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For those who may be on company pensions
August 10, 2017
7:47 am
Cranston
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You may want to sign this electronic petition. A DB company pension can always be in jeopardy until the provincial and federal governments put some teeth into protecting pensioners.

Sign CARP’s Petition to Put Pensioners First
http://www.carp.ca/campaign/ca.....ers-first/

While today Sears is the highlight and the past has been Nortel, Stelco and many others.

August 10, 2017
10:58 am
Bill
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I'd rather press government to legislate (and enforce - that's the usually forgotten part) that a DB pension plan, at any particular moment, can never be less than 100% funded. The penalty: cessation of operations in Canada until 100% funding is reached. There are always risks in waiting until bankruptcy, even for those creditors first in line.

August 10, 2017
3:55 pm
Loonie
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I would support both the CARP position and Bill's idea.
However, I don't see how it would be feasible to insist that a DB plan never fall below 100%. It's not realistic to be watching their daily returns for a dip. Usually these things are only reported to members annually - and none too speedily. During the 2008 crisis, many DB plans, even very large ones which are now functioning over 100%, were below 100%. They had to stop, recalculate contributions and/or payouts, and it was a lengthy process. If it can be done, I'm in favour, but I think CARP's approach is the more realistic. I mean, what are they doing with that money that is supposed to be for pensions anyway? Seems to me it was never really a pension plan anyway, if they're using it for general revenues. It was more like a "lick and a promise". There should be a requirement to segregate the funds and manage them as a pension plan, seems to me, with a joint employer-employee board overseeing them.

There's something else I don't understand. I know someone who worked in the Sears warehouse in Toronto for several years in the 1970s or thereabourts, and never received any kind of pension from them at all.

August 10, 2017
7:25 pm
Norman1
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I wouldn't sign CARP's proposal. It has half-truths and is arrogant. It tramples on the rights of secured creditors in a way that even CRA can't. What makes someone think they are above even the CRA?

If I sell $100,000 of cubicles and office furniture to a company, let the company have the furniture now, and let them pay the $100,000 purchase price over five years, then I should be able to secure that $100,000 owed with a lien on the cubicle and furniture I sold them. Should the company go bankrupt during the five years, I can either take back the unpaid furniture or demand the bankruptcy trustee pay what I'm still owed.

What CARP proposes is that pensioners take precedent over such secured amounts owing. The bankruptcy trustee should be able to override the lien on the furniture, sell the furniture, and use the proceeds towards any pension deficits.

I don't think even the CRA has that kind of super priority claim over secured amounts owing!

August 10, 2017
7:52 pm
AltaRed
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That is the kind of behaviour that destroys CARP credibility. CARP is one of the most biased and manipulative organizations on the Canadian scene.

August 10, 2017
7:54 pm
Norman1
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Loonie said
… Seems to me it was never really a pension plan anyway, if they're using it for general revenues. It was more like a "lick and a promise". There should be a requirement to segregate the funds and manage them as a pension plan, seems to me, with a joint employer-employee board overseeing them.

That's one of the half-truths. According to the appointed Companies' Creditors Arrangement Act proceedings monitor, FTI Consulting, the pension money is and has been segregated. From their Pension Plan and Retiree Benefits FAQ:

1. What does the CCAA filing mean for the Company's registered pension plan and its assets?

● The assets of the Defined Benefit component of the Sears Registered Retirement Plan (SRRP) are held by CIBC Mellon - an independent trust company. Those assets are separate and apart from the Company’s assets. As such, they are not subject to claims by the Company’s creditors.

Loonie said
There's something else I don't understand. I know someone who worked in the Sears warehouse in Toronto for several years in the 1970s or thereabourts, and never received any kind of pension from them at all.  

Did every Sears Canada employee receive a DB pension?

August 10, 2017
8:21 pm
Joebart
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It is very simple.
I have worked for Sears Canada not as their employee but as a subcontractor for more than 20 years.
In my office ( where I had to report to but i was not a part of it) there was about 30 people working. Only three (3) were full time employee and the rest was only part time with no benefits or pensions.
Very, very ruthless company.
It deserves what is happening to them just feeling sorry for employees. By the way, they treated contractors like dirt as well. They deserve to be bankrupt....
Just look at this:
http://www.huffingtonpost.ca/j.....a-homepage

August 10, 2017
9:29 pm
Loonie
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You seem to be telling me two things, Norman. First, that the pensioners constitute unsecured creditors of Sears; and, second, that the Sears pension plan is segregated and registered as such. If the latter is true, then the former could not be an issue. If it's a segregated plan, separately managed, then why are we having this issue?

For the record, I do think that elderly people who are too old to work and who have had their necessary income snatched away are a higher priority than the ownership of used furniture. But that is not really the kind of either/or that we should be looking at, and it distorts the problem to put it in terms of people versus property. The guy who makes furniture can choose not to do business with a customer and assumes a known risk when doing so on time, and his risk can be spread among other customers. However, the low income person who works for Sears isn't going to have a lot of income streams to turn to if the pension he'd been promised evaporates.
Ultimately, the solution to the problems of income security are none of the above. A slew of independent pension plans is not efficient.

