How this retiree lost his benefits on purpose

When Victor Nozdryn took early retirement from the Regional Municipality of Durham and opted for a lump sum instead of an OMERS pension, he lost ten years of company paid post-retirement medical and dental coverage.

Nozdryn retired at age 55 after 33 years of service. The collective agreement between CUPE Local 1764 and Durham gives extended health and dental benefits up to age 65 for employees who meet three qualifications:

•   They retire early (before age 65).
•   Their age plus service is 90,  or they have at least 15 years of service.
•   They take a pension.

Durham representatives cautioned Nozdryn on the telephone and by letter that he would not be considered an 'OMERS retiree' and would not be eligible to keep either extended health or dental benefits if he opted for the lump sum value of his OMERS pension instead of a monthly pension. Nevertheless, Nozdryn stuck with his  decision.

When his health and dental benefits were withheld, the union filed a grievance, arguing how he took his pension was irrelevant as it represented the same amount of money and the same cost to Durham. The union also maintained that taking a lump sum instead of periodic payments was just another legally permissible vehicle for taking a pension.

Durham's lawyer Jordan Freemont argued  that under the Ontario Pension Benefits Act and the OMERS pension plan, a pension is defined as a periodic benefit or stream of income paid by a pension plan to an employee. He also suggested that because a lump sum is the value of the pension on a certain date, taking the lump sum is a transfer of income and not taking a retirement pension.

The arbitrator John Stout accepted Freemont’s argument and dismissed the CUPE grievance against Durham. Stout said that if it was intended that employees taking lump sums were eligible for extended health and dental benefits, this could have easily been stated in the collective agreement.

This decision is fact specific, but there is a broader lesson. Whether or not you are subject to a collective agreement, in order to make educated choices it is important to fully understand your pension and benefit plan provisions and how they inter-relate.

Then if like Nozdryn you take a calculated risk, you will at least be aware of the downside if an arbitrator or a court ultimately rules against you.

 For other articles about retiree health benefits, see What about benefits when you retire? and Health insurance plans for retirees worth the cost.