In early 2002, only a few months before Slater Steel filed for bankruptcy protection, two pension funds at subsidiary Slater Stainless Corp. received a stamp of approval from Melvin Norton, a veteran actuary with Aon Consulting Inc. The Ontario Superintendent of Financial Services, the province’s pension regulator, later concluded the funds were in fact 40-per-cent underfunded. It sued Mr. Norton for allegedly filing a false actuarial report.
The charges against Mr. Norton were dismissed by an Ontario judge. In 2008, the Canadian Institute of Actuaries fined Mr. Norton $15,000 and placed him under supervision for six months after it found that he had failed to perform professional services with “skill and care.”
Mr. Norton says he was not responsible for the pensioners’ losses. “It was the fact that the company didn’t put enough money in the plan.”
“We need an early-warning system,” says Mr. Arthurs, who headed the Ontario commission. “There is a wide zone of discretion left to actuaries who are making judgments about the health of pensions.”
Justice can seem selective for pensioners whose funds become entangled in bankruptcy proceedings.
In court, however, workers, unions and even pension regulators have been locked in losing battles against creditors. In two recent cases, creditors offering new financing have successfully demanded that the courts suspend payments owed to repair pension deficits.
This is a dream buster …. People have really been caught short.
By trumping pension laws, the judges in these cases are seeking to strike a reasonable commercial solution that can help the companies survive and possibly one day prosper sufficiently to repair ailing pensions. But these decisions come with risks. If restructuring efforts fail and company assets are liquidated, pensioners have little hope of recouping owed pensions, because they are outranked by most other creditors.
“Everyone feels like a victim here,” says Carol Kirton, 52, who has worked for 32 years at one of the companies – the Port Hope, Ont.-based branch plant of U.S. auto parts maker Collins & Aikman Corp.
Ms. Kirton says company officials have disclosed that the pension has a 30-per-cent shortfall. After two years of bankruptcy protection, she says hope is fading that the company will survive.
Concerns are rising among labour groups and their legal advisers that bankruptcy proceedings are becoming a place were companies can too easily amputate their infected pensions.
“Bankruptcy, or the threat of bankruptcy, is being used to eviscerate pension funding,” says Murray Gold, an adviser to Ontario’s Arthurs commission and a Koskie Minsky LLP lawyer who specializes in representing labour groups. “Bankruptcy court … is not the right place to make social policy.”
Attention must be paid
There are other places besides bankruptcy court to reform a damaged pension regime. But these court room tug-of-wars will likely continue until governments, businesses and workers adopt what former Ontario pension commissioner Mr. Arthurs calls “a new mindset.” That new approach would recognize that battles over shrinking corporate pension plans have, at best, only fixed the system at the margins and, at worst, delayed momentum for change.
Turning the Band-Aid solutions into a blanket fix for Canadian retirees would require Ottawa and the provinces to take a difficult and politically unattractive first step: Recognizing that the century-old business promise of a comfortable retirement is vanishing like the trading companies, retailers and railroads that first introduced them. Until that happens courts will continue to be the graveyards of broken retirement dreams.
Just ask Mr. Walker, the former Aleris executive. “This is a dream buster …. People have really been caught short."
With files from reporter Greg Keenan
