Hon. Diane Bellemare: I rise today to speak in support of Bill C-288.

It is about time that we acknowledged the ongoing social injustice that pensioners and future retirees with a defined benefit registered pension plan face when a company goes bankrupt.

Bill C-228 responds to this important concern, which is shared by all parliamentarians in the other chamber.

Nevertheless, our role in the Senate is to provide sober second thought. That is why, as a member of the Standing Senate Committee on Banking, Commerce and the Economy, I wish to share the witnesses’ thoughts on this bill with all those who did not participate in the committee’s study and to explain the reasons for my vote.

We received many emails about this bill, encouraging us to pass it quickly. You will understand, as I did, that this bill addresses the needs and uncertainty expressed by thousands, if not millions, of pensioners, because it will cover approximately 1.1 million employees in the private sector, in addition to an even larger number of already retired pensioners.

Some of the organizations and individuals who testified or submitted briefs told us not to act hastily. Today I will recap what we heard.

First, this bill will unfortunately not solve all the problems for current and future pensioners in the private sector. In other words, Bill C-288 is not a panacea or a cure-all.

Bill C-228 aims to prevent high-profile cases like the bankruptcy of Sears and other companies that pushed pensioners and older workers into poverty because they were relying on their company pension plans to provide for them in their old age. In some cases, their pensions were reduced by as much as 30%.

The approach chosen by the sponsor of this bill, MP Gladu, is to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act in order to ensure that retirement pensions are given priority in the event of bankruptcy proceedings. I believe Senator Moncion explained the legal context of this bill quite well last week.

However, there is no guaranteed protection. Let’s be clear. This is not a retirement insurance plan like those that exist elsewhere in the world. Prioritizing pension funds during bankruptcy proceedings does not guarantee that the proceeds of a company’s liquidation will fully cover the promised pensions.

A company expecting to go bankrupt could act accordingly and make special payments to reduce the amount recoverable by the pension fund. Bill C-228 does not prevent such behaviour. The brief from the Council on Aging of Ottawa, which is made up of a variety of experts, points out the following:

An ethical and financial problem can be created if firms approaching bankruptcy make decisions to run down remaining assets by making special payments to executives, directors and shareholders. Any “special” or “unusual” payments to any of these groups should be recoverable by the pension fund if made within a specified time period before the application to be declared insolvent.

The bill does not provide for that option.

Furthermore, this bill will not produce any real results for four years. Many pension managers are happy about that and would have liked even more time. They talked about as much as 10 years in some briefs. Meanwhile, pensioners and workers will not be given priority in the case of a recession or bankruptcy until four years from now, once the bill is given Royal Assent. We need to plan for a four-year period before this comes into force.

Second, the scope of Bill C-228 would affect very few people in terms of the whole issue of registered pension plans in the private sector. Over 12 million Canadians are employed in the private sector and very few of them have defined benefit pension plans.

According to Statistics Canada data, the percentage of workers who are members of a registered pension plan has been steadily declining, from 46.1% in 1977 to 37.1% in 2019. This percentage has remained stable in the public sector, where 88% of public sector employees have a registered pension plan, but it has been steadily declining in the private sector, where it is now at 22.4% . Two in ten private sector employees have a registered pension plan.

The percentage of workers covered by a defined benefit registered pension plan has also declined significantly from 34.5% in 1999 to 24.7%, to the benefit of defined contribution plans, which have seen participation rates increase from 0.7% to 5.5% in 20 years.

The coverage rate of defined benefit registered pension plans such as our pension plan, such as the pension plan that Bill C-228 is trying to protect, has remained rather stable in the public sector. It has gone from 83% to 80% in 20 years. It has drastically decreased in the private sector, going from 21.3% to 8.8%. Fewer than one in ten private sector workers have a defined benefit registered pension plan. Bill C-228 seeks to protect these workers and pensioners covered by these plans.

Again, I would like to quote the brief submitted by the Council on Aging of Ottawa, which notes the following:

Canada’s retirement income system has been designed on the assumption that workplace pension plans will play an important role in helping people with moderate to high earnings maintain their standard of living in retirement. Success in meeting this objective has been modest and recent trends are worrisome.

