This meeting was held at the Hamilton Convention Centre from 7:00 to 9:00pm and included an update on Committee activities, a review of the CCAA proceedings from our lawyers, with a question and answer period, and presentations from, and Q&A with, candidates from the three major political parties.
Paul Wendling chaired the meeting and started with a brief review of SSPO activities. Four meetings have been held with Stelco representatives at which Stelco has provided a summary of its current business situation and groundwork has been laid for future discussions. We are concerned about the slow rate of progress in the CCAA proceedings and the lack of up-to-date information from Stelco, particularly on the state of our pension plans. At the last meeting, on June 15, Hap Stephens (Stelco’s Chief Restructuring Officer) agreed to give us the latest (December 31, 2003) pension actuarial data. This will be assessed by our recently-assigned pension and benefits actuary, Tom Levy, who has wide experience working on US steel industry insolvencies. Levy, whose assignment has been approved by Stelco, will be able to interpret pension and benefit plan details and risks.
Much of the Committee’s recent effort has been on lobbying a total of 25 federal and provincial politicians to ensure that they understand our concerns.
About half the salaried pensioners have paid their $50 to SSPO. It is important that those who have not and who can afford the money also pay to ensure equity among the members.
UPDATE ON LEGAL PROCEEDINGS AND RESTRUCTURING
Murray Gold, Koskie Minsky
We have challenged the clause in the initial Court Order that allowed Stelco to unilaterally change the pension and benefit plans without notice. The Court has said that there will be no change to our pensions and benefits until our arguments against this clause have been heard. So far there is no date set for this hearing.
The focus of the restructuring has not been on the salaried pensioners but rather on the struggle between Stelco and its unions. Quite recently the Company and the unions have agreed on a framework for future discussions, including the Lake Erie Steel Co. contract negotiations, largely because of the intervention of the Court-appointed mediator, George Adams, an ex-judge, labour relations expert and mediator. While Adams will initially focus on the Company/union problems he will ultimately be available to assist other stakeholders, including the salaried pensioners.
The Pension Benefit Guarantee Corporation in the US is a federal pension insurance fund that provides members of insolvent pension plans up to about $4000/month. In Ontario a similar insurance plan, the Pension Benefit Guarantee Fund (PBGF) provides up to $1000/month but has not been updated since it began in 1980. In the UK a new pension insurance system has just been introduced. So this type of support is not unusual and the members must keep government focussed on their role of protecting the most vulnerable.
We will need to review detailed Company information on the books, business plans, pension plans, etc. The Company wants us to sign a confidentiality agreement before giving us this information but under the current terms of the agreement anything provided to us by the Company is confidential and could not be passed on to the Members. We have declined to sign this agreement but are continuing to have discussions with the Company to reach a mutually acceptable agreement. We do need to be able to pass on the details of the pension and benefit plans, but not the business plans, technology, etc.
Q Is Stelco currently making contributions to the pension plans?
A No, because the last valuation report showed that the plans had a surplus on a “going concern” basis. There are two ways of looking at pension plans:
1. Wind-up, where the plans is closed down, the plans are insolvent and do not have enough money to provide the required level of pensions, and
2. Going concern, where the plan continues, the actuarial assumptions and calculations indicate the plan has a surplus and therefore, under current rules, no contributions to the plan are required.
Q How long will restructuring take?
A This is not known. The restructuring has been moving slowly and the high current steel prices have taken away the urgency. It is expected that over the next few months that discussions between the Company and the steelworkers will open up a broader range of topics, including topics for us, but the process is slow and will take time.
Q When we get a reduction in pension, how much will we lose?
A The plan is about 80% funded and the PBGF would top up the first $1000, if the plan is wound up. But the Company has not indicated any intention of winding up the plan. Typically what happens is that the pension benefits don’t change but the plan funding rules get relaxed, which increases the long-term risk to the plan solvency.
Q What is the worst-case scenario for the pension?
A In the worst case, the stock market melts down, the plan is wound up at much less than 80% funded and the governments decline to help. If this happens, monthly pension benefits will very likely be reduced.
Q Can salary and hourly pension plans be combined?
A Currently the Financial Services Commission of Ontario (FSCO) has put a freeze on plan mergers. But a merger(s) is a possibility.
Q What happens to the pension plan when the last member dies?
A Because that is the way the legislation is drafted; there is no special protection for pensioners.
Q What impact did the pension plan contribution holiday have on the current situation?
Q If the plan is wound up, who administers it?
A Generally, when an employer is bankrupt FSCO will appoint an outside party to administer the wind up of the plan or the FSCO Superintendent may take over the administration of the plan. Alternatively, if Stelco remains a viable company it can administer the wind up of its pension plans.
Q How soon after wind–up does the PBGF provide support?
A It will take some time, longer if legal
pressure is not applied.
Q Is the federal government taking the problem of underfunded pension plans seriously?
