Like many department stores, Sears Canada has struggled with competition from specialty stores and online retailers. Its bankruptcy will eliminate some 12,000 jobs and leave 16,000 retirees worried about their pensions.
Its just the latest signal that employees and regulators should rethink their approaches to defined-benefit pensions.
Pensions are promises
Pensions represent deferred wages, money promised to employees in the future. With defined-contribution plans, employers make short-term promises to invest each year in their pension accounts. The eventual pension cheques depend on how the investments perform.
With defined-benefit plans, employers also promise to invest more if investment returns are poor. That reas…
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