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Former Sears workers are having their pension fund cut, yet again, because those who controlled Sears made a deliberate decision to leave the pension plan underfunded.
Ottawa (21 June 2018) — Just when it appeared that the treatment of former Sears Canada workers couldn’t get any worse following the companies collapse, pension administrator Morneau Shepell announced that many of these workers will have part of their pensions clawed back.
CBC is reporting that Morneau Shepell has sent Sears retirees letters saying that, because of delays in transferring the administration of the pension fund after Sears collapsed, retirees have been “over-paid” and the overpayment will be clawed back. Their pensions will be reduced in August 2018. The reduction will be in place for 20 months.
Pensions already cut by 20 percent
Retirees have already had their pensions reduced to 80 per cent of their original value because the Sears pension plan was underfunded. Now their pensions will be reduced to 70 per cent of their original value.
Billions in payouts to shareholders, while pension plan underfunded
Sears Canada had the money to ensure the company pension plan was fully funded. The reason former Sears workers are having their pension fund cut yet again is because those who controlled Sears made a deliberate decision to leave the pension plan underfunded.
Between 2005 and 2013, $3 billion was paid to Sears Canada shareholders. Of that amount, $1.5 billion was paid out after 2010, when it was already known that the pension plan was underfunded and the company was struggling to survive.
The shortfall in the pension plan was less than a fifth of what was paid to investors since 2010 and less than a tenth of what was paid out since 2005. If those who controlled Sears Canada hadn’t callously ignored their obligations to people who spent their lives working for the company, the pension plan would have been fully funded and people would be getting the pensions they earned. It’s even possible that if those controlling Sears Canada hadn’t put short-term profit taking ahead of the long-term well-being of the company, Sears Canada might have had the funds to rebuild and stay in business.
Judge orders investigation of payouts to Sears Canada shareholders
On March 2, 2018 an Ontario Superior Court judge ordered an investigation of the $3 billion paid to Sears Canada shareholders since 2005. This was in response to a motion brought by the law firm representing the retirees and former workers, Koskie Minsky.
Law needs to be changed to better protect pensions
The motion for an investigation will hopefully provide more information about how those who controlled Sears were able to siphon so much money out of the company. However, if we want to avoid a repeat of what happened to Sears Canada workers and retirees, the law needs to be changed.
As Elisabeth Ballermann, Secretary-Treasurer of the National Union of Public and General Employees (NUPGE) said, "Pensions are deferred wages that are supposed to provide an income for workers in retirement. They are a debt employers owe their workers and former workers."
"Meeting that debt should be a priority if companies run into difficulties," Ballermann continued. "When company pension plans are underfunded, there needs to be restrictions on payouts to shareholders. Without those protections it is a case of when, not if, what happened at Sears Canada and to many other companies will be repeated."