Hon. Lucie Moncion moved, for Senator Wells, third reading of Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985.

She said: Honourable senators, I apologize for taking the floor without giving notice. I couldn’t do it on Thursday so I chose to do it today.

I rise to speak at third reading of Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985.

The purpose of Bill C-228 is to offer better protections for pensioners. For that, it addresses the issue of pension plan solvency in three ways. First, before each chamber of Parliament, it would require the Superintendent of Financial Institutions to table an annual report on the solvency of federal pension plans.

Second, it would provide a mechanism allowing money to be transferred into the fund without tax implications to ensure the insolvent portion until the funds could be restored. These two components will help monitor solvency and allow corrective measures to be taken as needed.

Third, in the case of bankruptcy, the bill improves the protection provided to those who have defined benefit pension plans that are underfunded. In that case, the pensions would be paid in priority to the pensioners ahead of secured, preferred and unsecured creditors.

I want to begin by expressing my support for this bill and thanking its sponsor, Senator Wells, and the critic, Senator Yussuff. I’m pleased to see that this bill has already made it to third reading stage of the legislative process. That is rather unexpected. Unlike its predecessors, it has made it through most of the steps in the legislative process, where many others before it have failed.

The existing legal framework perpetuates not only an unfair system for the sharing of bankruptcy costs but also an unwise laissez-faire approach to underfunded pension plans, and that is the crux of the problem. The fact that many bills similar to Bill C-228 have been introduced over the past 20 years is significant. The urgent need to find solutions to this problem has been brought to light many times. Many Canadians continue to suffer the loss of their retirement income because the defined benefit plans they paid into were underfunded when their employer filed for insolvency or bankruptcy.

By way of example, I’m thinking of Nortel Networks’ insolvency in January 2009, where company heads gave themselves bonuses and spent large sums on performance pay for executives. I’m also thinking of Sears Canada’s bankruptcy in 2018 and the millions of dollars in dividends paid to shareholders a few years prior.

More recently, in February 2021, a new precedent was set when the first publicly funded post-secondary institution sought protection under the Companies’ Creditors Arrangement Act. In the case of Laurentian University, the pension plan had been cut considerably through the elimination of guaranteed benefits indexed post-retirement. Bill C-228 would ensure a more equitable sharing of the costs of bankruptcy and restructuring.

As they currently have no protection when a company files for bankruptcy, pensioners are forced to accept significant reductions in their benefits from the start of restructuring to avoid even more devastating cuts in the event of bankruptcy. When a company goes bankrupt, having a priority claim is certainly more advantageous than being in the lowest class of creditors. Funds must remain to be distributed, but often there are none when a company goes bankrupt. In this process, the likelihood of a pensioner receiving their share will depend on the position of their pension fund at that point. Despite the improvement that the bill makes to the financial security of pensioners, its scope remains narrow. The intent of my intervention today is to shed light on the broader context of this bill so we can continue searching for solutions closer to the source of the problem. More specifically, I’d like to address the problematic issue of underfunded pension plans and the rights regimes that tolerate that the financial security of pensioners is put at risk.

I’m pleased to see that Bill C-228 includes a provision to address the problem when it comes to federally regulated plans. The Office of the Superintendent of Financial Institutions already has a mandate to ensure that federally regulated plans are financially sound and in compliance with the regulations governing them and the requirements of the oversight regime. Clause 6 of the bill gives the Office of the Superintendent new responsibilities, requiring it to table an annual report in Parliament explaining the extent to which pension plans are meeting funding requirements and the corrective measures taken or ordered to remedy the problems of pension plans that aren’t meeting requirements.

I’m delighted that the bill includes provisions to rectify the situation of underfunded plans. However, I’m not convinced that this provision will have a real impact on the funding of plans that are in arrears, especially given its scope, which is limited to federally regulated plans.

I understand the jurisdictional hurdles involved in regulating provincially regulated pension plans. However, I believe that issues related to the funding of a pension plan of an entity that is at risk of insolvency are within the federal government’s jurisdiction and that the federal government has a responsibility to pensioners and pension plan members.

[English]

I would like to read a passage from the appearance of Canadian Labour Congress President Bea Bruske that illustrates this issue:

The federal government legislated changes in response to the Sears Canada debacle but they were woefully inadequate. This is especially frustrating, since the evidence shows that many companies with underfunded pension plans could eliminate the solvency deficiency in their plans by allocating just a portion of their shareholder payouts to the pension plan. Many firms consciously choose to reward shareholders and senior executives, boosting the stock price, rather than fully fund their pension obligations. That leaves pensioners and plan members at risk if the company becomes insolvent.

We need to bring forward a comprehensive model to prevent the insolvency deficiency of pension funds. The issue of underfunded pension plans is critical, in my view, and deserves further attention.

The narrow scope of the bill is also felt in other respects. While some witnesses at the Standing Senate Committee on Banking, Commerce and the Economy raised the possibility that the creditor order provisions could also apply to pension plans where registered deficits are charged to participating employers, the bill is really aimed at defined benefit plans, since only these plans are able to develop underfunded liabilities.

I would therefore like to draw honourable senators’ attention to the many Canadians whose pension plans are not covered by the legislation given that fewer than 10% of private sector workers belong to a defined benefit plan. In addition, we have seen a significant decline in these pension plans over the past 10 years, as they are often too costly and unsustainable for private sector employers.

For these reasons, it would be appropriate to continue our reflection in order to study other options that would have a broader scope and that would allow for greater protection of pensioners and pension plan members.

[Translation]

Although well beyond the scope of the bill, we must also address the financial security of seniors. There are significant disparities and inequities between Canadians who have access to a defined benefit pension plan, those who have access to a defined contribution pension plan and those who don’t have a registered pension plan. There are significant differences between public and private sector employers in terms of the availability of defined benefit pension plans compared to defined contribution plans. The labour shortage could change some of these trends by rebalancing the power relationships between workers and employers. It’s worth keeping an eye on the situation.

Despite the narrow scope of the bill, it is an improvement in the protections that are afforded to beneficiaries of certain pension plans. This bill has managed to make it through almost every step of the legislative process.

Colleagues, I therefore encourage you to vote in favour of this bill, which represents an important first step toward a fairer pension system in Canada.

Thank you for listening.

(On motion of Senator Martin, for Senator Wells, debate adjourned.)

[English]