Canadian Government Workers not Entitled to Pension Surplus

November 26, 2007 ( - An Ontario Supreme Court judge has ruled that 700,000 public workers are not entitled to any of the surplus in their pension plans.

The Ottawa Citizen said the $30 billion surplus in pension funds for public servants, military, and RCMP personnel has been the center of a legal battle for more than a decade. Eighteen unions and pensioner groups accused the government of “stealing” their pension surplus and asked the court to order the surplus put back in their accounts, the news service reported.

In his ruling the judge accepted the government’s argument that the $30 billion is not a real “surplus” of cash or assets, but is an accounting device to record or monitor the government’s liabilities. It claimed the years the surplus exploded was a result of the government over-recording the liabilities it would have to pay in future pensions, according to the news report.

The judge concluded that the pension accounts were not funded with real assets and the unions failed to prove the accounts had the key characteristics of a trust fund. Therefore, the judge said the government could not have breached its fiduciary obligations when it amortized the surplus and used it to offset the deficit between 1990 and 2000.

Justice de Lobe Panet also said the government gained the legal authority to take all of the surplus when it passed Bill C-78, legislation that allowed the government in 1999 to claim the surplus and book it against the debt. The unions argued Parliament did not intend for the government to take the whole surplus, but Panet said Parliament’s intent was “clear and unambiguous,” according to the Ottawa Citizen.

In his ruling, Panet also dismissed the unions’ claims that the provisions of the bill that allowed the government to take the surplus violated the Charter.

The unions and pensioners argued they were entitled to at least a portion of the surplus, which was partly built out of their contributions and interest. However, the government said the pension accounts were simply “ledger sheets” and that the contributions and interest were merely bookkeeping entries to keep Parliament informed of the cost of providing pensions to workers. It argued there were no investments, bonds, real estate or other assets in the accounts.

If the unions had won their case, it could have meant billions of dollars added to the country’s national debt.