The British Columbia firm looking to restart the NewPage Port Hawkesbury mill is walking away from the mill's underfunded pension plan, signalling bad news for hundreds of retirees.

Pacific West Commercial Corp.'s offer to take over the mill in Point Tupper does not include inheriting the mill's four pensions plans, which are underfunded by approximately $130 million.

"It's quite a shock," said Roddie MacDonald, a NewPage retiree.

"You never anticipate that when you've worked for 30 to 40 years and paid into your pension plan, you never think this is going to happen."

The lapse in funds will affect MacDonald and about 1,000 active and former employees, according to the provincial Department of Labour and Advanced Education.

"They would be looking at a 30 per cent reduction," said Nancy MacNeil-Smith, Nova Scotia's superintendent of pensions.

According to the 10-year contract proposed by Pacific West Commercial Corp., the pension plan at the operation will be discontinued and replaced with a new defined contribution plan, with matching contributions from the company of five per cent of wages.

MacNeil-Smith said NewPage Port Hawkesbury's current pension plans will now be wound down.

"In a wind up situation where there is no planned sponsor to make more contributions, then there would be no position for improving the situation for those members," she told CBC News on Friday.

Premier Darrell Dexter said the province didn't consider topping up the pension as part of any aid package because of the precedent it would set.

"There are pension plans across the province that have been in difficulty and some that have failed," he said.

"That liability cannot be transferred to the taxpayers."

Workers have until Thursday to decide on contract

Representatives for Pacific West Commercial Corp. have said the company would not assume the pension's unfunded liability — about $130 million — because picking up a bill that size would make it impossible for the mill to become a low-cost producer.

The NewPage Port Hawkesbury mill was shut down in September after struggles with soaring fuel and electricity costs, a strong Canadian dollar and declining demand for paper products.

mi-ns-newpage-hawkesbury

The British Columbia firm looking to restart the NewPage Port Hawkesbury mill is walking away from the mill's underfunded pension plan. (CBC)

About 1,000 people were left without work when the operation closed, including 600 employees and approximately 400 forest contractors.

Pacific West Commercial Corp., which is associated with Stern Partners Inc., sent mill employees contract ultimatum and said if a new collective agreement cannot be reached, it will withdraw its bid to buy the mill.

Hundreds of members the Communications, Energy and Paperworkers Union Local 972 got their first look at the contract offer on Thursday night, including the pension details.

The contract offer said 229 unionized employees will be offered work if the mill is restarted, down from about 600 employees when the mill shut down in September.

The collective agreement would last for 10 years — until Dec. 31, 2022 — if it is ratified. A company spokesman said the workers have until Thursday to decide whether to accept the offer.

Under provincial legislation, what's left in the pension plans will be used to buy annuities to pay out retirees their benefits.

Pacific West Commercial Corp. is offering $12 million over 10 years to cover severance payments, as well as benefits for retired and disabled former employees.

MacDonald said he would be keeping a close eye on how the money is handed out.

"We'll be sitting down with the union executive to see if we can come to some agreement as to how this $12 million will be dispersed evenly between all groups," he said.

With files from The Canadian Press