February 1, 2008 / 11:04 AM / in 10 years

Canada's top court to hear case on pension funding

OTTAWA (Reuters) - The Supreme Court of Canada will look into whether companies can fund their contributions to their pension funds from surpluses in those funds.

The high court agreed on Thursday to hear an employee challenge of the practice involving the Canadian subsidiary of the Irish food conglomerate Kerry Group. Both employee groups and corporations are likely to watch the case closely.

Kerry (Canada) Inc. ran a defined-benefit pension plan -- in which employees are guaranteed a specified retirement pension -- but in 1985 started taking “contribution holidays” because the pension fund had been in surplus for years.

It also paid the plan’s administrative expenses from the plan fund. Company employees are challenging both practices.

The actual amounts involved total only about C$2.4 million ($2.4 million) but the principles decided by the Supreme Court will likely set precedents for companies with defined-benefit plans across Canada. The court is expected to hear the case later this year.

($1=$1.01 Canadian)

Reporting by Randall Palmer; Editing by Peter Galloway

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