Bill C-26 (Historical)

An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act

Part 1 of this enactment amends the Canada Pension Plan to, among other things,
(a) increase the amount of the retirement pension, as well as the survivor’s and disability pensions and the post-retirement benefit, subject to the amount of additional contributions made and the number of years over which those contributions are made;
(b) increase the maximum level of pensionable earnings by 14% as of 2025;
(c) provide for the making of additional contributions, beginning in 2019;
(d) provide for the creation of the Additional Canada Pension Plan Account and the accounting of funds in relation to it; and
(e) include the additional contributions and increased benefits in the financial review provisions of the Act and authorize the Governor in Council to make regulations in relation to those provisions.
This Part also amends the Canada Pension Plan Investment Board Act to provide for the transfer of funds between the Investment Board and the Additional Canada Pension Plan Account and to provide for the preparation of financial statements in relation to amounts managed by the Investment Board in relation to the additional contributions and increased benefits.
Part 2 makes related amendments to the Income Tax Act to increase the Working Income Tax Benefit and to provide a deduction for additional employee contributions.

[The Chair, Liberal, Wayne Easter]

For Bill C-29 it is next Thursday. Bill C-26 is Monday.

Income Tax Act

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. Speaker, as the member well knows, Canada's retirement system was founded on three pillars, and this bill will be of great assistance with respect to the pillar of personal savings.

I want to look at the situation of women. We know today that the probability of a 71-year-old woman reaching her nineties is much higher than it was even 20 years ago.

Shifting the conversation to Bill C-26, I realize that the Conservatives stand against this bill, but it more than likely has the votes to pass in this House. Would the member not agree that since the bill is going to pass, the government should at least amend its own bill to fix the provisions that unfairly penalize women with respect to that all-important pillar of government pensions for retirement security?

[Aaron Wudrick, Federal Director, Canadian Taxpayers Federation]

Thank you, Mr. Chair.

Good evening. My name is Aaron Wudrick. I am the federal director of the Canadian Taxpayers Federation. I am very pleased to appear this evening on behalf of the CTF to comment on Bill C-26, which, as we know, deals primarily with the expansion of the Canada Pension Plan.

In CTF's view, Bill C-26 is essentially a classic case of good intentions leading to some very unintended consequences, and of an attempt to solve a very specific concern by using a very blunt instrument.

Income security for seniors is, I don't think anyone will deny, a very valid and pressing public concern, but it is also important here to acknowledge that the facts do not show that there is a broad, generalized crisis when it comes to Canadian seniors' pensions. For poor seniors in particular, income supplements such as old age security and guaranteed income supplement, which have already been mentioned, largely address the issue. If concerns remain for this group as a whole that these programs are not sufficient, those are nonetheless the programs we should look to, and not CPP, to address any lingering problems. Rather, the changes in Bill C-26 are instead designed to target a relatively small group of middle-class to upper-middle-class Canadians who are not meeting an arbitrary threshold set by the government as to what an adequate amount of retirement savings should be. Most importantly, in calculating this, the threshold does not consider, for example, non-RRSP investments, nor things such as equity in people's homes. Rather, the government has declared that this threshold isn't met. As a result, they have chosen a sweeping, one-size-fits-all solution to effectively force—not help, but force—all Canadians to save more money.

Now, some people will probably react by saying, “What is so bad about governments forcing Canadians to save more money?” It does raise a number of important questions, such as why exactly the government feels that it is better placed than individual Canadians and their families—who I think we can all agree have a vast range of lifestyle preferences—to know what the right amount of savings is. It is entirely possible that there are some people who would prefer to spend more money today. I think an obvious example is people with young children or large families who require money today and want to spend that money today in anticipation of, perhaps, a more frugal lifestyle once the kids have grown up and moved out.

Then there is, of course, the question where, if some people are not saving because they simply cannot afford to save, how is depriving them of that money today—even if they are potentially going to get it down the road—going to make them better off overall?

It is also important to stress here that, when we are discussing income security for seniors, income support is often conflated with income replacement. CPP, of course, is a program where the yield you receive depends on what you pay in. Enhancing it, therefore, does nothing for people who are not paying very much into it in the first place. It does not give people extra money. It simply shifts the money from the current day into the future.

Finally, and very briefly, I think it is still worth noting that its expansion could be very damaging to businesses insofar as it effectively functions as a payroll tax. It is possible—I believe news came out today of a government memo that stresses exactly this point—that the CPP expansion could lead, certainly in the short and medium term, to lower wages and fewer hours for workers, as businesses attempt to compensate for the new costs.

I think I will leave it at that. Thank you.

