CP asks for 13-year extension on pension plans

Originally published in The Toronto Sun on July 9th, 2010. To go to the Toronto Sun Website please click here

OTTAWA — The federal government could set “an exceptional” precedent if it offers The Canadian Press a 13-year reprieve to pay off its pension plan shortfall, industry experts say.

CTV Globemedia, Torstar Corp. and Gesca, the owners of La Presse, are in negotiations with the newswire’s union and hope to firm up plans this fall to take over the cooperative and change it into a for-profit business.

Part of the sticking point is what to do with the company’s pension plan which is $34.4 million in the red.

The union, the Canadian Media Guild, and The Canadian Press’ management agreed last year to ask the federal government for special permission to use a 13-year payment schedule.

“I’ve never heard of a 13-year postponement, it seems unusually large,” said Carleton University business professor Ian Lee.

With so many pension plans in trouble, the feds would face tremendous pressure if they created a precedent by granting CP’s request, he said.

“Anyone else who is a similar position, whose pension is under water would come forward and say I want the same 13-year privilege too (because) it is a far less extreme hit to their income statement,” Lee said.

Cabinet ministers have only ever approved 10-year extensions, as was done for Air Canada, said Department of Finance Canada spokesman Jack Aubry.

The Canadian Press has already been granted special permissions to delay pension payments after arguing it would be forced into bankruptcy if it had to fund pension plans under current terms.

Federal legislation allows companies five years to pay back the money they owe.

Pension lawyer Murray Gold said he thinks the lengthy exemption would “raise some pretty serious red flags.”

“The whole idea of pension planning is that you put in the money quickly so that the pension promise is secure and stretching repayment options is always risky, especially to 13 years, it is quite a stretch … (the company) would have 13 years during which they could become insolvent,” he said.

Terry Pedwell, president of the Guild’s CP unit, said the union isn’t bargaining with the prospective owners to change the 13-year payment schedule, employees are more concerned they are being asked to close down their pension plans.

“That doesn’t change the past deficit (but) they think that closing the plan for new members is a way to deal with this,” he said.

The potential new owners, some of the wealthiest families in Canada, won’t be forking over their own cash.

“They are not putting any money at all into paying down the pension deficit. They want The Canadian Press to pay this down out of general revenues,” Pedwell said.

Susan Eng, CARP’s president, said companies that ask for lengthy exemptions are “holding everybody at ransom.”

“Their attitude is if you don’t give us the 13 years, we will go bust and all the employees will not have a job at all,” she said.