Hollinger Canadian Publishing Holdings Co. ( HCPH ) proceeding under the Companies Creditors Arrangement Act ( CCAA )

Transcription

1 February 17, 2011 Andrew J. Hatnay Dear Sr/Madam: Re: Re: Hollnger Canadan Publshng Holdngs Co. ( HCPH ) proceedng under the Companes Credtors Arrangement Act ( CCAA ) Update on CCAA Proceedngs and Recent Notce of Wnd-Up of HCPH Penson Plans: Hollnger Canadan Publshng Holdngs Co. Retrement Plan Hollnger Canadan Publshng Holdngs Co., Wndsor Star Employees Penson Plan Hollnger Canadan Publshng Holdngs Co. Penson Plan for the Employees of Newspapers formerly owned by Thomson Newspapers Sterlng Newspaper Companes Penson Plan for the Employees of Newspapers formerly owned by Thomson Newspapers Hollnger Canadan Publshng Holdngs Co. Plan for Employees of Newspapers formerly owned by Sterlng Newspapers We are wrtng as your Representatve Counsel to report on the status of the HCPH penson plans and post-retrement benefts n the HCPH CCAA proceedngs. HCPH s no longer an actve company and s n the process of wndng down. As you may be aware, on December 10, 2009 our frm was apponted by the Ontaro Superor Court of Justce as Representatve Counsel to all members and benefcares of HCPH s post-retrement beneft plans n HCPH s CCAA proceedngs. On July 27, 2010, our mandate as Representatve Counsel was expanded by a further court order to nclude representaton of all HCPH members and benefcares of the HCPH regstered penson plans. In December, 2010, HCPH sent out a Notce of Proposal of Wnd Up (the Wnd-Up Notce ) dated December 21, 2010 relatng to fve penson plans that t admnsters: 1. Hollnger Canadan Publshng Holdngs Co. Retrement Plan (formerly the Southam Penson Plan), (ths plan s regstered n Ontaro); 2. Hollnger Canadan Publshng Holdngs Co., Wndsor Star Employees Penson Plan (ths plan s regstered n Ontaro);

2 Page 2 3. Hollnger Canadan Publshng Holdngs Co. Penson Plan for the Employees of Newspapers formerly owned by Thomson Newspapers (ths plan s regstered n Ontaro); 4. Sterlng Newspaper Company Penson Plan for Employees of Newspapers formerly owned by Thomson Newspapers (ths plan s regstered n Ontaro); and 5. Hollnger Canadan Publshng Holdngs Co. Plan for Employees of Newspapers formerly owned by Sterlng Newspapers, (ths plan s regstered n Brtsh Columba). Although the Wnd Up Notces state that the HCPH penson plans wll be wound up (.e. termnated) as of December 31, 2010 ths does not mean that your penson benefts were stopped as of that date. At ths tme, you should be contnung to receve your regular penson benefts. Penson Plan Wnd-Ups - General The wnd-up of a regstered penson plan s hghly regulated by law. The Wnd Up Notce that you receved s a requrement of the frst stage of the wnd up process. The wnd up of HCPH s Ontaro-regstered penson plans must comply wth the Ontaro Penson Benefts Act ( PBA ) and the polces establshed by the provncal regulator, the Fnancal Servces Commsson of Ontaro ( FSCO ). Smlarly, the wnd up of the Sterlng penson plan, whch s regstered n Brtsh Columba, must comply wth the Brtsh Columba Penson Benefts Standards Act and the polces of the Superntendent of Pensons of Brtsh Columba. As a result of an agreement among varous provncal penson regulators, a penson plan that has members who are employed n more than one provnce need only be regstered n the provnce n whch the majorty of ts members are employed. However, penson mnmum standard laws of the other provnces where members work wll also apply to those employees. Generally, the procedural law of the provnce of penson plan regstraton wll be appled. In a typcal penson plan wnd-up stuaton, the ultmate task of the entty mplementng the wnd up (whether t s the employer or an outsde admnstrator apponted to perform the wnd up) s to purchase annuty contracts from an nsurance company to contnue wth the payment of penson benefts to each penson plan member. Such annutes are desgned to replcate the payment of each member s penson benefts after the penson plan has been wound up. There s no change n the tax status of your penson ncome when you receve penson payments through an annuty. For example, penson payments from an annuty wll stll be elgble for penson ncome splttng. Also, the benefcary treatment establshed at the tme of your retrement wll also contnue to apply to the annuty payments. Durng the frst phase of the wnd-up process, the penson plan actuary retaned by the penson plan admnstrator wll proceed to prepare a Wnd-Up Report. Durng ths stage, penson benefts that commenced to be pad pror to the ssuance of the Wnd-Up Notce wll contnue to be pad. The Wnd-Up Report wll nclude an analyss by the actuary of the fnal funded status

