In a shocking move, Hudson’s Bay Company (HBC) has notified some of its former senior executives that their pension payments will face significant cuts. This decision comes as the iconic Canadian retailer accelerates its liquidation process, leaving the future of the company hanging by a thread.

Last Friday, HBC delivered letters to participants in its supplementary executive retirement plan (SERP), announcing the immediate cessation of all payments. The letter, which was acquired by The Globe and Mail, revealed that the trustee will begin winding up the SERP, marking a troubling chapter in the company's history.

It’s important to note that Hudson’s Bay operates two main pension plans, and while changes to the SERP will impact its former executives, the roughly 20,000 other HBC employees enrolled in the main pension plan are not affected by these immediate cuts. These regular employees will continue to receive their benefits, ensuring some level of security amidst the uncertainty.

The recent communication highlighted the company's insolvency as the driving force behind these drastic measures. According to the letter, HBC will not contribute to the funding of the trust that supports SERP benefits, leaving the Royal Trust Corporation of Canada to oversee the winding-up of the plan. Participants in the SERP have been warned that their benefits may be adjusted or reduced.

Furthermore, the SERP had previously experienced significant funding issues, with a reported shortfall of $84.5 million as of January 1, 2022, based on court documents filed by HBC’s chief financial officer. This contrasts sharply with the larger pension plan, which is currently in a surplus position, assuring members that it is likely to meet its obligations without similar cuts.

Legal experts, such as Elizabeth Pillon from Stikeman Elliott LLP, have emphasized that HBC's situation differs from the infamous 2017 Sears Canada liquidation, where many retirees faced steep pension reductions due to funding shortfalls.

As HBC navigates these turbulent waters, they reported a workforce of over 9,300 employees worldwide, many of whom are now bracing for layoffs. The company terminated around 200 corporate positions last week and anticipates further job cuts as the liquidation continues.

In March, Hudson’s Bay sought court protection from creditors, allowing the company to begin liquidating nearly all its department stores across Canada except for six. As closing sales persist at 74 Bay stores and multiple Saks stores across the country, the retailer is also actively seeking bids for parts of its operations. This move is essential as it aims to restructure and potentially salvage the business in some operational form.

As Hudson's Bay grapples with these challenges, the fate of countless employees hangs in the balance. Will the company find a way to emerge from the brink of collapse, or are more heartbreaking cuts on the horizon? Stay tuned as this story develops!