Addressing the concerns of former Sears Canada employees, Justin Trudeau told lawmakers that the government was working diligently to “help them through this tough time.”
Earlier this month, the iconic retailer filed for insolvency and announced it would reduce pensions and eliminate health benefits. Coming so soon after details of a $9.2 million payout for executives was revealed, the announcement infuriated Sears workers.
In response, CARP, Canada's largest advocacy group for seniors, met with MPs in Ottawa last week, urging them to draft new legislation to protect pensioners.
In attendance was CARP's VP of Advocacy Wanda Morris, who was largely satisfied that their words had been heeded.
“It was split on party lines,” she says. “The NDP were overwhelmingly supportive; the Conservatives were more hesitant; the Liberals warmed to the idea over the course of meetings and have agreed to study the issue. I think it is a positive first step.”
Discussing the Sears case at the House of Commons, the prime minister stated that affected workers would have their pensions protected. “I understand the current Sears Canada pension fund assets are held in trust and must be used solely for the benefit of pensioners,'' Trudeau said. This doesn’t tell the entire story, however, as Morris outlines.
“He’s absolutely right about the funded pensions, which are secure and will be used by pensioners, less administration fees that are going to Morneau Shepell. What is at risk is unfunded pensions.”
While the payments workers made into the pension fund are indeed safe, failure by the employer to make its required contributions mean these funds are now badly underfunded.
With Sears, it’s a $250 million shortfall that will affect some 16,000 pensioners, who also lose their health/dental benefits, in addition to their life insurance. The liquidation process has been damning for a once proud institution, but it is far from an isolated case, with similar accusations levied against US Steel, Stelco, Algoma steel, Wabush Mines, and Cliff Mines.
For that reason, CARP presented a petition signed by 20,000 people calling for greater protection of pensioners to Canada’s three major parties.
NDP MP Scott Duvall is duly calling for major legislative changes, while Bloc Québécois MP Marilène Gill has introduced Private Member’s Bill C-372. The bill seeks to amend both the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act, thus giving priority status to pension and benefit claims during an insolvency or restructuring.
It’s a change that is long overdue in Morris’ opinion, and one that will mean other companies facing bankruptcy must prioritize their workers.
“When it comes to bankruptcy, you have your trustees that are paid first, then your secure creditors – bankers and bondholders,” she says. “What we are saying is that before you pay those people, you need to pay out to pensioners. That’s wages that have already been earned, deferred as a pension, and should be paid before a bondholder sees a penny.”
Retirees group calls for pension protection across Canada
Weakness in defined-benefit pension plans exposed in Sears Canada case
The issue of underfunded pension plans and workers benefits came to the fore on Parliament Hill last week, provoking a response from the prime minister.