Finance

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Madam Speaker, again, infrastructure is of such critical importance for all Canadians in every region, from coast to coast to coast. We need to invest in infrastructure. This Prime Minister and this government have recognized the need for infrastructure expenditures and we have put more money into infrastructure in the history of this country. In fact, for many years I sat in opposition and saw Stephen Harper and the Conservative government do nothing in recognition of the importance of infrastructure. That is why I feel that the Conservatives, once again, made a mistake by voting against this budget.

If we want to talk about helping Canadians, let us think back to what I made reference to in my questions. This budget would make substantial increases to Canada's child benefit program. That would assist tens of thousands of children in every region of our great nation. They would be lifted out of poverty as a direct result of this budget. What happened? The official opposition voted against the budget, denying that benefit.

However, it does not end there. What about seniors, some of the most vulnerable in our society? Let us talk about single seniors who are finding it difficult and have to decide whether they buy the medications they need or food. Quite often, seniors make the decision to buy medications and go to a food bank. This Prime Minister and this government have recognized the importance of increasing the GIS for the most vulnerable seniors in our society. Once again, the Conservative Party voted against that.

I can go on. If we want to talk about vision, this is a government that demonstrates leadership with a vision and takes actions, something we did not see with the Conservative Party. Let me provide two examples, one of which we were supposed to talk about this afternoon, the Canada pension plan in this budget. If members had listened when Liberals talked about canvassing Canadians from coast to coast to coast, they would have heard that pensions were very important to them.

A historical agreement by this government demonstrates leadership. Provinces of all political stripes came on board. They recognized what Canadians see as very important, which was to increase CPP, because it is not just about today. We should be thinking about future generations also, and that is what having a vision and a plan is all about. That is something that this government and this Prime Minister brought to the table and were able to deliver in a substantial way.

In this entire country, as best I can tell, the Conservative Party is the only political entity that actually opposes investing in pension programs. In fact, if we listened to the speeches that the Conservatives made on Bill C-26, one would question whether they even believe in the CPP.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, it is a pleasure to rise and to put forward, in a very clear way, what I believe is somewhat of a tragic story by the Conservative opposition. I believe we are seeing a Conservative Party that has really lost touch with what Canadians want to see and what their expectations are of government.

Let me go further and say that it is more than just an expectation of government, but that Canadians as a whole have an expectation of the official opposition, too. What we are seeing today is disappointment in the official opposition.

One of the things that Canadians truly believe in is the Canada pension plan. They believe in its importance. We have witnessed the provinces, territories, and every region of our country recognize the importance of the CPP. Only the Conservative Party, the party that has lost touch with Canadians, does not recognize what Canadians want. That is really what Bill C-26 is all about.

It is about delivering to Canadians what Canadians have been asking for, and not just for one year but for many years. It is the type of thing that Stephen Harper—

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, we have an aggressive agenda as government. There is the cut to the middle-class tax bracket, the Canada child benefit program, and the substantial increase in the GIS for our seniors. We are lifting seniors out of poverty. We are lifting children out of poverty. We can talk about the investment in Canada's infrastructure. There are so many things in the budget and the government's mandate. We are disappointed that the member saw fit to attempt to adjourn the House.

The very bill that we hoped to debate today, Bill C-26, is a historic agreement that would see millions of Canadians benefit. My question for the member is very specific. Why does the Conservative Party attempt to adjourn debate when there is so much that Canadians want us to do?

[Herb John, President, National Pensioners Federation]

Thank you.

My name is Herb John, and I am the president of the National Pensioners Federation. With me as our counsel is Susan Eng.

The National Pensioners Federation is a national, non-partisan, non-sectarian organization of 350 seniors chapters, clubs, groups, organizations, and individual supporters across Canada, with a collective membership of one million seniors.

While seniors need help with their health and financial concerns today, they are also concerned about the financial security of tomorrow's seniors. Without reservation, National Pensioners commends the federal and provincial governments on reaching a historic agreement to increase the Canada Pension Plan. We welcome the proposal in Bill C-26 to implement the increase and to amend the Income Tax Act to facilitate deductions for the increased CPP and QPP contributions, but especially for the increase to the working income tax benefit to allow low-income Canadians to participate.

National Pensioners held our annual convention this year in Vancouver, where the delegates applauded this rare example of federal and provincial co-operation. It is important to note that none of the people in that room will benefit from the increase to the CPP. Rather, they are concerned that their children and grandchildren do not have workplace pensions—two-thirds of working Canadians do not—and see the increased CPP as vital to helping them save for retirement. They know how hard it is to make ends meet in retirement, even though some of them have workplace pensions.

The CPP increase is coming just in time. No new defined benefit pension plans have been established in years. Many workplaces that have defined benefit plans are switching to defined contribution plans in which the investment risk is entirely borne by the employees. This is happening even in the unionized environment. GM, Ford, and FCA auto workers made an unprecedented concession to allow companies to close the doors on their defined benefit plans and to require new employees to participate in a defined contribution plan.

