by Salman Ahmed

Sears has been a staple of Canadian malls for decades. It’s where I got my elementary school grad outfit and where my parents got our family photo taken 20+ years ago. The photo still adorns their wall, and on every visit to their house I wonder how the photographer got us to smile while sitting in such an awkward pose.

Unfortunately, Sears employees aren’t smiling much these days. The retailer’s bankruptcy has resulted in large layoffs and many have not received severance payments.

Recently, employees were informed that they’ll only receive 81% of their pension amounts. The other 19% may or may not be paid; its fate will be known over the next five years, leaving people struggling to cover the shortfall.

This development is particularly alarming because Sears offered employees a defined benefit pension plan (DB). In DB plans, the employers and employees both contribute money to the retirement pot. The employer, however, takes on the risk that there will be enough money to sustain steady payments throughout retirement.

If a DB plan sounds like a good deal, it is! But as the Sears case reminds us, companies can change the terms when difficulties befall them.

To be fair, DB plans are more common for government or government-related employers as fewer private companies offer them today. These government plans are considerably safer, but they too can change their original commitment. For example, New Brunswick teachers saw their pension plan overhauled in 2014 after the province said it couldn’t maintain payments. Other pension plans have also tweaked rules around early retirement to make plans more sustainable.

While employer-run plans are a valuable perk, we always recommend Canadians take advantage of other retirement vehicles if they can. A Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) can complement what you already have with your employer. You control these accounts, and you'll remain in the driver's seat even if things change at work.