This system -- along with the triumphs of classical social democracy, government pensions and medical insurance -- did a lot to get rid of one of the scourges of an earlier era of capitalism, the destitute old age.
Unless you work for the public sector (and if you do, get back to work -- I'm paying your salary), then you probably don't have a pension like that from your employer any more. Instead, your employer might contribute a bit every month to a locked-in RRSP or other "defined contribution" retirement vehicle. The story about these is that what they pay when you are all wrinkly and smell funny will depend entirely on how your investments panned out.
On average, one is as good as the other. But half of everybody does worse than average. What the rise of the defined contribution means is that the future means increasing variation in the wealth of our oldsters. When the Pithlord is ready to learn cribbage and complain about loud music, he's going to enter an old age cohort with the class divisions of contemporary Brazil.
There are many villains in the tale of the decline of the defined benefit pension. Some of it is stuff we really wouldn't want to get rid of -- greater freedom, in a word. But the defined benefit plan has also been overloaded with regulatory burdens. The more difficult and expensive it is to live up to these, the harder time unions and employees will have to convince employers to do it, no matter what other things said unions are prepared to give up.
Most of these regulatory burdens are statutory. But it must be said that the Red Nine have done there little part in making the defined benefit pension plan a thing of the past by making extremely complicated one of the potential benefits to employers of defined benefit plans.
I will try to explain without making your eyes bleed. It goes like this. Just as a defined contribution plan has an upside for a lucky employee whose investments do well, an upside which does not quite compensate for the greater risk, a defined benefit plan would seem to have the same upside for an employer. The employer puts away what the propeller-heads tells it is necessary to pay out the promised benefits. If things go worse than expected, the employer has to come up with more money. But if things go better than expected, then it is joy in pension geekdom: there is a surplus.
In any sensible system, the surplus would belong to the employer (just as the deficit does, if things are unpleasant). That is the risk/reward tradeoff inherent in defined benefit plans. As we noted, that risk/reward tradeoff is good for employees, and the Pithlord's chances of avoiding elderly Marxist rabble rousers on his way to the cruise ship a few decades hence.
The unions didn't see it like this. Arguing from the correct premise that pensions are a form of deferred salary to the incorrect conclusion that employees therefore "own" the trust fund that pays for them, they tried to get their hands on the pension monies that accumulated during the Clinton-era stock market boom.
In Schmidt, the Court gave one of its untenable and very-hard-to-follow compromise judgments. The upshot was that the surplus in a defined benefit plan could be used by employers to reduce their ongoing contributions, but on termination, it all goes to the employees. They made this decision based on a particularly obscurantist reliance on trust law. (Which isn't even right as trust law, but you need to buy me another beer to get into that.)
Much trouble has, predictably, ensued. If you get a gagillion dollars as long as a plan continues, but I get it if it stops, then I'm going to do everything I can to stop it and you are going to try to continue it come hell or high water. And that is the situation Rogers and a group of retired employees of one of its predecessors found themselves in.
Rogers inherited from a corporate predecessor a pension trust with a big surplus. For reasons to boring to go into, Rogers couldn't do anything with the trust unless the retirees, who hate it, agreed. On the other hand, the plan document didn't give the retirees the right to terminate it. So they both decided to spend the money on litigation, which has now reached Dickensian excesses. Anytime in the last decade, you could walk by the courthouse in Vancouver, and you had better than even odds of seeing yet another episode of Buschau v. Rogers, playing to a rapt audience of pensioners and actuaries.
The solution the retirees came up with was to invoke an old English case, Saunders v. Vautier so that they could terminate the pension plan without the employer's agreement. A trust consists of property where the power of control is given to one person or persons and the right to benefit from the trust is given to a different person or group of persons. The Saunders principle is that the beneficiaries can, if they all agree, and if they are all grown ups with functioning minds, get rid of the trust and divide the property among themselves.
The Red Nine can see why this rule shouldn't apply to pension plans. First of all, the rule is based on a trust in individual judgment about one's own future, while pension plans are based on the assumption that if you give people a chance they will spend their retirement money on blow and high-priced whores. Second, pension "trusts" are really vehicles to deliver a complicated deal between employers and their employees, and do not resemble the trusts in Jane Austen novels at all.
So the SCC said that termination provisions of the plan and in the legislation govern, and have returned some of the way towards sanity in relation to the application of ancient trust doctrines to modern employment dealings. This is good, although much of the damage is already done.
Case Comment of Buschau v. Rogers Communications Inc., 2006 SCC 28
Update: Stan Rule blogs this decision here.