Former Cliffs Natural Resources Workers to Recover 60% of Pension Loss

Retirees and former unionized employees of mining company Cliffs Natural Resources in Canada may soon recover C$18 million ($14 million), or 60% of a C$28 million shortfall in their pension funds, according to terms of a settlement.

Members of Cliffs Natural Resources’ pension saw their health benefits eliminated after the company shuttered its Canadian operations and filed for creditor protection in 2015 under terms of the Companies’ Creditors Arrangement Act (CCAA), according to Canada’s United Steelworkers (USW) union. The pension plan had not been fully funded, and pensions were reduced by 21% to 25%.

The settlement affects 1,700 retirees and former unionized employees of Cliffs Natural Resources’ former Wabush Mine in Labrador, and the company’s rail operations in Quebec. The settlement calls for the pensioners to share a payment, estimated at C$10.9 million, to compensate for the loss of health benefits, although the precise amount of the payment will be confirmed at a later date, the union said.

“This is good news for pensioners and former workers,” Marty Warren, the union’s director for Ontario and Atlantic Canada, said in a release. “Our union has fought relentlessly alongside the former Cliffs workers and pensioners and this struggle has finally paid off with this settlement.”

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The USW said pension beneficiaries had registered as creditors with the court-appointed monitor, while the USW sought legal maneuvers to obtain as much as it could get for former employees, including priority treatment for the pension plan. The union also brought a class-action suit on behalf of the pensioners and former workers against Cliffs Natural Resources’ parent company in the US.

Warren said that despite the settlement, pension reform in Canada is still needed to better protect workers’ pensions and benefits in bankruptcy and insolvency cases.

“The fundamental problem remains—pensioners and workers most often get the short end of the stick in corporate bankruptcy and insolvency cases,” he said. “Their pensions and benefits are relegated to the back of the line, while banks and other financial institutions get priority.”

The settlement still requires the approval by the courts, as well as the creditors affected by the company’s bankruptcy protection proceedings.

Tags: Canada’s United Steelworkers Canada, Cliffs Natural Resources, Companies' Creditors Arrangement Act, Pension

A top British court ruled that the nation’s pension regulator has the power to order a company to support the pension plan of a failed subsidiary.

The UK’s Upper Tribunal has sided with The Pensions Regulator (TPR) regarding the use of its Financial Support Direction (FSD) to compel corporate parent media company ITV to financially support the Box Clever pension plan, which has 2,800 members and a deficit of £115 million ($155.4 million) The purpose of the FSD is to provide a rescue framework for pensions in deficit.

The judgment followed a two-week hearing in January, which was the first anti-avoidance case by TPR to be heard in full by the tribunal, according to the regulator. The TPR has so-called “anti-avoidance” or “moral hazard” powers that are intended to help protect pension members’ benefits; reduce the number of claims for compensation to the Pension Protection Fund (PPF), which is the UK’s pension lifeboat for collapsed companies; and reduce the PPF’s exposure if a claim is made.

The ruling “sends a clear message to companies linked with defined benefit pension schemes that we will not hesitate to use our anti-avoidance powers where we believe it is reasonable for them to provide financial support,” Mike Birch, TPR’s director of case management, said in a release. “We will pursue these cases for as long as necessary to protect pension savers and the Pension Protection Fund.”

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Box Clever was formed in 2000 as a joint venture between the TV rental businesses of Granada, which merged with Carlton Communications in 2004 to form ITV, and Thorn, which is now Carmelite. The respective employees were transferred to the new company and enrolled in the Box Clever pension plan, according to TPR.

TPR opened an anti-avoidance investigation following the collapse of Box Clever, and said that prior to the collapse, ITV received “significant value” from the joint venture.

“This has been a long and complex case, where the targets have raised numerous legal challenges causing significant delays in an outcome being reached,” said Birch. “We now hope that ITV will accept the Upper Tribunal’s findings and seek to work with TPR to put in place appropriate financial support for the scheme and deliver a good outcome for members.”

The Tribunal ruled that it is reasonable for ITV to provide financial support for the pension in the circumstances of the case. ITV has 14 days to seek permission to appeal the Tribunal’s decision. If there is no appeal, TPR’s determinations panel will issue financial support directions to ITV.

“By their choice of structure for the joint venture, the shareholders extracted considerable cash from the business with no risk of recourse to their assets,” said the Tribunal. “They retained an ongoing interest in the merged business with the possibility of further value being generated if the business was successful, but without having to bear any responsibility if the business, whose strategy they continued to determine, subsequently failed.”

Tags: Box Clever Pension Plan, ITV, Pension, The Pensions Regulator, UK, Upper Tribunal