Ontario Arbitrator Upholds Employer's Right to Reduce Pension Contributions Without Union Consent
October 06, 2026
An Ontario labour arbitrator has dismissed a grievance challenging Ontario Power Generation's ("OPG") decision to reduce its contributions to an overfunded defined benefit pension plan.
The grievance arose after OPG advised the Power Workers' Union (the “Union”) that it would reduce its pension contributions effective March 2025 to the same level as member contributions. Among other things, OPG relied on provisions in the pension plan that permit an employer to reduce or suspend contributions when a plan has sufficient surplus. At the time, the plan's funded ratio exceeded 120% on both a going concern and solvency basis.
The Union argued that the contribution reduction required its consent under the collective agreement, which provided that changes to the pension plan “affecting employees” could only be made with the Union's agreement. The Union argued that employer contribution reductions could affect future pension improvements, indexing, and the parties' ability to negotiate the use of pension surplus.
OPG maintained that it had not changed the pension plan. Rather, it was exercising a right already contained in the plan text, which expressly permitted the employer, to reduce or suspend contributions when specified statutory requirements were met. Employee contribution rates and pension benefits remained unchanged.
The arbitrator agreed with OPG. The arbitrator found that the pension plan text was incorporated into the collective agreement and had to be read alongside the agreement's consent provisions. Because the plan text expressly authorized OPG to reduce contributions where a surplus existed, the company was exercising an existing right. OPG did not reduce benefits or increase employee contributions.
The Union argued, as an alternative, that OPG was estopped from relying on its contribution-reduction right because OPG had represented through its historical conduct that it would not unilaterally exercise its right to reduce pension contributions. The arbitrator rejected this argument, finding that there was no clear evidence of representation or commitment by OPG that it would refrain from exercising a right expressly reserved under the plan text. The grievance was dismissed.
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