Senator Dalphond: You mean the amendments to the Pension Benefits Standards Act will apply to provincial pension funds?

Senator Wells: It would fall under the financial institutions rubric, and therefore it would be nationally covered.

Senator Dalphond: I have two questions. The first question is about the Pension Benefits Standards Act — the question was asked by Senator Marty Deacon. It applies only to federal pension funds. It doesn’t apply to most pension funds that are regulated by the provinces. Am I right or wrong?

Senator Wells: You’re wrong. I don’t want to say this again, but you’re wrong. It would apply to both federal and provincial pensions.

Senator Dalphond: To conclude on the last question, I understand that during that period this bill will not prevent an employer from, with the consent of the union, moving from a defined benefit pension to a defined contribution system with no defined benefits.

Senator Wells: This bill is silent on that. That would be up to the company and its pension holders, whether that’s the union, the employee association or just the general employee agreement that might be present.

Senator Dalphond: I suppose that is an aspect the committee will look at because provincial pension funds are regulated by provincial regulators and not by the superintendent here in Ottawa. It is a constitutional issue, as a matter of fact.

My other question is about the scope of that bill. I certainly understand and share the goal of the bill to protect retirees. They have worked many years, and they come to retirement having managed their retirement based on the retirement benefits they expect to receive. If there is a reorganization of the company for which they were working, they may end up receiving a lesser amount. You referred to Sears and Nortel. Algoma Steel also went through that process, but were able to reorganize the pension funds and re-establish the pension benefits.

You referred to the fact that this will apply — if I understand properly — only to those who are entitled to defined pension benefits, and you said these now represent less than 10% of the retirees in Canada. I also understand this bill will not come into effect right away if it is adopted. It will come into effect in four years — further to an amendment that was adopted in the House of Commons — in order to give a transitional period to the employers who are providing pension benefits. Do you feel that at the end of the day the number of people who will benefit from that bill will be even less than 10% of the retirees?

Senator Wells: It could very well be less than 10%. I think it is important to note that the defined benefit pension plans right now are funded to about 109%. That’s not to say that all the different pension plans are overfunded. They are not. Some are obviously below. Over time, you are right — that will decrease.

The whole idea of the four years is for a getting-up-to-speed for those that have to ensure that their pension funds are funded. That four-year period is to allow that to happen so there is no deleterious effect if a company has to reach in and pull out from some source — from revenues or asset holdings — enough to top up their plans. That four-year period is to allow that, and, of course, an important part of the bill is to allow that to happen without deleterious financial penalty by placing sold or liquidated assets or other revenues into that plan. It would essentially allow them to do it without a tax penalty.