Unions alleging the government wrongfully took money from federal employee pension funds began their fight in Ontario Superior Court Monday.

The unions are challenging a 1999 law that allows the federal government to transfer surpluses from the pension funds into general revenues.

'We allege that it is immoral and unethical for them to use money that [was] earmarked for pension purposes.'— Michèle Demers, president of the Professional Institute of the Public Service of Canada

Michèle Demers, president of the Professional Institute of the Public Service of Canada, said the court case in Ottawa pits the government against 17 unions representing about 670,000 working and retired members of the federal public service, RCMP and Canadian Forces.

"We're charging the government with essentially the theft of $30 billion in the pension fund surplus in 1999," she said in an interview, adding the unions want the government to return the money, which was used largely to pay down the national debt.

The unions gained the right to take the case to court in the fall. Demers expects the case to last eight weeks, with the losing side appealing to the Supreme Court of Canada.

"We allege that it is immoral and unethical for them [the government] to use money that [was] earmarked for pension purposes," said Demers, adding employees themselves had contributed "a fair chunk" to that money.

Furthermore, she said, employees were asked in 2006 to increase their pension contribution rate by 0.03 per cent annually for the next seven years to compensate for the aging population and the increase in the number of retirements. She suggested the increase might not be necessary if the government had not spent the pension surplus.

Ottawa seeks clarity

Mike Storeshaw, a spokesman for Treasury Board President Vic Toews, told CBC News the government is looking forward to getting some clarity on the issue from the courts, but cannot comment specifically on the matter while it is before the courts. He added the government has always remained committed to paying employees their pension benefits regardless of the pension funds' financial status.

In 1999, the Liberal government passed Bill 78, the law that allowed it to spend its employees' pension surpluses. At the time, the government argued the public wanted the federal books balanced, and the money would be used to pay down the national debt. The government also said that since employees would be paid their pension benefits anyway, no one was hurt when the extra money was taken out.

Many members of Stephen Harper's current Conservative government opposed the law when it was debated in the House of Commons, including Monte Solberg, now minister of human resources and social development. He accused the Liberal government of "raiding people's retirement and insurance nest eggs so they can pad their own election slush fund."