3 Page 3 of the penson plan as of the wnd up date. Ths analyss ncludes a comparson of the penson plan s assets to ts labltes whch then determnes the plan s fnal wnd-up rato. Whether a reducton to ndvdual penson benefts wll be nsttuted n the future depends on the fnal wnd-up rato of each penson plan as determned by the actuary n the Wnd-Up Report. If there are suffcent assets (.e., cash) n the fund of the penson plan to cover all of the plan s labltes, then the annutes that are purchased from an nsurance company should pay plan members and retrees the same level of monthly penson benefts that they receved, or would have receved, before and durng the wnd-up process. If, however, t s determned by the actuary that there are nsuffcent assets to cover a plan s labltes, then penson beneft payments gong forward wll lkely need to be reduced to reflect the funded status of the plan. For example, f the actuary determnes that a penson plan s 90% funded on ts wnd up, then penson benefts can be expected to be reduced by approxmately 10%. The Ontaro Penson Benefts Guarantee Fund For those members who were employed n Ontaro and who are a member of an underfunded penson plan and thus exposed to a penson beneft reducton, an applcaton can be made by the plan admnstrator to the Ontaro Penson Benefts Guarantee Fund (the "PBGF") for a payment to be made to the underfunded plan to mprove ts funded status. The PBGF s a fund admnstered by the Ontaro Superntendent of Fnancal Servces. The PBGF guarantees the payment of specfed penson benefts up to $1,000 per month for members who meet age and servce crtera whle employed n Ontaro, subject to certan exclusons. Ontaro s the only provnce that has a PBGF. The Current Status of the Wnd Up of the HCPH Penson Plans HCPH has started the wnd up process for the above-noted penson plans and has elected December 31, 2010 as the wnd up date. As noted above, the wnd up date does not mean that the penson plans cease to be pad as of that date and you should have contnued to receve penson benefts snce the ssuance of the Notce. Rather, the wnd up date s the date that the actuary wll use to determne the fnal wnd up rato of each HCPH plan. Once the Wnd-Up Reports have been completed for the HCPH penson plans, they wll be submtted for the revew and approval of the Ontaro Superntendent of Fnancal Servces (or the B.C. Superntendent of Pensons for the Sterlng Newspaper Plan). When the Wnd-Up Reports have been approved by the regulatory authortes, arrangements wll be made by HCPH or any subsequent admnstrator for the purchase of annutes for plan members usng the penson fund assets. A number of you have nqured f your penson benefts wll cease to be pad due to the wnd up of the HCPH penson plans. Based on the nformaton provded to us by HCPH, we expect that the full or close to full amount of your penson benefts wll lkely contnue to be pad. However,

