Peter Kozak, a 73-year-old retired chemist from Sarnia, Ont., figures it cost him more than $300 to get to pension purgatory last week.
The place of suffering was a small hearing room in a North Toronto office tower where a three-person panel of the Financial Services Tribunal heard arguments about the future of pensions paid to him and 408 retirees from Imperial Oil Ltd. If the tribunal approves an order to move the pension assets into a separate investment plan, known as an annuity, the elderly men and women have been warned they will lose health benefits and inflation protections.
Faced with such a loss, Mr. Kozak drove hours through a fall rainstorm, rented a Toronto hotel room and marched into the hearing room to make a stink. "We are about to be shafted," he said, with an angry shake of his fist.
The curious thing about the retirees' predicament is that it is not Imperial Oil that wants to boot them out of the pension plan. Rather, it is Ontario's pension regulator, the Financial Services Commission of Ontario.
Nearly five years after a groundbreaking Supreme Court of Canada decision on pensions, the regulator's legal department arrived at a decision late last year that the retirees, each of them casualties of long-ago layoffs or forced early retirements, are no longer eligible to stay in the company's pension plan. After a daylong hearing Friday, the pensioners were told it will likely be months before the tribunal rules, a wait that could extend into years if Imperial Oil appeals the decision.
The legal purgatory for the Imperial Oil pensioners is only one of dozens of Kafkaesque nightmares playing out in courtrooms and hearings across Canada as pension litigation escalates between corporate plan sponsors and regulators. At stake in these battles are legal rights to billions of dollars of pension assets and surpluses, rights which have become clouded by vague court decisions and outdated provincial and federal pension legislation.
Caught in the middle are thousands of elderly retirees who find themselves alarmed and confused by complex legal contests that are clouding their retirements. After hours of listening to lawyers debate such legal nuances as "pension distribution," Bill Dyer, a 69-year-old contract manager who was laid off and took early retirement from Imperial Oil in 1992, seethes: "The only people making money here are the lawyers."
Technically, the retirees have landed in this legal limbo because of laws relating to their particular breed of pension plans, funds that were partially wound up after their corporate divisions were sold or their jobs eliminated as a result of cutbacks. In the Imperial Oil case before the tribunal, three pension plans were partially wound up in the 1990s because of downsizing. Those employees that wanted out of plans were allowed to transfer pension savings elsewhere. Others such as Mr. Kozak and Mr. Dyer opted to stay and have continued, in most cases, for more than 15 years with Imperial Oil's partially wound-up plans.
The status of the surviving 409 retirees came into question after the Supreme Court handed down a ruling, known as the Monsanto decision, that ordered employers to distribute surplus pension savings to members of partially wound-up plans. The bold decision was cloaked in such vague wording, however, that five years later its legacy is waves of pension litigation driven by companies challenging any attempt to drain assets and surpluses from their pension plans.
As a result, the law has become so confused that lawyers for the Superintendent of the Financial Services Commission decided that laid-off or early retirees such as Mr. Kozak could no longer remain with partially wound-up pension plans. Instead, the commission has ordered Imperial Oil to shift the pension assets into annuities managed by insurance companies.
But even this decision is a source of conflict. Underlining the huge stakes, Imperial Oil has dispatched one of Canada's top constitutional lawyers, Mahmud Jamal of Osler Hoskin & Harcourt LLP, to make its case. Judging by the face of the commission's lawyer, Deborah MacPhail knows what it feels like to show up for a game of shinny and find Wayne Gretzky facing off against her.
For much of the day Mr. Jamal will cast Imperial Oil as a benevolent pension manager fighting to protect its former employers from the devastation of what it says are reduced pension benefits. But there is more than charity at stake in this hearing.
One of the huge subtexts to the hearing is the enormous costs Imperial Oil will bear if the annuities are approved. After questions from the panel, a company executive tells the hearing that Imperial Oil will have to pay a $16.5-million bill to set up the annuity. The company would also see a big hole kicked into its pension plans as it would be required to transfer, according to a company spokesman, about $65-million of pension fund assets to back the annuity.
Faced with such costs, Imperial Oil has raised the stakes, and in the process alarmed its retirees, by telling the tribunal that it will terminate health and drug benefits for pensioners forced out of its plans. It has also told retirees they will no longer be eligible for inflation protections.
By the end of day, the half-dozen retirees attending the hearing are dazed and uncertain about the future of their pensions.
"Why is this happening to me?" asks Mr. Dyer. "I've never had to worry a day about my pension until this happened."
© The Globe and Mail
