PENSION PLANS AND TRUST LAW
The Supreme Court of Canada ("SCC") recently considered the interplay between traditional trust law and closed pension plans. In Buschau v. Roger Communications Inc. [2006] S.C.J. No. 28, the SCC held that members of a closed pension plan could not rely on traditional trust law principles to require the termination of the pension plan and distribution of its surplus.
Pension plans have their own set of unique contractual and legislative rules that operate outside of traditional trust law. In Buschau v. Roger Communications Inc., members of a closed pension plan registered under the Pensions Benefits Standards Act, 1985, sought to terminate the underlying trust of the plan and distribute surplus assets in the plan on the basis of the rule in Saunders v. Vautier.
According to that common law rule, the terms of a trust can be varied or the trust terminated if all beneficiaries of the trust, being of full legal capacity, consent. The SCC held that members of the pension plan could not invoke the rule in Saunders v. Vautier to terminate the trust. It required that beneficiaries seeking early termination possess the sum total of vested, not contingent, interest in the trust corpus. The members did not have absolute entitlement to the surplus until the pension plan and trust were terminated.
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