The federal government is proposing legislation to protect an employee’s pension in the event their employer becomes insolvent. The purpose of the legislation is to ensure underfunded pension plans with insufficient assets have the means to ensure those pensions are given priority over large creditors’ executive bonus payouts during the insolvency process.
Advocates of the new legislation suggest it could help employees whose employers face financial difficulties avoid costly legal battles and catastrophic shortfalls in their pension income.
There is very little legislation in Ontario that serves to protect an employee’s pension when their employer is facing bankruptcy proceedings. However, Ontario is the only jurisdiction in Canada with a pension protection fund that can help when an employer goes bankrupt. The fund guarantees specified benefits up to $1,000.00 per month for members who meet certain age and service criteria.
The proposed legislation would apply only to defined-benefit pension plans run by private-sector companies. Many defined-benefit pension plans are underfunded and do not possess enough assets to pay their total liabilities. As one would guess, this becomes a disastrous situation for pensioners when their employer becomes bankrupt, as we have seen in the past with large corporations like Sears.
Sears paid its shareholders billions of dollars in dividends for several years before it sought creditor protection in 2017. At that time, its pension plan had a deficit of about $270 million. Still, Sears paid millions of dollars in executive bonuses, which the company argued were necessary to retain its leadership and management staff through the insolvency process. The new legislation aims to curb such corporate conduct and ensure that pensioners are at the top of the priority list.
If your employer is facing bankruptcy and you have questions about how it will affect your pension payments, consult an employment lawyer to discuss your legal options.
At Lecker & Associates, we exclusively represent employees. We have extensive experience in handling sensitive pension matters. Our experienced Toronto employment lawyers will review your case to seek solutions that protect your retirement savings.
In many cases, we do not require a fee upfront. Instead, we charge it at the end as a percentage of your settlement. If you are in a dispute with your employer over your pension, contact us to schedule an appointment to discuss your case.
