PENSION PLANS AND THE LAW OF TRUSTS

Abstract

The purpose of this article is to begin to establish a much-needed analytical framework for pension law. This complex area of law has grown in recent years, yet few lawyers and fewer judges have had training in the area. The author uses equity and trust law principles in her approach, following the lead of recent Canadian court decisions. When a pension is funded by a trust, trust law is to be applied to funding issues. However, in general, the administration of a pension plan is governed by contract law. Pension trusts are not purpose trusts,for which there are no direct beneficiaries, but are more akin to "classic" or "true" trusts. Employers see pensions trusts as contractual promises and feel that money put aside to ensure the fulfilment of a trust belongs to the employer. Employees feel that money deposited into pension plans are deferred wages and that, therefore ; the money belongs to them. The author examines the rights enjoyed by beneficiaries of a pension trust. The rights of the beneficiaries to trace trust property and restrictions on an employer's right to surplus assets are currently in dispute. The author also discusses ways of amending, varying or ending pension trusts. In the end, the author concludes, it is up to lawyers, academics and judges to develop a complete framework. However, trust law and equity principles should be used, while other systems of law which intersect with pensions, such as contract and employment law, should be taken into account when conflicts arise.