Advisors most certainly have a dog in this fight, with a court of appeal set to decide whether plan members will continue to remain at the front of the queue when an employer files for bankruptcy.
Advisors most certainly have a dog in this fight, with a court of appeal set to decide whether plan members will continue to remain at the front of the queue when an employer files for bankruptcy.
Former employees of Stelco/U.S. Steel Canada filed a "friend of the court" brief urging the Ontario Court of Appeal to overturn a Superior Court decision that moved amounts owed to secured creditors ahead of pension plans during the windup of a bankrupt employer.
The group is claiming in the recent Superior Court case of Grant Forest Products Inc., Justice Colin Campbell wrongly caved in to lender threats to restrict the flow of credit if their claims against the company were nudged out of the top spot.
The Ontario Court of Appeal is now considering that decision.
"This is a very potent remedy for pension plan members when their plans are wound up in a deficit situation," Andrew Hatnay of Koskie Minsky LLP said to OurWindsor.ca. "It is an important remedy that gives pension plan members priority in a windup."
Justice Campbell’s decision threatens the status of pensions by holding the legal principle of “deemed trust” is only created if the employer winds up its pension plans before going bankrupt.
The decision leaves pensioners languishing at the back of the queue, along with other unsecured creditors, with employees only getting paid if there's anything left after secured creditors have been satisfied.
Hartnay argued the judge is trying to do someone else’s job, "What he's doing there is his own version of economic engineering. He thinks he is doing a service to society … but that is Parliament's job."
The deemed trust idea was validated as recently as 2013 by the Supreme Court of Canada, which ruled it has a priority over "all other secured creditors" because "pension benefits are a form of deferred compensation for the employees' service."
"We don't have a stake in the Grant Forest decision itself, but we have a big stake in how this principle is applied," Hatnay said. "We want to avoid losing this protection at all costs. That is crucial to the pensioners."
U.S. Steel Canada’s four main pension plans were $830 million underfunded as of Dec. 31, 2013. A new solvency report is being prepared, but the retirees' court brief warns, "It is expected that the Solvency Deficiency in the pension plans has worsened since December 31, 2013."
In its own filing, Grant Forest's major creditor, West Face Capital Inc., argues it would be unfair to allow the steel pensioners to intervene, as they "will not make a useful contribution" to the issues in its case, which only the decision to push Grant Forest into bankruptcy. That neutralizes the deemed trust and pushes West Face to the head of the queue.
Former employees of Stelco/U.S. Steel Canada filed a "friend of the court" brief urging the Ontario Court of Appeal to overturn a Superior Court decision that moved amounts owed to secured creditors ahead of pension plans during the windup of a bankrupt employer.
The group is claiming in the recent Superior Court case of Grant Forest Products Inc., Justice Colin Campbell wrongly caved in to lender threats to restrict the flow of credit if their claims against the company were nudged out of the top spot.
The Ontario Court of Appeal is now considering that decision.
"This is a very potent remedy for pension plan members when their plans are wound up in a deficit situation," Andrew Hatnay of Koskie Minsky LLP said to OurWindsor.ca. "It is an important remedy that gives pension plan members priority in a windup."
Justice Campbell’s decision threatens the status of pensions by holding the legal principle of “deemed trust” is only created if the employer winds up its pension plans before going bankrupt.
The decision leaves pensioners languishing at the back of the queue, along with other unsecured creditors, with employees only getting paid if there's anything left after secured creditors have been satisfied.
Hartnay argued the judge is trying to do someone else’s job, "What he's doing there is his own version of economic engineering. He thinks he is doing a service to society … but that is Parliament's job."
The deemed trust idea was validated as recently as 2013 by the Supreme Court of Canada, which ruled it has a priority over "all other secured creditors" because "pension benefits are a form of deferred compensation for the employees' service."
"We don't have a stake in the Grant Forest decision itself, but we have a big stake in how this principle is applied," Hatnay said. "We want to avoid losing this protection at all costs. That is crucial to the pensioners."
U.S. Steel Canada’s four main pension plans were $830 million underfunded as of Dec. 31, 2013. A new solvency report is being prepared, but the retirees' court brief warns, "It is expected that the Solvency Deficiency in the pension plans has worsened since December 31, 2013."
In its own filing, Grant Forest's major creditor, West Face Capital Inc., argues it would be unfair to allow the steel pensioners to intervene, as they "will not make a useful contribution" to the issues in its case, which only the decision to push Grant Forest into bankruptcy. That neutralizes the deemed trust and pushes West Face to the head of the queue.
