A pedestrian passes the Hudson's Bay store in downtown Calgary, on March 20.Jeff McIntosh/The Canadian Press
Hudson’s Bay Co. has informed some former senior executives that their pension payments will be cut, as the retailer continues to liquidate the majority of its stores and the future of the company hangs in the balance.
Last Friday, the retailer sent letters to participants in its “supplementary executive retirement plan” (SERP), saying that HBC is stopping all payments under the SERP. The trustee will now be initiating a wind-up of the plan, according to the letter, which was obtained by The Globe and Mail.
Hudson’s Bay sponsors two different pension plans, and the one affected by the cuts is a plan allocated to current and former senior executives. The news does not affect thousands of members of the HBC pension plan covering other employees. The benefits paid under the SERP are only partially pre-funded through a trust, according to the letter dated March 28.
Because of “the company’s insolvency,” the letter stated, Hudson’s Bay will not make any payments to fund the trust or SERP benefits, and Royal Trust Corporation of Canada will wind up the trust. The trustee will issue payments to members of the plan, “which may be reduced or adjusted” according to the letter.
The remaining benefits that were not pre-funded, were paid from HBC’s general revenue – payments that have now stopped.
“As such, you will not receive any further payments or benefits under the part of the SERP that was not pre-funded,” the letter stated.
Court documents had previously disclosed that the SERP was not fully funded. The plan had a shortfall of $84.5-million as of Jan. 1, 2022, the time of its last valuation report, according to an affidavit from Hudson’s Bay chief financial officer Jennifer Bewley, which was filed in court on March 7.
By contrast, the largest Hudson’s Bay pension plan, with more than 20,000 members, is in a surplus position, according to lawyers representing HBC.
“So this is not a Sears situation,” Elizabeth Pillon, a lawyer with Stikeman Elliott LLP, said during a court hearing in March, referring to the 2017 liquidation of Sears Canada, when many retirees saw their pensions cut owing to a funding shortfall.
That larger pension plan includes both a defined benefit component, in which an employer pays out a set amount to retirees; and a defined contribution component, meaning that the amount retirees receive depends on the performance of investments made under the plan. In the Bay’s case, 4,000 people had defined benefit entitlements and 17,000 people had defined contribution entitlements as of Dec. 31, 2024.
“The Pension Plan is sufficiently funded and is able to satisfy its liabilities,” Ms. Bewley wrote in the March 7 affidavit.
The company has not specified the number of current and former employees in the SERP who are affected by the cuts.
A representative for Hudson’s Bay did not respond to a request for comment on Tuesday.
Currently the Bay has more than 9,300 employees across the country, many of whom are facing the prospect of job losses as stores shut their doors permanently. Last Friday, the company terminated the jobs of nearly 200 corporate employees, effective April 4. It was the first of what is expected to be a wave of job cuts as the retailer winds down the operations of many of its stores.
Hudson’s Bay was granted court protection from its creditors in March, under the Companies’ Creditors Arrangement Act (CCAA). Canada’s oldest retailer subsequently received court approval to begin liquidating all but six of its department stores across Canada, starting last week.
Closing sales are continuing at 74 Bay stores as well as two Saks Fifth Avenue and 13 Saks Off 5TH stores that HBC operates in Canada.
Canada’s oldest retailer is soliciting bids for part of its operations, in the hopes that it can restructure the business and continue to exist in some form. If a solution emerges, more of the stores could be removed from clearance sales. But the clock is ticking as the company continues to sell off merchandise.