions are placed into the Civil Service Superannuation Fund (CSSF), a trust fund wholly funded by employee money. 50% of the retirees' monthly pension benefit is paid from the CSSF; the other 50% is paid by the employer.

In the CSSA plan, any surplus solely belongs to the plan members (employees and retirees) and is used to improve benefits, never to reduce the employers' costs.

On privatization, MTS plan members' assets in the CSSF were transferred to the new MTS plan. It was known at the time that plan members were contributing more than their 50% share of the costs of the new plan benefits, the "initial surplus". The amount was later agreed to be approximately $43 Million.

Representatives for members in the plan secured assurances from MTS and the government that the Initial Surplus, would be protected and only be used to provide pension benefit improvements, consistent with the prior history of such surplus use in the CSSA plan. The government, MTS and plan member representatives entered into a Memorandum of Understanding (MOU), agreeing on how the Initial Surplus would be protected. MTS also promised that it would not use the Initial Surplus to reduce its costs or share of contributions to the new pension plan.

The government of the day then passed a law requiring the Provincial Auditor to appoint an independent actuary to ensure that benefits in the MTS plan were equivalent in value to those of the CSSA plan. In March 1997 the independent actuary concluded that the benefits under the new plan were equivalent in value to the old plan.

In 1999, when it became apparent that MTS was taking contribution holidays because the plan was in surplus, TEAM-IFPTE Local 161, CEP, IBEW and the Retirees filed a lawsuit asking that the Initial Surplus plus interest be returned to the plan members.

The Long Road

After many procedural wranglings and delaying tactics, the trial was set for September 2, 2008 and lasted for 13 weeks. In a groundbreaking decision, the Manitoba Court of Queen's Bench ruled in favour of the unions and retirees.

Justice Bryk, found that despite the MOU and assurances provided to plan members, MTS' cost or share of contributions to the plan was reduced by the amount of the initial surplus. His ruling returned the initial surplus plus lost interest (almost $100M in 2010) to the plan members and gave them control over the funds.

On April 8, 2010, MTS filed a Motion to Appeal which went to trial in December 2010. Justice Bryk's decision was based on numerous findings of fact, whereas the Court of Appeal decision focused on pension law as it applies to private pension plans, ignoring or dismissing important trial findings regarding the origins and history of the plan.

The Appeal Court ruled in MTS' favour, reversing the lower court's earlier monetary award to members and agreeing with MTS' argument that the Initial Surplus was an actuarial surplus existing only on paper.

Shortly after receiving the Manitoba Court of Appeal's decision, TEAM-IFPTE Local 161 sought and received legal advice and decided with CEP, IBEW and the Retirees to seek Leave to Appeal to the Supreme Court of Canada.

A party wishing to be heard by Canada's highest court must first obtain permission from a panel of three judges of the Supreme Court. Such permission, or leave to appeal, is granted if the panel concludes that the case involves a question of public importance or raises an important issue of law (or a combination of law and fact) that warrants consideration by the Court. Only 6% of appeal applications receive approval to proceed to trial.

On September 25, 2012, the Supreme Court of Canada granted TEAM leave to appeal and on May 16, 2013 TEAM-IFPTE Local 161 made an historic appearance at the Supreme Court.

After more than 17 years, on January 30, 2014, the Supreme Court of Canada ruled in favour of TEAM/IFPTE Local 161, IBEW, UNIFOR (formerly CEP) and the retirees and reinstated the lower court's ruling. In his written decision, Supreme Court Justice Rothstein concluded that,

"...MTS has violated the terms of the Reorg. Act, that this conclusion is not inconsistent with the MOA, and that it is unnecessary to decide whether MTS's other written representations had legal effect and were breached. In light of deficiencies in the record and the financial complexity of the issues, I would reinstate the trial judge's order requiring MTS to make the $43.364 million in Initial Surplus plus "interest at the New Plan rate of return from January 1, 1997 to the date of payment" ("plan rate interest") available to the plan members to be used to pay for enhancements to their pension benefits (2010 MBQB 11, 248 Man. R. (2d) 31, at para. 518)."

Success at Last!

TEAM-IFPTE Local 161 Executive Director Bob Linsdell said "this decision is affirmation that the surplus did indeed always belong to the plan members."

Pension benefits are expected to be increased by $43 million, plus interest calculated at a rate equal to the pension plan's rate of return since 1997, which could increase pension benefits in time by up to $147 million.


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