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218,135 fewer Canadians had DB plans, 168,095 of those employees were in the private sector. Christopher Brown, a Calgary-based partner with Osler Hoskin & Harcourt LLP, was co-chairman of a joint expert panel looking at creating greater access to pension plans in Alberta and British Columbia. The panel reported in November 2008 and called for funda- mental reforms to pension legislation in both provinces. One of the suggestions was to have greater harmonization for plans in Alberta and British Columbia. Other suggestions looked for greater flexibility for DB plan sponsors. One of the recommendations was to allow pension plan sponsors to contrib- ute excess funds to a separate, pension- security fund. The plan sponsor could withdraw amounts in excess of the cal- culated "wind-up basis," after building in a reasonable margin. In addition, the report called for changes to the Income Tax Act, which limits the amount of sur- plus a plan can build up and maintain. While not identical to the allowance to use plan surpluses in Kerry, it clearly shows consideration needs to be given for DB plan sponsors to create a cushion they can access. "Obviously it is harder to come up with money to fund your plan when the economy is bad and you really need your economic resources to run your business," says Brown. "But that usually coincides exactly with when your plan is underperforming and your funding obligations are going up. "So in order to cushion against that we are advocating that the income tax rules be changed to allow employers to build up more significant funding cushions in the good times, so that in the bad times, it wasn't as much of a burden on their businesses to increase their funding obligations. . . . That is the primary issue that drives employers away from sponsoring defined-benefit pension plans, the volatility in the con- tributions they have to make." One of the interesting issues raised Negotiation: The Art of Mutual Gains Bargaining Second Edition David Corry and Courtenay Mercier Achieve mutual gains bargaining success in any negotiation setting New negotiation topics include: • Making the first offer • Creating value in negotiation • Investigative negotiation • Strategies for dealing with hidden constraints • Developing the worst alternative to a negotiated agreement ("WATNA") Benefit from this practical approach to negotiating fair and lasting agreements of all types. Order your copy today! Perfectbound • Approx. 200 pp. • October 2009 • Approx. $68 P/C 0712010002 • ISBN 978-0-088804-493-8 canadalawbook.ca MERGING TRADITION WITH TECHNOLOGY For a 30-day, no-risk evaluation call: 1.800.565.6967 Canada Law Book is a Division of The Cartwright Group Ltd Prices subject to change without notice, to applicable taxes and shipping & handling. CL0000 following Kerry is the idea companies would be able run from DB plans. They could put an end to the DB plan, give new employees only the DC option, and then fund contribution to the DC plan with DB surplus. However, with the markets being low and the economy still staggering, how many DB plans in Canada have surpluses large enough to fund two plans? It makes the idea of Kerry having a major impact almost moot. "Kerry helps plans that have sur- plus period," Frazer says. "If you have a surplus why would you change? There is no point in changing your plan because you are not contributing anything. . . . If you've got a plan that is underfunded perpetually then DC would be better." Yet one point remains clear from Kerry: companies should make sure to check their plan language before contem- plating any changes. While the Supreme Court decision does offer employers and pension plan administrators some flexibility, that movement can only be realized if the plan language does not specifically prohibit it. "Our advice to clients would be you obviously need to look at your plan documents," says Andrew Harrison, a partner with Borden Ladner Gervais LLP. "Because there are some pension plan texts that deal with very specifically how pension plan expenses have to be paid and you have to comply with that. If the plan document is silent then what the court is saying is that the employer can pay reasonable expenses from the pension fund." Knowing plans can have specific lan- guage where contributions from the company must be made in a certain way, or possibly define the use of any money held in surplus, may lead to issues in employee negotiations. This may in turn mean the greatest impact Kerry will have is at the bargaining table. Changes to pension plans may soon be the key issue in labour negotiations, with employee groups and employers negotiating on plan language and con- trol of plan surpluses. "Often with pension it is kind of a zero-sum gain, what is good for the employers side is not so good for employ- ees and vice versa," says Harrison. CORRY_Mutual Gains Bargaining (CL 1-3sq).indd 1 www. C ANADIAN Law ye rmag.com OC T OBER 2009 45 9/14/09 3:57:51 PM