Many of our members have also been affected by business bankruptcies like Nortel's, which left the pensioners with heavily reduced pensions, if they had anything left at all after the dust settled. This is an ongoing result of not having legislated protection of pension plan assets during bankruptcy. The sustainability of the CPP, clarified by the fact that the chief actuary has declared that the CPP will be able to pay CPP benefits for at least the next 75 years, is very important to seniors, again, for their children and grandchildren.

The changes announced, which are the first increase in half a century, will take years to phase in. Even so, the increase is modest and, while very welcome, does not ensure Canadians an adequate retirement. What it does do is bring the maximum CPP benefit to $20,000 in 2016 dollars, which is approximately equivalent to the poverty line. National Pensioners would recommend that a review of future increases, including a voluntary layer to the CPP, be initiated as soon as possible, especially given the length of time it took to get this increase.

I will now turn it over to Susan Eng, who has further recommendations for the committee.

[Dr. Tammy Schirle, Associate Professor, Department of Economics, Wilfrid Laurier University, As an Individual]

I'm glad you could come back to give me an opportunity to speak with you today. Thank you.

I will take this opportunity to flag some general concerns I have with Bill C-26, with a focus on individuals with low earnings. Over the past few years, several researchers have expressed concerns that an expansion of the CPP's existing structure, alongside the provisions for the guaranteed income supplement, would imply a very low rate of return on contributions for individuals who enter retirement with low average earnings.

The planned changes to CPP and the Income Tax Act, as set out in Bill C-26, take some steps to mitigate those concerns. First, an expansion of the working income tax benefit is included in this bill. Most importantly, this will help some individuals with low earnings cover their additional CPP contributions. This has several other benefits.

As a method of prefunding retirement income through the current generation's tax revenues, rather than relying on programs funded by future—

[James Hicks, National Coordinator, Council of Canadians with Disabilities]

Hello, everyone. Thank you for inviting me to talk. I'll make it quick so that you can move on.

Who are Canadians with disabilities? When we speak of people with disabilities, we are actually talking about people with impairments who are disabled by the environment and type of society in which they live. People may have impairments with hearing, seeing, communicating, walking, thinking, learning, or doing any similar activities, but they are disabled often because of inaccessible information; inaccessible buildings, homes, and apartments that are not designed for people with impairments; inaccessible public and private spaces; lack of supports and services for employment, education, and training; lack of services to remain in one's home; and stigmatizing attitudes.

People with impairments are disabled often because of societal barriers, both structural and attitudinal, which limit the types of activities they can do in their homes, at school, at workplaces, as well as other activities. The United Nations Convention on the Rights of Persons with Disabilities defines disability in terms of social factors, not so much in terms of biological factors.

People with disabilities want to be part of their broader communities, be educated, be trained, and have good-paying jobs. This requires leadership and commitment from governments, the private sector, and disability organizations to work together to bring about this change.

What are the employment realities for Canadians with disabilities? We know that people with disabilities are less likely to be employed than are people without disabilities. The participation rate for people without disabilities aged 15 to 64 years was 79.3%. For people with disabilities, this dropped to 53.6% of the population.

We know that people with disabilities have lower incomes than people without disabilities. The self-reported median income in 2010 for people with disabilities aged 15 to 64 was just over $20,000, while for people without disabilities it was just over $30,000.

We know that many people with disabilities rely on government programs for income and social supports. Among the 204,700 people with disabilities who are completely prevented from working, 43.4% reported that they received CPPD or QPPD in 2010. Among the 632,600 people with disabilities aged 15 to 64 who are permanently retired, 39.9% reported they received CPP or QPP in 2010. This program is extremely important to the welfare of people with disabilities in Canada.

With regard to the impact of Bill C-26, due to unknown sporadic employment periods, a person with a disability who was unable to maintain workforce attachment throughout their adult working life potentially will see a greater impact in terms of the benefit of the enhancement as other Canadian citizens. The impact for people with disabilities will likely be greater levels of disparity between disabled and non-disabled people in the amount received in CPP benefits Additionally, it has the potential to further impact women and girls who are typically the caregivers for both children and family members with disabilities. Women with disabilities who are also caregivers will be hit with a potential double reduction in revenues through these proposed measures if their disability and caregiving drop-out periods are in different years.

In terms of analysis, it is the view of CCD that the implementation of the measures in Bill C-26 has the potential to negatively impact Canadians with disabilities in a manner that could increase the disparity in income levels between Canadians with disabilities and other Canadians. The removal of the drop-out options in the enhanced portion has the potential to further increase the disparity between disabled and non-disabled Canadians through a publicly designed pension scheme. This would be in contradiction to the intent of the UN Convention on the Rights of Persons with Disabilities, which Canada has signed and promised to uphold. Some of these protections are important to highlight here.

