OTTAWA — An Ontario-based food products company can pay pension plan expenses by taking surplus money from another of its pension funds, the Supreme Court of Canada has ruled.
The verdict could have implications for other companies that shift money between pension funds.
The high court also concluded Friday that Kerry Canada Inc. can pay its pension fund's "reasonable" administration costs from pension money.
The case pitted Kerry Canada against some of the company's current and former employees and had been closely watched by business, unions and the pension industry.
It stems from 1985, when Kerry began paying administrative costs for the pension plan from the pension itself, and then took a contribution holiday.
Then, in 2000, it amended its plan, closing its defined benefit plan to new employees, and creating a defined contribution plan.
Kerry employees asked the Ontario Superintendent of Financial Institutions to investigate the firm after it changed the plan.
In June, 2007, the Ontario Court of Appeal ruled that an employer could stop paying pension plan expenses if there was nothing specifically in the plan to prevent it.
It also concluded that the company would not have to pay back the money it took from the fund while it took a contribution holiday.
The Supreme Court agreed, saying there was nothing in the plan preventing the company from avoiding making payments if the fund was in surplus, and nothing stopping it from transferring funds from one part of the plan to the other.
"The plan documents do not preclude combining the two components in one plan and nothing in these documents or trust law prevents the use of the actuarial surplus for the (define contribution) contribution holidays," Justice Marshall Rothstein wrote.
The high court ruled that Kerry was not obligated to pay pension expenses out of pocket, because those expenses were incurred for the benefit of pension plan members.
"The payment of plan expenses is necessary to ensure the plan's continued integrity and existence, and the existence of the plan is a benefit to the employees," Rothstein wrote.
"It is therefore to the exclusive benefit of the employees that expenses for the continued existence of the plan are paid out of the fund."