“When a business becomes insolvent, many interests are at risk.  Creditors may not be able to recover their debts, investors may lose their investments and employees may lose their jobs. If the business is the sponsor of an employee pension plan, the benefits promised by the plan are not immune from that risk. The circumstances leading to these appeals show how that risk can materialize. Pension plans and creditors find themselves in a zero-sum game with not enough money to go around.

The Ontario Court of Appeal decision in Indalex Limited (Re) has created considerable uncertainty over the priority status afforded to pension plan wind-up deficits, particularly in insolvency proceedings involving the plan sponsor.

Certain provisions of Bill C-9, last year's Budget Bill, which amended the federal Pension Benefits Standards Act (PBSA), have been proclaimed in force.

With a number of Canadian companies seeking bankruptcy protection over the past few months, it has become apparent that the defined benefit pension plans sponsored by many of these companies are underfunded. As retirees and former employees protest their shrinking pensions, many are left asking how this all happened.