Joebart - yes, it's possible the person I was referring to did not, technically, work fulltime. She worked a lot of hours though, and there was no pension at all, DB or otherwise. It was manual work, and eventually she was physically unable to keep up. No golden handshake.

Whatever the problem is, the bonuses paid to managers should be the first source of funding.

August 11, 2017
5:44 am
Bill
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If the guy who chooses to sell furniture to Sears can choose not to, then so can the people who choose to work there. If he's supposed to see the future then so are they. My "income security" is my responsibility, no-one else's.

August 11, 2017
8:24 am
Top It Up
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YET another cradle to grave thread, without claiming personal responsibility. it's no wonder socialist governments flourish in this country.

August 11, 2017
8:26 am
AltaRed
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There is a degree of unrealistic expectation here. There is no obligation for any company to offer a DB plan, and no obligation, if there is a DB plan, to cover everyone who works there. Pension plans are simply a part of a compensation package that a company may decide to offer folk as an enticement to work there. Those who decide to work for a company despite the lack of a DB plan available to them have no right to bitch or complain about not being covered. Don't work for the company if you don't like it. It is a free country.

As Norman said, the assets of a pension plan are kept segregated in a trust. A company insolvency cannot raid it. However, the problem is that at the time of insolvency or bankruptcy, whatever is in the plan is in the plan. If it is underfunded as a going concern, that is one issue. The bigger issue is when a plan is frozen or wrapped up because there are no more active employees (or viable employer) around to continue front end inputs. Almost every plan will have a deficiency in this regard. So that means existing pensioners will be limited in their future payments, and active employees will likely only get all (or some) of their contributions back. If it has been a non-contributory plan (no employee contributions), then there may be nothing for the employee to extract. Those are the real hardships in such cases.

DB plans in the private sector will disappear over time simply because of the impact they have on a company's balance sheet with respect to funding and the cruel reality that expectations employees have from such plans will not be met in many cases. It would be much better to simply work with DC Plans and/or Group RRSP contributions and revert to employees being responsible for their own retirement plans. Why should an employer be involved in a DB relationship anyway?

To this end, CARP is misrepresenting the Sears situation and is out-to-lunch on their assertions/accusations. Their representations and petitions thus typically fall on deaf ears for these reasons.

August 11, 2017
9:06 am
Koogie
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Top It Up said
YET another cradle to grave thread, without claiming personal responsibility. it's no wonder socialist governments flourish in this country.  

+1

AltaRed said
DB plans in the private sector will disappear over time simply because of the impact they have on a company's balance sheet with respect to funding and the cruel reality that expectations employees have from such plans will not be met in many cases. It would be much better to simply work with DC Plans and/or Group RRSP contributions and revert to employees being responsible for their own retirement plans. Why should an employer be involved in a DB relationship anyway?
  

Why indeed. It has been ruinous for some industries that allowed themselves to get heavily unionized.

As was famously said about GM: "It seems to concentrate mainly on pensions and healthcare and for as long as I can remember has seen the car making side of the business as an expensive loss-making nuisance. "

August 11, 2017
2:37 pm
Loonie
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Bill said
If the guy who chooses to sell furniture to Sears can choose not to, then so can the people who choose to work there. If he's supposed to see the future then so are they. My "income security" is my responsibility, no-one else's.  

Not really. There are always going to be some people who are desperate enough to work at Sears and similar places. It is unimaginable that they would have no employees.
A basic level of income security is an issue which must be addressed publicly, unless, of course, you are happy with a Dickensian society.

August 11, 2017
3:56 pm
AltaRed
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Loonie said

A basic level of income security is an issue which must be addressed publicly, unless, of course, you are happy with a Dickensian society.  

Not really. A company decides how it wants to compensate to attract the talent (or grunts) it needs to carry on business. It can include a DB plan or a DC plan and pay correspondingly less in salary/hourly wages.... or it can simply pay more in direct compensation and forego benefits and job security.

Quite often contract "employees" are paid materially more on a per hour basis to compensate for that. I remember when I had a few independent contractors in our group. When I didn't need them, I shipped them off according to the contract. A few got angry about the dismissal. I asked them what part of being a well paid contractor...some 30+% more than an employee did they not understand?

August 11, 2017
4:29 pm
Bill
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If you're "desperate enough to work at Sears", then so be it - you could have made better decisions along the way, like all those people who are not desperate and don't have to work at Sears.

And if you're comparing Canada's poor of today (many with their smartphones, tattoos, internet & satellite TV, illegal drugs and various other discretionary expenditures) with the Cratchits or the starving, working poor of Dickens' England than you're not keeping up to date. It's not even close - the wealth capitalism has created has enabled even today's 1st world poor to be rich by any historical standard.

August 11, 2017
6:19 pm
Jon
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Definitely see difference in political ideology here!

