Former employees of Wabush Mines in Newfoundland and Labrador received good news Thursday when the provincial government announced a legal move that could help them recover some of their losses from their defined benefit pension plan.
The pensioners have been fighting for priority among creditors since the parent company, Cliffs National Resources Inc., closed its subsidiary operations in Canada and filed for creditor protection under the Companies’ Creditors Arrangement Act in May 2015.
Cliffs Natural Resources, headquartered in Ohio, first terminated the pensioners’ health benefits and then wound up an underfunded pension plan, resulting in an income reduction of 21 per cent for unionized retirees and 25 per cent for non-unionized retirees. It also dropped administrative responsibility for the plan, leaving retirees to pay the fees, according to Rita Pynn, a retiree and member of the pension committee.
Having worked at Wabush Mines for more than 40 years, Pynn is vowing to fight to recover the losses. “You’re talking about people who are in their 70s, 80s and older. In addition to losing their pensions, they’ve lost medical benefits and they have to pay for medical issues out of their own pocket. We have widows who are living in the community whose husbands have passed away. Right now, some of them are receiving as little as $300 to $400 a month,” she says.
Since Wabush Mines’ headquarters are in Montreal, creditor proceedings were to take place in Quebec. Pensioners, however, want their specific case subject to Newfoundland and Labrador’s Pension Benefits Act because it provides for a deemed trust and outlines the role it plays in the event a company goes into liquidation or bankruptcy.
A deemed trust means the pensioners’ money isn’t part of the employer’s assets because it’s held in trust for the plan members, says Andrew Hatnay, a partner with Koskie Minsky LLP’s benefits and pension practice and legal counsel for the non-unionized pensioners. “So if someone gives me $20 to hold in trust for you, I can’t spend that money. Even if you don’t have it in your possession, I’m holding it in trust for you, which means you’re the beneficiary and it doesn’t form a part of my property.”
While all Canadian provinces’ pension laws provide for deemed trusts, the language varies and Quebec’s Supplemental Pension Plans Act is significantly different from Newfoundland’s legislation, says Hatnay. Newfoundland’s legislation, he notes, delves deeply into the deemed trust, while Quebec’s pension act is brief and doesn’t expand on the role it plays upon the windup of a pension plan in deficit.
Initially, the Wabush Mines retirees asked to move their case to Newfoundland and Labrador so it would be subject to that province’s pension law, but the judge overseeing the case denied the request, according to Pynn. However, after pressuring the government for help, the retirees learned on Thursday the province is proceeding with a reference to the Supreme Court of Newfoundland and Labrador Court of Appeal on the interpretation of the deemed trust under the province’s Pension Benefits Act.
“It’s the first positive thing we’ve had going in our favour since the plan closed down,” says Pynn. “We’ve been waiting since around the third of February and things have been really tense. People have been emailing their [members of the house of assembly], the provincial government, their MPs in Ottawa on a constant basis. . . . It’s one step forward, so it’s been pretty upbeat today.”
Cliffs National Resources didn’t respond to Benefits Canada’s request for comment on the Wabush Mines case.