A The government appears to be dealing with this problem on a case-by-case basis. So far the government has not been very responsive and seems to be hoping that the problem will go away.
Q Who controls our pension plans?
Q What effect on our situation would a sudden increase in pensioners have, due to restructuring?
A It could be positive or negative and would need to be assessed by an actuary. When people retire early it is usually on a reduced pension so the long term effect on the plan may be positive.
Q A decade ago I was involved in a partial wind-up of the plan. Am I affected by the current situation?
A Those people are receiving monthly benefits from an annuity from an insurance company so their pension is not at risk. However, non-pension benefits are at risk.
Q What happens if Stelco makes a profit this year because of high steel prices?
A This would be extremely unusual and there are many possibilities: insolvency could come to an end, more likely it will remove the sense of urgent crisis and perhaps the severity of the restructuring (need for cost-cutting) will be reduced.
Q Is there any guarantee for non-pension benefits?
A There is no separate fund for non-pension benefits so that if the Company becomes bankrupt the benefits will end. Unlike pensions, there are no legal rules governing non-pension benefits so any issue resolution depends on common law. Our position is that, for pensioners, the benefits are “crystallized” and can not be terminated, but this position is untested in court. It is expected that Stelco will want to cut non-pension benefits or require that we pay a higher proportion of the premium. We can decide if what is being asked is fair, or we can negotiate or challenge in court if agreement can not be reached.
Q I have recently experienced an apparent reduction in health benefits. Is this allowed?
A There has been no change in coverage since February 5. If there is evidence that coverage has been reduced this information should be given to the SSPO Committee and the issue will be raised with the Company.
The following candidates agreed to indicate their positions and answer written questions concerning matters of interest to Stelco pensioners:
Tom Jackson – Conservative candidate for Hamilton Mountain
David Laird – NDP candidate for Burlington
Tony Valeri – Current Minister of Transport and Liberal candidate for Hamilton East – Stoney Creek
Some remarks are given verbatim where thought to be significant.
· stronger trade rules
· review of CCAA to strengthen pensioner’s position
· ensure no slippage in pension level
· allow for increase pension plan surplus by changing the Income Tax Act
No specific position in preamble
· “need for a federal financial contribution to the successful restructuring of Stelco”,
· “restructuring can not take place on the backs of pensioners”,
· “CCAA Act long overdue for review”,
· “We need to ensure that pensioners are not held hostage to bad management”,
· “Pensions are deferred wages.”,
· take a hard look at a federal pension insurance plan,
· review Income Tax Act and remove any disincentives to fund pension plans when there is a surplus,
· review RRSP contribution limits for those in defined benefit pension plans with the view to increasing the limit.
· “I want to continue to earn your respect and support. I’m optimistic; I think we can work together to ensure a successful restructuring and can ensure that the pensions are paid to those that they are owed to.”
Q Stelco has capital spending plans that will reduce operating costs. Would your party provide financial support to Stelco to allow these plans to be executed in the form of loans or loan guarantees?
We will support Stelco pensioners in the same way that Algoma pensioners were supported (note: the Conservative platform opposes corporate subsidies).
Laird
NDP committed to loan guarantees.
Loan guarantees – “we will be there”.
Fully review the CCAA with a view to protecting pensioners.
“Pensioners and employees are to be made the primary beneficiaries of insolvency plans”
I disagree with the Senate’s position. I believe that pensions are deferred wages and should be protected. The CCAA should be amended.
The federal government must work with the provinces to support a pension guarantee fund.
The national government needs to take a lead role in bringing together the provinces to establish an effective model that meets the criteria of what pensioners need in order to sustain themselves and, secondly, that it is adequately funded.
No constructive comments.
Q In the USA when a country is accused of dumping it is up to the country to prove it is not at fault. In Canada, when a country is accused of dumping it is up to the accusing company to prove the accused is at fault. How quickly will your party move to create a level playing field for Canadian industry?
No constructive comments.
The Canadian International Trade Tribunal and how it operates must be changed. The difference between the US and Canada is “exceptional” and must be addressed. Part of the Canadian Steel Partnership Council is working on this issue.
Agree with the US approach and would move to adopt it.
Q Do you support the use of the Employment Insurance fund as a bridge to support workplace downsizing?
I support the strategic retraining and adjustment assistance through the EI fund and the need to leverage provincial assistance.
EI should be used for its original purpose not to support restructuring.
We support the use of EI in restructuring.
Governments can’t prevent this but we can make sure that all of the laws concerning pensions, labour, environment, etc. are complied with.
No constructive comments.
No constructive comments.
Q What would your party do to address the pension plan underfunding problem created by Regulation 5.1 of the Provincial Pension Benefits Act?
We would pressure the provincial government to stop Stelco being grandfathered under this regulation.
The federal government does not have any jurisdiction.
This is under provincial control but the federal government would work to move the protection of pensioners up the creditor chain so that a company entering restructuring would know that they were liable for pension shortfalls.
2004-07-15