Pensioners of a New Brunswick co-operative have suffered a blow as legal wranglings continue over the fate of pensions at several Canadian companies.
In Moncton, N.B., this week, a group of 90 former employees of Co-op Atlantic suffered a setback in a case centred on a 32 per cent reduction to their pension entitlements as the plan winds up. And the union representing employees of Essar Algoma and U.S. Steel Canada is pushing back against a potential buyer looking to merge the two Ontario-based companies without protecting pensions and retiree benefits.
In June 2015, Co-op Atlantic obtained protection from its creditors under the Companies Creditors’ Arrangement Act. Then in April, non-unionized former employees received letters informing them that a 32 per cent reduction to their pension entitlement would begin on May 1, 2016. “This is an interim reduction that reflects the estimated funding level of the plan on its wind-up date, December 31, 2015,” the letter stated.
“The final funding level can only be approved once the Court approves distribution of the assets of Co-op Atlantic, the Superintendent of Pensions determines the status of plan amendments that were made at the time of the proposed conversion to shared risk, and the wind-up report is approved.”
Read: Co-op Atlantic staff facing 30% pension reduction
However, a settlement reached on April 28 provided for the distribution of virtually all of the cash assets to the creditors, according to Andrew Hatnay, a partner in Koskie Minsky LLP’s benefits and pension practice who represents at least one of the former Co-op Atlantic employees. “The non-union retirees had no prior input on the settlement and were not given prior notice of the court hearing to approve the settlement.”
A group of 90 of the non-unionized pensioners went to court Monday to request a representation order so that Koskie Minsky LPP could represent the entire group as one voice. “The judge said it’s too late in the process and he’s not willing to grant such an order,” says Hatnay. “We are speaking with our clients about the next step. They are obviously very disappointed with the court’s decision. Thirty-two per cent is a very significant cut. It’s on the high side for pension cuts in solvency proceedings. They are already fairly low pensions to start with, and many of the people who contacted us are forced now to emerge from retirement and look for jobs.”
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In a letter sent to Koskie Minsky earlier in June, Co-op Atlantic’s counsel at Goodmans LLP acknowledged the reductions were “deeply unfortunate and will cause a significant loss to the beneficiaries of the pension plan.” But it suggested the result achieved in the CCAA proceedings “is the best outcome that could have been achieved in the circumstances.”
Derek Gerard, a principal at Eckler Ltd., says the court decision allows the process to move forward. “The finalization of CCAA proceedings through Co-op Atlantic’s restructuring plan allows the plan to recover a majority of the remaining available assets and allows us to complete the winding up of the pension plans and update calculations regarding pension entitlements,” says Gerard, whose firm is the pension administrator for the plan.
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In the meantime, the union representing the employees and pensioners of steelmaker Essar Algoma and U.S. Steel Canada is condemning a decision to eliminate Essar Global as a potential buyer of U.S. Steel Canada’s operations in Hamilton and Nanticoke, Ont. The United Steelworkers says if KPS Capital Partners, a hedge fund bidding to buy and merge the two companies, is successful, it won’t protect pensions and retiree benefits.
“This is a potentially devastating decision for thousands of workers, pensioners and the communities that are most affected by the restructuring of our steel industry,” said Marty Warren, the union’s Ontario director, in a press release. “Essar Global has indicated it is more committed than other bidders to protect jobs, pensions and retiree benefits.”
“We don’t need a hedge fund that intends to make huge profits at the expense of workers and pensioners. We have to ensure this restructuring benefits the long-term interests of workers, pensioners and our communities,” said Gary Howe, president of union Local 1005 in Hamilton, in a press release.
U.S. Steel Canada has been operating under CCAA protection since 2014.
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