Wednesday, January 13, 2010

Molly has blogged on the matter of pension protection in the case of corporate bankruptcy before, particularly in the case of Nortel retirees- the most egregious recent case in Canada. The following is another entry on this subject, this time from an open letter on the part of two labour organizations to the last Finance Ministers' meeting last December. What I found more interesting about the following is the glancing reference as to how Canada's bankruptcy laws can actually be used to not just dodge legitimate debts but even to make money. Now I have always associated 'living off bankruptcy' with the usual low flying scam artist type, but it stands to reason that the high fliers can make money off this as well-in much bigger batches. Here's the story from the online progressive Canadian newsjournal Public Values. People interested in following this issue might consider checking in now and then with the Congress of Union Retirees Canada.
Unions tell finance ministers of social, economic risks of failing to support retirees:
Companies hiding behind bankruptcy courts to reduce pension benefits.
On the eve of a meeting of federal, provincial and territorial finance ministers' that was held in December in Whitehorse, two groups sent a letter urging them to fix the pension system that is allowing companies that go bankrupt or that are sold to discontinue benefits to retirees.

The letter, signed by Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada (CEC)( CEP Union actually-Molly ), and Don Sproule, national chair of the Nortel Retirees and former employees Protection Canada (NRPC) pointing out the social and economic risks of failing to provide support for seniors while companies hide behind the protection of bankruptcy courts.

"As a result, tens of thousands of pensioners are facing drastic pension benefit reductions. Retirees are particularly vulnerable people as they cannot replace their benefits by re-entering the workforce or further reducing their living costs. Most of them are already living on a tight budget, many are in ill-health and these cuts will drive them into poverty and despair."

The letter expresses concern that pension funds be financed at a solvency level and that the funds should come from the assets of bankrupt companies, not the taxpayer. It further examines how Canada has outdated bankruptcy laws that can sometimes be manipulated by bondholders to trigger failure in order to collect insurance and other payments. As well, they are uncomfortable with the thought of pensioners having to suddenly manage their own pensions in a difficult market.

Before the same meeting, the Professional Institute of the Public Service of Canada (PIPSC) issued a press release stating how they were "appalled" with the C. D. Howe Institute's Pension Paper released in time for the meeting. Fearful of the influence of right wing commentators, PIPSC pointed out how public sector pensions are actually "deferred salary" where members contribute between 8.4 and 10.15 per cent of their annual salary.

David Gray, CGA and vice-president of PIPSC, wrote: "The data presented includes total debts for the public service pensions but only includes the amounts paid in from 2000 forward. It fails to include the $30B paid in by public service employees, or the $62B set aside by the employer as its contribution. Finally it fails to mention the additional $30B pension surplus that was seized by the government in 1999 and used to pay down the national debt."
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