44th Parl. 1st Sess.
November 18, 2022 10:00AM
Madam Speaker, I am equally troubled at why the Liberals, and the member for Winnipeg North especially, do not want to support Canadian workers who need their severance pay. This is really troubling, and now they have put them behind bankers, large creditors and executive bonuses. It is just really disappointing to me. The government has an opportunity to rectify this error and put that amendment into its omnibus budget bill when it comes in March.
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Madam Speaker, I am really pleased to have an opportunity to speak at this moment in the history of Bill C-228 and extend my deep appreciation to the member for Sarnia—Lambton. There have been many attempts in this place to ensure workers are secured creditors in bankruptcy. It should not be so hard. I will be voting for her bill with enthusiasm and merely want to thank her.
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Madam Speaker, I am pleased to participate in the debate on Bill C-228. We are studying this bill at third reading in the House after it was examined by the Standing Committee on Finance.
As reported back to the House by the committee, Bill C-228 would amend the treatment of pension claims in proceedings under the Bankruptcy and Insolvency Act, or BIA, and the Companies' Creditors Arrangement Act, the CCAA.
Under current law, unfunded pension liabilities and unpaid special payments are unsecured claims. Unfunded pension liabilities are the shortfall between a fund's current assets and amounts owed to pensioners. Pension special payments are additional contributions by employers that are sometimes required under pension legislation to reduce a pension deficit over time.
Bill C-228 would give both these pension claims a superpriority. In BIA bankruptcies and receiverships, pension claims would be paid out ahead of secured, preferred and unsecured claims. CCAA and BIA restructuring plans would need to provide for the payment of pension claims to obtain court approval.
As originally drafted, Bill C-228 provided for a five-year transition period before the pension changes took effect. The bill that was sent back to the House after study in committee provides for a four-year transition period, as proposed by the government members.
Bill C-228 would also amend the Pension Benefits Standards Act, 1985, or PBSA, under the responsibility of the Minister of Finance. The only PBSA amendment, as reported back by the committee, would amend the federal superintendent of financial institutions' existing requirement for an annual report to the Minister of Finance on the operation of the PBSA, which is tabled in Parliament. It would add additional content to this report related to the funding requirements of a federally regulated pension plan under the PBSA and require it to be transmitted to provincial counterparts.
I would note that Bill C-228, as referred to committee by the House, dealt with the treatment of both federal and provincial private pensions in insolvency proceedings under the Bankruptcy and Insolvency Act, or BIA; the Companies' Creditors Arrangement Act, or CCAA; and the regulation of federal pensions under the PBSA.
However, during the clause-by-clause study of Bill C-228, the committee broadened the scope of the bill beyond pensions by adding a new privileged claim for termination and severance pay owed to a worker by a bankrupt employer under the federal or provincial employment standards legislation or a collective agreement.
These amounts are currently considered unsecured debt. Under the amended Bill C-228, these debts would be paid in full before the claims of any other unsecured creditor.
The government clearly explained in the House and in committee that it understands the challenges that an employer's bankruptcy can present for retirees, current employees and their community. We continue to listen to the concerns expressed by Canadians on the important issues of retirement security, wage protection, and termination and severance pay.
Our government has taken measures to improve the retirement income and security of all Canadians, including retirees, and to improve the protection of Canadian workers who are owed unpaid wages and termination and severance pay by their bankrupt employers.
No one in the House doubts that Bill C-228 was introduced with good intentions in the interests of pensioners. Having said that, we should be mindful in our continuing debate on the bill that significant concerns were raised by expert witnesses and pension plan administrators during committee study that a superpriority for pension claims may have unintended negative consequences for both pensioners and employees of insolvent employers and the much larger number of pensioners and employees in the Canadian workplace as a whole.
We should also take serious note of the fact that the new preferred claim for termination and severance pay was introduced only during the committee's clause-by-clause consideration of the bill. As such, the committee did not have the benefit of the views of the House at second reading on this new priority claim. It also did not have the opportunity to hear the testimony of expert witnesses and ask questions regarding its potential impact on different employee groups, as well as other stakeholders and creditors in an insolvency proceeding.
Even though all members of the House share the desire of protecting the interests of retirees, we must also consider the significant negative consequences that a superpriority of the unfunded liabilities of a defined benefit pension plan could have for pensioners, employees, businesses and Canadian employers.
First, this superpriority can only protect pensioners from the consequences of the employer's bankruptcy in certain cases. We all know about past cases of bankruptcy where the pension plan deficits were very large, sometimes in the billions of dollars.
During study in committee of Bill C‑228 and similar private member bills, experts, lenders, promoters of pension plans and employers, and even certain unions, noted that a superpriority would not guarantee that pensioners would be fully protected in the event of an employer's bankruptcy if the employer did not have sufficient assets to cover the liability.
It is also crucial that we take note in our deliberations of the potential impact of a pension claim superpriority on the incentives of pension plan sponsors to continue to provide defined benefit pension plans to current employees. During the committee's study of the bill, pension plan experts and plan sponsors predicted that as many as 40% of private plan sponsors could terminate their defined benefit pension plans during the bill's transition period if Bill C-228 were to pass with a superpriority.
Private defined benefit pension plans currently have 1.2 million active employee members who are still accruing defined benefit pension entitlements. We should be very careful about the potential impact of a superpriority on these employees when we consider whether to support Bill C-228, as reported by the committee.
In some cases, retirees and workers are better served if the company can enter into a restructuring agreement and continue operations, which means pension and benefit plans would be funded.
Let us keep in mind that there have been successful restructurings involving unfunded pension liabilities that have taken place under the current processes in the Bankruptcy and Insolvency Act—including Stelco, AbitiBowater and Air Canada—where pension benefits were preserved even though the pension plans were significantly underfunded at the time of insolvency.
As we consider how to best protect pensioners and workers, we must also consider ways to balance the potential credit consequences of a pension superpriority for employers with pension plans. Lenders will price and allocate credit based on the risks of default and non-payment. If a pension deficit is payable ahead of all other claims, a responsible lender must take this risk into account, either through higher interest costs or reduced credit amounts.
The government made important changes to insolvency and corporate laws in 2019 to protect pensioner and worker interests in an employer insolvency. Corporate restructuring was made fairer, more transparent and more accessible for pensioners and workers. Federal corporate law amendments better aligned corporate incentives with the interests of workers and retirees, and provided greater scrutiny of corporate decision-making. Finally, Canada further improved its strong regulation of federal pension plans that already require full solvency funding.
While these measures have improved the retirement and security of employees, the government has also listened to the voices of pensioners and considered more balanced ways to protect their interests rather than a superpriority.
While no OECD country gives unfunded pension liabilities a superpriority—
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