Sears Canada workers who were left with reduced pensions after the company’s collapse last year are being promised up to $500 a month in additional help from Ontario’s Liberal government.
Wednesday’s Ontario budget pledges to make a package of provincewide pension changes announced last year – but not yet brought into force – retroactive to May 19, 2017.
It’s a move that Ontario Finance Minister Charles Sousa says he is making so that thousands of Sears workers are eligible for a larger payout from Ontario’s Pension Benefits Guarantee Fund, which backstops defined-benefit pension plans when employers go belly up.
About 18,000 former Sears employees are facing an uncertain retirement with their pensions expected to be cut by as much as 19 per cent after the company went into bankruptcy protection and its pension fund was left $267-million short.
Under Ontario’s current program, retirees in defined-benefit pension plans who see their pension payments dwindle, after their plans are wound up without enough cash left to cover their obligations, can receive up to $1,000 a month.
Last year, Premier Kathleen Wynne’s government announced plans to boost that maximum payout to $1,500 a month, as well as scrap the age and years-of-service requirements for the payouts.
But the legislative changes, passed last year, have not yet been proclaimed. On Wednesday, Mr. Sousa said in his budget that making them retroactive would “ensure that former Sears Canada employees could benefit from receiving this additional support.”
Sears retirees, who have been fighting in court for their pensions and asked the government for help, praised Ontario’s move. They say it would at least guarantee retirees in Ontario the first $1,500 of their monthly pension payments, whatever happens with the company’s filing for bankruptcy protection.
“I am gratified to learn that the Ontario Government has responded to our letter of January 12th and agreed to provide further assistance for many Ontario retirees,” said Bill Turner, president of the Sears Canada retiree association, in a statement. “I am hopeful that other actions will be taken that will provide relief for all of our pensioners across Canada.”
The Ontario budget also pledges new legislative amendments to ensure that provisions for the pension backstop fund are reviewed periodically.
The government is also promising other pension changes, including setting up a regime already in place in Britain and the United States, that would force companies with pension plans to disclose red flags to the province’s newly created pension regulator, such as “significant asset stripping” or the issuing of “extraordinary dividends.” The new regulator, the Financial Services Regulatory Authority, was announced in 2016 and is supposed to be up and running by 2019.
Critics have said Sears paid out hundreds of millions back to its investors for years, leaving its employees’ pension fund in the lurch. Most of the proceeds from nearly a decade of asset sales went to its majority owner, U.S. hedge-fund manager Edward Lampert.
However, despite the government’s changes to increase the benefits backstop to pensioners, just last year, it also passed rules that would actually give companies more leeway to avoid topping up their pension funds when money is tight.