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Stelco's salaried pensioners have submitted a claim to the company for
$14 million they say is owed to their pension fund.
The group, representing nearly one-third of Stelco's 13,000
pensioners, says the steelmaker "breached its fiduciary duties"
by improperly managing its pension plans.
Since 1996, the provincial government has been allowing Stelco to put
money into the Pension Benefits Guarantee Fund (PBGF) rather than topping
up its pension plans.
The law that allowed this -- referred to as the 'too big to fail
clause' -- was based on the assumption that large companies could not go
bankrupt.
While Stelco is paying all of its pensioners, the firm was not forced
to fill up a contingency fund in case its pension plans had to be wound
up.
Instead, it has been making payments to the PBGF, which works like an
insurance fund.
In a press release, Stelco's salaried pensioners say the steelmaker
used money from the pension trust fund to pay the PBGF, rather than
paying out of the steelmaker's assets.
They say Stelco used "inappropriately aggressive" accounting
assumptions to make it appear that the salaried pensioners' plan had a
surplus. The company then used the surplus money to make its PBGF
payments, the pensioners say.
"Stelco is required to pay PBGF premiums from its assets, not
from the trust fund of the Stelco plan," the press release said.
"The practice of paying the premiums from the trust fund has
resulted in more than $14 million owing to the fund."
Stelco declined to comment until the company has had a chance to look
over the pensioners' statement.
Lawyer Murray Gold, who represents the salaried pensioners, said the
group felt the need to get their claim in now because it will be too late
after the steelmaker completes its bankruptcy protection. When Stelco
filed for protection on Jan. 29 of last year, all of the debts it owed
were frozen.
Yesterday was the final deadline for creditors to notify Stelco of
those debts.
Now Stelco and the court will sort through those claims. All of the
accepted creditors will have a vote on Stelco's final restructuring plan,
which will determine how much they get paid.
The salaried pensioners have also submitted a second claim, because
their pension plans have not been indexed to inflation since 1997. The
union's pension plans have been indexed. The salaried pensioners say
Stelco promised that group "continued commitment to internal equity,"
implying their pension plans should have the same increases as the union
plans.
The pensioners have not yet attached a dollar figure to that claim.
tperkins@thespec.com
905-526-4620
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