But as a statement of fact, people do compare and when they do comparatively worst than their counterpart in a wealthy society, they will complain and "strike back". That's why we have Trump (which bring us into a possible hot nuclear war), or Brexit (the most stupid thing British can do to their economy as their position of international financial center hindges on its relationship with the rest of Europe). The phenomenon of comparing is not common in poorer society as most people have no time to jealous sf-surprised.

Moving back to DB pension plan, I do agree it is a thing of the past as it create a lot of risk for private business as employer have to shoulder the risk of poor market performance. But I think we all agree that the childrean, the handicap, the sick, and the elderly need to be taken care of, hence, a more nuance regulation for current plan benefiter is a good idea. I also think it is a good idea for company that set up a pension plan to receive tax credit as it relief burden from the government in terms of reducing future GIS and OAS payout.

Moving to the idea where forcing all pension plan to be fully funded, I think this idea is too rigorous and will deter anyone from setting pension plan. Perpheps allow company to not make extra contribution when its situation is bad and only pay it back when its operation improve.

The proposal of super priority for pension plan will also deter company from setting pension plan, which will increase burden on government (increase GIS and OAS payout). Making the situation worst, it will also deter businesses overseas to do business with Canadian company because they know the bankrupt law is less protective of them.

A better solution is to make judges have the ability to "piece the cooperate veil" when owner of the bankrupted business act in bad faith (such as giving itself massive dividend before the business fail) and make them use their own money to beef up the underfund pension plan (In this case, the total amount of dividend they receive).

Added later:
1.In another words, government should encourage the establishment of pension plan, and 2. government should only step on to protect plan member when there are fraud and gross negligence.

August 12, 2017
7:26 am
Bill
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Jon, I completely agree, people compare and a lot of this is about the most powerful force, human envy.

The reason I have for saying pension funds should always be 100% funded is because if one is underfunded there's no guarantee the situation will ever improve and in fact may get progressively worse (as in the case of Sears, sometimes for many years) until final bankruptcy.

How about this? No more employer pension plans, just have a super-CPP, each employee's deduction / employer's contribution legislated based on income level and then you get your pension, based on your specific employment history (i.e. the more you worked, earned and contributed during your working days the more you get), from the government fund. I think many European countries do something like this.

A problem is lots of people live high on the hog, spend their money on going out to eat regularly, trips, cottage, expensive toys, luxury-decorated homes, expensive clothes, credit card and loan interest, etc, and then when they get to retirement they don't have enough for a decent retirement. My plan ensures that doesn't happen, plus it ensures those who were more prudent aren't penalized by now having to subsidize in retirement their spendthrift neighbours.

August 12, 2017
10:52 am
Norman1
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Loonie said
You seem to be telling me two things, Norman. First, that the pensioners constitute unsecured creditors of Sears; and, second, that the Sears pension plan is segregated and registered as such. If the latter is true, then the former could not be an issue. If it's a segregated plan, separately managed, then why are we having this issue?

As AltaRed pointed out, all the contributions, employer and employee, are safe in the separate pension fund.

The defined contribution pension part is all up to date.

It is the defined benefits part needs to be topped up. I don't think Sears Canada raided the fund assets. Interest rates in recent years have been lower than expected. I think that the returns on fund's assets have been below the actuarial estimates. That is not unique to Sears Canada's pension fund.

Sears Canada had been making extra contributions regularly to eventually close the shortfall. The December 2015 valuation showed there would eventually be a $28.9 million surplus with the continuing extra contributions! sf-surprised Without them, there would be a $266.8 million shortfall.

That is a 19% shortfall in the funding of the defined benefits pensions as of December 2015. So, the defined benefits pensions were 81% funded.

Loonie said
For the record, I do think that elderly people who are too old to work and who have had their necessary income snatched away are a higher priority than the ownership of used furniture. But that is not really the kind of either/or that we should be looking at, and it distorts the problem to put it in terms of people versus property.…

I disagree. Secured lending allows business to borrow without the lender having to get involved in things like employer-employee relations. Repay the loan or return the collateral.

As well, when they retired, the pensioners could have commuted the value of their pensions out to their own personal life annuity. Monthly payout could be lower. But, that's the price to be paid for insulating one's pension from one's employer.

In reality, no Sears Canada pensioner will have his/her pension snatched away. The question is whether the defined benefits pensioners will be receiving closer to 81% or closer to 100% of their pension.

Lots of creditors would be delighted to get 81% to 100% back in the event of bankruptcy.

August 12, 2017
11:55 am
Jon
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Bill, your proposal is actually what the current government is doing right now sf-laugh.

However, such fund will be way too large and end up suffer from dis-economic of scale in the end, as it have difficulty to find enough investment target that have sufficient return to fulfill its obligation.

I think another way to deal with pension is to encourage company to set up multi- companies cross industries private pension plan in order to diversify the risk of pension plan contributor overly focus on one company and industry. At the meantime, we can also set up a government insurance scheme for pension plan to give basic protection to retiree to ensure the livelihood of elderly is partially protected. In addition, I also propose a hard cap on unfunded liability will help avoid the situation where poorly managed company letting its pension plan's unfunded liability to grow continually.

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