4 Page 4 the possblty does exst that the members of any HCPH plan that s found to be underfunded as of the wnd up date wll have ther future penson benefts reduced. We wll not know the fnal funded status of your HCPH penson plan untl the Wnd-Up Reports have been completed by the HCPH actuary. As explaned above, f there are suffcent assets n the penson plan fund to cover all of the plan s labltes, then you should experence no reducton to your penson benefts. If so, a PBGF applcaton wll not be necessary and the changes that you experence as a result of the wnd up wll be largely admnstratve n nature. That s, HCPH wll no longer be responsble for the admnstraton of your penson plan, and nstead of recevng a monthly penson payment from a penson fund, your monthly payment wll be made to you through an annuty that has been purchased from an nsurance company on your behalf. In order to avod penson beneft reductons due to any HCPH plan that s found to be underfunded as of the wnd up date, we are currently n negotatons wth HCPH to have any such penson plan topped up through arrangements n the CCAA proceedngs. We wll report on the status of those negotatons n due course. In the event there are nsuffcent assets n your HCPH penson plan to cover all the plan s labltes, an applcaton can be expected to be made to the Ontaro Superntendent to request that the PBGF apply n respect of the pensons of those employees who were employed n Ontaro. If granted, a PBGF payment should be made to the plan to supplement ts funded status and mnmze the amount of any penson benefts reducton. Possble Delays If you are already n recept of penson benefts from an HCPH penson plan, your penson payments should contnue to be pad unnterrupted at ther current level for the near future. However, those plan members who wsh to start recevng ther penson benefts or wsh to receve a lump sum commuted value transfer may experence delays. Penson-elgble members may start to receve ther penson benefts durng the wnd-up process only wth Superntendent and admnstrator approval. If you have questons about your penson elgblty, please contact HCPH s actuary, the frm of Mercer at The wnd-up process s lengthy and generally takes 12 to 24 months to complete. We wll provde updates as the process moves forward as well as updates on the status of our negotatons wth HCPH. We wll also ensure that you are notfed of any future change to your penson benefts as early as possble. Furthermore, f a fundng defcency s dentfed by the actuary for any of the HCPH penson plans, we wll ensure that an applcaton s made by the penson plan admnstrator to have Ontaro s PBGF pay an amount to supplement the underfunded HCPH plan n respect of Ontaro members. We wll keep you nformed durng ths process.

5 Page 5 Other HCPH Beneft Plans In addton to the HCPH penson plans, you may also be enttled certan other benefts on your retrement from HCPH such as benefts for retree health and dental benefts, lfe nsurance and supplemental penson benefts. Although ths coverage s currently beng contnued whle HCPH wnds down, HCPH wll at some pont n the future (date to be determned) cease to provde coverage for such benefts. We are n negotatons wth HCPH and Ernst & Young Inc., the court-apponted Montor, of HCPH n ts CCAA proceedngs, to reach an arrangement to settle HCPH s labltes for such benefts as HCPH approaches ts own wnd up. To date, there has been no fnal determnaton as to how such benefts wll be treated on HCPH s wnd down and optons are stll beng dscussed. There may also be tax mplcatons for the arrangement whch s ultmately agreed upon. If so, these wll be explaned to you n further correspondence whle the settlement s beng negotated. We have also been n contact wth varous nsurance provders to dscuss alternatve retree health care coverage that would be avalable to you for purchase on an ndvdual bass wthout havng to provde medcal nsurablty when your health benefts coverage from HCPH ends. We wll provde updates of these developments n due course. Address Changes It s mportant that we have your current address. If you have a change of address please wrte, e-mal or fax our offce. Our fax number s Our address s 20 Queen Street West, Sute 900, Toronto, Ontaro M5H 3R3. We cannot take address changes over the telephone. If you have any questons or concerns, please contact us at the followng coordnates: Emal: hcph@kmlaw.ca Hotlne: Please also vst our frm s webste at where we post updates on the HCPH CCAA proceedngs a perodc bass. Yours truly, KOSKIE MINSKY LLP Andrew J. Hatnay AJH:sg cc: Andrea McKnnon and Mchelle Landy-Shavm, Koske Mnsky LLP