Even though post-retirement benefit (PRB) plans are not the same as registered pension plans, and are not subject to pension standards legislation, the recent arbitration decision in Regional Municipality (Durham) v. Canadian Union of Public Employees, Local 1764 is an important reminder to both employers and employees that benefits under pension plans and PRB plans can often be linked, with the result that a decision to take a transfer of the lump sum value (commuted value) of pension benefits could render a former employee ineligible for PRBs.
The case involved a grievance filed by CUPE on behalf of a former (unionized) employee of Durham. As an employee of Durham, he was a member of the OMERS pension plan and also entitled to PRBs under a plan sponsored by his employer, if he qualified for such benefits on his retirement. The collective agreement in question provided that in order to qualify for PRBs (extended health and dental benefits), employees must meet three criteria:
- they must retire before age 65,
- they must achieve a factor of 90 or have at least 15 years service, and
- they must take a retirement pension.
In this case the employee retired in 2009 and met the first two criteria. On his retirement, the employer (Durham) advised him that if he elected a commuted value of his pension, he would not be considered a retiree within the meaning of the collective agreement, and therefore would not be eligible for the (extended health and dental) PRBs. Nevertheless, on his retirement the employee elected to take a commuted value of his OMERS pension entitlements, rather than electing to be a pensioner and receive monthly pension payments. On learning of his election, the employer took the position that he did not meet the third criteria above and terminated his PRBs. The union filed a grievance, claiming that the form or manner in which the pension is taken is of no relevance to entitlement to the PRBs.
The arbitrator focused on the proper interpretation of the words “retirement pension” used in the collective agreement, and whether the commuted value elected could qualify as such. The arbitrator noted that both the pension plan in question (OMERS) and the Ontario Pension Benefits Act define a pension as a periodic payment, and make a clear distinction between a pension and the commuted value of a pension. As a result, he ruled that the intention of the collective agreement was to provide PRBs only to employees who elect a pension, and not to those who take a commuted value, dismissing the grievance.
This decision should be contrasted with the result and reasoning in a court decision involving OMERS (Berthiaume v. City of Windsor) in which the court ordered the employer to provide post-retirement health benefits to a retiree who was not yet in receipt of a pension. While at first glance the results of these two decisions may appear to be difficult to reconcile, what they really demonstrate is how each case is very much dependent on its facts and the wording and terms of the PRB plan in question. Employers would be well served to review the terms of their PRB plans to ensure that conditions for eligibility for PRBs are clearly and precisely defined.