INCOME TAX

It is income tax time and the following link (studiotax) is getting rave revues from those that use it. It is easily downloaded, free, will do all your tax calculations for you, will give you all the tax saving tips and will split the income of spouses as you go along to give the best tax advantage. You can use to do the taxes for your immediate family as well. It has the approval of CRA and will let you file electronically or will print out the completed forms for mailing.  To download - visit  http://www.studiotax.com/en/main.htm

Art

Who owns the Surplus ?

I think it sometimes depends on the Golden Rule. Who owns the gold, makes the rules. The most recent decision on the issue of surplus in a pension fund was handed down in Toronto on the 21st of November 2007( It is a decision that certainly would not have been handed down on the 11th  hour on  the 11th Month) because the decision went against members of the Canadian Forces and the RCMP, with the court ruling the members had no entitlement to any of the $32.2 billion surplus. If you click on the Benefits Canada web site in my column it will open up all of the submissions that have been made thus far to the Ontario Expert Commission on Pensions. Over to the left of that web site is a separate column with the heading  Most Popular Stories click on the first story Government Unions Lose Pension Surplus  and you have the outline of the story, as you scroll down you can click on and open the 102 page Court Decision by Justice Planet (some members might want to put him on another planet)   If you open the judgement and scroll down to page 58 it sites the Markle decision , it is the main reason why the RCMP and the Military lost their access to the surplus in this court decision.  

I have been a Trustee of the Benefit Fund since 1978 and John Markle has been a Trustee of the Metropolitan Toronto Pension Plan a few years before me. I pick John up on my way down to the monthly Trustees meetings at City Hall. Our Trustees meeting are held in the same room and we have the same Chairman and some of the same Councillors on our committees (Michael Walker and Rob Ford) The Metro Plan starts at 9-30 and when it is finished we join together the to listen to one of our investment managers tell us their view of the investment world. When that is over they adjourn and we start our Benefit Fund meeting.

In 1998 both our funds were in good shape, with surpluses, when Metro Treasury suggested we start paying the administration costs (paying the salaries  of the staff who run the pension division) They argued  the administration cost are paid out of the OMERS pension funds like all other pension funds and we should pay them out of our funds.. We mulled this over in our minds for a couple of months and were at the point of coming back with a counter offer that we would be prepared to do it if they would go along with some kind of a cash payout to our retirees to compensate for the contribution holidays the active members were having. They gave us a sucker punch after the bell, and, at Metro Council changed the by-law on April 28th 1999 to say the Funds would pay the administration costs. We came out fighting for the next round. We reasoned, what is the point of us being Trustees if they can just change the by-laws whenever they wanted to, we may as well throw in the towel if they could ignore the Marques of Queensbury Rules. We were off to court. John was the complainant for the Metro Fund and I was the complainant for the Benefit Fund. We hired the law firm of Koskie Minsky, John's fund had more of a surplus then we did and they represented more retirees than us, they agreed to pay the up front legal costs and we would reimburse them from time to time at our monthly meetings on a pro rated basis.  

Koskie Minsky argued that both funds are Trusts. The use of the word "Trustees" is indicative of an intention to create a trust for the benefit of the employees and their dependents by giving the custody of the Fund to the Trustees for those purposes.

1."Trustee" means those Trustees who are appointed from time to time by Council.

2.The Trustees shall be responsible for the receipt of all contributions to the Fund and the custody of the Fund including investments of monies in securities of the classes eligible under the Trustees Act,Ontario, as revised from time to time.

3 The Trustees shall be responsible for the payment out of the of  Fund benefits to which Members become entitled under the plan."  

Thus, the Trustees are specifically given custody of the Fund, responsibility for the investment of monies in the appropriate securities for trust funds and responsibility for the payments of benefits which further the purposes of the Plan. Thus, the terms of by-law 426 create a trust which meets the test of the "three certainties"  

The Trust is Irrevocable  The Trustees May Not Permit Any Unauthorized Use of the Fund Without Committing a Breach of Trust. The courts ruled in our favour and the change in the by-law became a nullity.  

While the  RCMP and Military court decision is far from over, it is my belief they would have won the first round if they had been able to establish their pension funds were held in Trust. Well, just who can you trust these days?

Art Lymer  

P.S. - Seems to me instead of calling part of the 401 'The Highway of Heroes', it may be more appreciated if they just called their pension fund a TRUST.
Art