Manitoba Telecom Services reaches pension deal with retirees

WINNIPEG – Manitoba Telecom Services Inc. (TSX:MBT) says it has reached agreement with its unions and retirees over implementing a court ruling that a multimillion-dollar pension surplus that existed when the former Manitoba Telephone System was privatized in 1997 belonged to the workers and retirees.

Manitoba Telecom said the company and its advisory have been working closely with its unions and retiree representatives for several month to develop an implementation plan, which it said was “unanimously agreed to” Wednesday by all parties.

The Supreme Court of Canada earlier this year upheld a lower court ruling that the company did not have a right to the surplus, which was $43.3-million at the time. It has since grown to $140 million with interest calculated at a rate equal to the pension plan’s rate of return since 1997, according to figures in the agreement.

The company said specific arrangements are to be given affected MTS defined benefit pension plan members in the coming weeks, subject to regulatory as well as court approval at a hearing scheduled for Nov. 3.

“We are pleased to have come to an arrangement that is equitable and fair that everyone has agreed to and is now subject to the approval of the court,” CEO Pierre Blouin said in a release.

Key point of the agreement provide:

— Total enhanced benefits available under the settlement will equal $140 million as of July 1, 2014. Thereafter the amount will grow at the rate of two per cent per annum until court approval.

— Of the total, about $30 million will be paid in 2014 or early 2015 by the company directly to MTS employees who are members of its defined benefit pension plan.

— The remaining balance of about $110 million will be funded from MTS’ defined benefit pension plan and will be used to pay retirees and other persons with interests in the plan, and also pay expenses associated with the settlement. This amount will be funded by MTS over time and in accordance with federal statutory funding obligations

Manitoba Telecom said that as a result of the company’s $250-million equity financing that closed in December 2013 it is is expected to have sufficient liquidity to satisfy all of its pension funding obligations, including the obligations in respect of the settlement agreement.

“As we have indicated in the past, we were entirely prepared for this scenario and will manage its financial impact while maintaining a strong balance sheet,” said chief financial officer Wayne Demkey.