Kerry (Canada) Case


ISSUE

In June 2007, the Ontario Court of Appeal concluded in Elaine Nolan et al. vs. Kerry (Canada) Inc. et al. (“Kerry”) that plan expenses could be paid from the pension fund in the absence of an explicit prohibition in the plan documents preventing such payment and also condoned contribution holidays taken in respect of a DB/DC arrangement.  On January 31, 2008, the Supreme Court of Canada (SCC) agreed to hear an appeal of Kerry. The major questions before the SCC in Kerry are:

- Are the ongoing costs of administering a pension plan properly payable from the pension fund?; and
- Are contribution holidays properly permitted in a pension plan that combines both defined benefit (DB) and defined contribution (DC) provisions?

ACTION TO DATE

As the issues raised in the Kerry appeal are important to occupational pension plans across Canada, ACPM sought leave to intervene in this matter.  On August 27, 2008, ACPM was granted leave to intervene by the SCC.  In October 2008, ACPM filed a factum with the SCC.  In November 2008, ACPM made oral arguments before the SCC at the appeal hearing.

RESULT

Friday, August 7, 2009 - In its decision on the Kerry Canada Inc. case this morning, the Supreme Court of Canada has ruled that an employer may use funds from a defined benefit pension plan to fund a defined contribution plan.   The Court also ruled that because the Kerry DC plan was in a surplus situation, the employer was entitled to take a contribution holiday and stop paying into the fund under the trust agreements governing the plan.

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