Make paying pensioners a super-priority

Posted by jesuslewis on August 10th, 2017

Every day, businesses make decisions: expand or retract, rent or buy, take a partner or go it alone. Once they sign a contract, they’re locked in. Our laws and law courts make it so — and with good reason. If businesses could walk away from their contracts, chaos would reign, and our economy would collapse.

Unfortunately, there appears to be a notable exception to this rule; businesses have been all too ready to walk away from pension commitments to employees, and the courts have been all too willing to let them.

It’s a sad irony that, in these cases, our laws and courts provide the least protection to those who need it most. Bankers have other loans, businesses have other customers, but most pensioners have only one workplace pension. What’s more, businesses are usually owed for a few months’ work, bank loans may extend for several years, but pensioner often have decades if not a lifetime of deferred earnings to collect.

Take Sears Canada. Employees contracted with the company to be paid partly in wages and partly in future pensions. They’ve held up their end of the bargain, working years or decades at partial pay in exchange for retirement security down the road. Suddenly Sears wants to walk away from more than 0 million in pension commitments, complaining that they can’t afford to pay. But within the past five years they’ve paid shareholders 0 million in dividends and, even now, are setting aside .2 million for executive bonuses.

This isn’t right.

Pension advocates have watched similar situations unfold too many times. They know how the story ends — and it’s not pretty. Companies encounter financial trouble, then ask the courts for permission to stop pension payments. The courts invariably agree. If a company restructures, it does so only after reducing the amount it is contractually obligated to pay pensioners.

If restructuring fails, bankruptcy ensues and pensioners go to the back of the line waiting for leftover pennies on what they’re owed.

Canada is a laggard in its treatment of pensioners. Article 8 of the EU Insolvency Directive requires member states to properly protect workers’ pensions. U.S. jurisdictions protect pensioners’ assets — up to ,000 a year — and a special fund in the U.K. guarantees pensioners 90 per cent of their pension. In Canada, only Ontario provides pension protection, and that covers just the first ,000 of an annual pension. 

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