Retired Money: Sears Canada pension outcome could pave way for copycats

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My latest MoneySense Retired Money column looks at the fate of members of the Sears Canada pension plans (DB and DC). You can find it by clicking on the highlighted headline here: What Sears retirees can do about the reduced DB pension.

While the focus is not per se on the demise of Sears Canada itself, and the loss of thousands of jobs, I refer readers to an excellent article by the Globe & Mail’s Marina Strauss (it may only be available to subscribers): Who Killed Sears Canada?

Not only will many retirees get an estimated 19% haircut on their promised pensions, but thousands of workers have lost their jobs without severance, and lost health and dental benefits. My MoneySense column reiterates that Ontario members of the Sears DB pension will be better off than Sears retirees in the other provinces, because of the Pension Benefits Guarantee Fund in Ontario, which we looked at a few columns back. Roughly half of Sears employees and retirees live outside Ontario.

Should workers take Commuted Value?

One of the questions before Sears retirees is whether to take the Commuted Value of the pension, if and when that option is offered, or to sit tight and wait for the promised pension benefits, even if they are — as expected — roughly 19% lower than they should have been. (The plan is roughly 81% funded.) This should also be a reminder to anyone in an employer pension of the importance of keeping tabs on your own plan’s solvency.

The piece ends with a warning that the manner in which the Sears Canadian subsidiary was gutted, including the pension plan, may become a model for other branch-plan subsidiaries of foreign giants, which in turn would have profound implications for employment and the health of other corporate pension plans.

After all, while Ontario residents may be made whole or almost whole by the PBGF, there’s a limit to how many pension plans can go to the trough of the guarantee fund. It’s one thing to monitor pension plan solvency, but the Government of Ontario itself is hardly a picture of fiscal rectitude!

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