Furthermore, as stated in the Canadian Federation of Pensioners’ brief, private sector defined benefit pension plans are practically in their death bed. The brief says the following:

The reality is that no one tracks data on private single employer defined benefit pension plans.

The Canadian Federation of Pensioners brief continues as follows:

What we do know, according to a 2022 survey of Canadian Federation of Pensioners member organizations, is that all our member plans are closed. This means new members are not allowed to be enrolled. In fact, most of these plans have been closed for up to twenty years. Our survey also showed that there are far more retired members than active members of these plans. For every 6 retirees, there is only one active (i.e. working) member.

Other briefs submitted by pension fund managers maintain that Bill C-228 could accelerate the disappearance of private employer-sponsored registered defined benefit pension plans. This already seems to have happened. They also submit that there are other ways to protect these pensions.

In summary, the pension issue is complex and, to add to the complexity, the financial stakes are enormous. I found the numbers quite startling. According to Statistics Canada, in 2019, total employer and employee contributions to a registered pension plan, or RPP, which is not a public plan, reached $71.1 billion. Also in 2019, the market value of all registered pension plan assets exceeded $2.1 trillion. That’s the value of Canada’s GDP. Of course, these issues raise many questions.

Why pass Bill C-228 so quickly when the issues are so complex and other solutions do exist?

Certain submissions from the Council on Aging of Ottawa, whose members are experts and former trade unionists, recommended that we take our time to propose sustainable solutions. They said, and I quote:

 . . . Bill C-228 creates a real dilemma. On the one side, the members of surviving defined benefit plans will have increased protection — but not complete protection — when the employer/sponsor of their defined benefit plan becomes insolvent. On the other hand, as Committee members have been warned, there is also reason to believe that Bill C-228 may contribute to the further decline in coverage of defined benefit pension plans.

Colleagues, you may be wondering whether this threat is a real possibility. The reasoning is simple. Once this bill comes into effect, the fact that pension benefits get priority would increase borrowing costs for businesses, since financial institutions would be at higher risk of not being able to recover their stake in the event of bankruptcy proceedings because they are no longer the priority. In short, if borrowing costs increase, companies will drop defined benefit plans in favour of defined contribution plans, as many are currently doing, because they do not present the same constraints for lenders.

Parliamentarians face a tough policy choice, according to the experts at the Council on Aging of Ottawa. Here is what they said:

This policy choice would be difficult under any circumstance. But the choice is especially difficult given that, as far as we are aware, there are no analytics in the public domain that would help in understanding the consequences of the choice. Important bills, like Bill C-228, should not reach the stage of passage that Bill C-228 has reached, without there being substantial analytical support in the public domain so the Members of Parliament (MPs) and the public at large can understand their consequences.

To make our decisions even more difficult, other witnesses warned that Bill C-228 could harm foreign investment as well as the restructuring of Canadian businesses. Those are some scenarios that were mentioned.

The Canadian Federation of Pensioners, which is in favour of Bill C-228, had this to say in its brief, and I quote:

Canada has 11 different pension jurisdictions, each with different requirements, rules, and enforcement standards. Superpriority under Bill C-228 is the best way to achieve fair and equitable protection for all defined benefit pensioners within Canada’s complex pension regulatory environment.

That is the backdrop against which all this is playing out, and the Association of Canadian Pension Management, which is very critical of this bill, noted that Canada would be the only OECD country, besides South Korea, to respond to the issue of what happens to registered pension plans in the event of bankruptcy proceedings by drafting a law that operates through the Bankruptcy and Insolvency Act. So what should we do? Canada is lagging far behind other countries, which protect their pensioners and future retirees in the private sector. They prefer retirement insurance plans. The United States, England, Germany and Ontario all have such a plan. We need to move toward that solution, but as senators know, that will be difficult to achieve, given the large number of jurisdictions we have in Canada.

To me, I think it is crucial to vote in favour of the bill at this time, because this will force us to reflect on it for the next four years so we can discuss it in further detail. As the Council on Aging of Ottawa said, if we vote in favour of this bill, we should undertake further analytics to advance this issue.

Pensions in Canada are in bad shape. We have public plans that provide the minimum, which is good. However, registered pension plans are woefully inadequate.

I hope the Senate will get things moving. That is its mission and its duty. Thank you.