When employers go bankrupt, their current day misfortune can effectively reach back in time and undermine the accumulated pensions of their past employees, rocking the foundation built during working years to ensure financial stability in retirement.
If a business goes under while its pension plan is underfunded, pensioners end up losing part of the defined benefit pensions they worked a lifetime to obtain. This scenario has played out many times, with Sears Canada’s employees being the latest victims. It isn’t fair, and the situation is about to get worse.
Today, of the $246 billion in total liabilities for Ontario-regulated private sector defined benefit pension plans, $54 billion are unfunded. This week in Queen’s Park, the government is preparing to relax the rules for funding pension plans even further, allowing an additional $33 billion of liabilities to be unfunded, which will lead to more — and deeper — plan underfunding.
The idea is to help Ontario employers save by decreasing their obligation to fund their pension plans. But this saving is at the expense of the security of Ontario pensioners.