Part of the CRPD preamble reads as follows: “Highlighting the fact that the majority of persons with disabilities live in conditions of poverty, and in this regard recognizing the critical need to address the negative impact of poverty on persons with disabilities”.

Article 3 talks about equality of opportunity, not about being treated the same.

Article 5, paragraph 3, says, “In order to promote equality and eliminate discrimination, States Parties shall take all appropriate steps to ensure that reasonable accommodation is provided.”

Article 5, paragraph 4, says, “Specific measures which are necessary to accelerate or achieve de facto equality of persons with disabilities shall not be considered discrimination under the terms of the present Convention.”

Article 28, paragraph 2b, says, “To ensure access by persons with disabilities, in particular women and girls with disabilities and older persons with disabilities, to social protection programmes and poverty reduction programmes”.

In conclusion, the proposed changes to the drop-out provisions in the enhanced portion of CPP and CPPD have the potential to further marginalize Canadians with disabilities. This includes those who have had to leave the workforce due to disability, those who experience potential discrimination in obtaining and maintaining employment, and those who because of disability have had to work sporadically throughout their working years.

CCD urges the finance committee to reconsider its acceptance of the current proposed changes to the CPP and CPPD programs. No revisions to the CPP program, including the retirement and disability portions, should create further barriers and inequality to Canadians with disabilities. The Government of Canada, through its commitment to the Convention on the Rights of Persons with Disabilities, has a responsibility to ensure that Canadians with disabilities are not further impacted negatively due to life circumstances beyond their control.

All federal programs should ensure provisions for those Canadians known to be living with adverse poverty, particularly those eligible for CPP and CPPD who would benefit from the inclusion of the drop-out provisions to all portions of CPP disability or retirement pensions.

Thank you to the committee for allowing us to bring this to light.

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

As our witnesses know, we're dealing with the subject matter of Bill C-26.

Thank you for coming. We will at least start with the presentations so that we have that on the record. We have to leave when the clock hits 15 minutes down.

I'll start then with the Council of Canadians with Disabilities and Mr. Hicks.

Pensions

[Scott Duvall, NDP, Hamilton Mountain, ON]

Mr. Speaker, after two days of our raising the issue in the House, it is obvious that the Liberals forgot to consider the needs of women and people living with disabilities in their legislation to expand the Canada pension plan. Stakeholders and union leaders agree that Bill C-26 is flawed because of the omission of the drop-out provision for these groups. It is a simple fix. We are proposing changes and asking for the current government's support.

Instead of rushing this expansion into law, will the government take the time to fix it by accepting our proposed amendments and make this right for all Canadians?

The House resumed from November 14 consideration of the motion that Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act, be read the second time and referred to a committee, of the amendment and of the amendment to the amendment.

[Chris Roberts, National Director, Social and Economic Policy, Canadian Labour Congress]

Thanks for the question.

Yes, indeed, most defined benefit plans are integrated with the CPP. That means the benefit, the workplace pension benefit, is adjusted to take into account the CPP. It's the same with the contribution rate.

There's nothing in Bill C-26 that tells workplace plans how they're going to accommodate the gradual phased-in increase in contributions and the higher CPP benefit. That's up to the bargaining agents and the employers in a unionized situation, or the trustees where there's joint-only trustee plans. It's really up to the plans and the stakeholders involved to decide how they want to adjust to that higher benefit and the higher contribution rate.

There's a gradual phase in, so there's lots of time for plans to adjust. It's true, we do have to do a lot of education with members about it.

[Francine Lévesque]

Thank you for the question.

In Quebec, we have to make specific representations to our government, given that we have a special plan, but the content of what we are saying is along the same lines as what we have said before you today on the Canada Pension Plan. We believe it is important to take measures to increase the percentage of contributions to the Quebec pension plan. We also believe it is important to ensure better plan coverage.

On those issues, we are saying exactly the same things. We believe that measures must be taken factoring in all the generations. We must avoid costs for future generations. We express this view in the debate on Bill C-26, as well as to our government. Its work is still ongoing and we are waiting to see how it plans to change its pension plan.

[Mark Janson, Senior Pensions Officer, National Office, Canadian Union of Public Employees]

Thank you, Mr. Chair, and thank you to the committee members for having CUPE here today.

CUPE is Canada's largest trade union. We have 639,000 members across the country. Pensions are a very big deal for our members. Half of our members don't have good defined-benefit plans in their workplace, so this is an important issue for our members, their families, and their communities.

The labour movement, as the CLC representative said, has long been a champion of Canada's public pension system, and of seeing it grow. At a similar committee hearing to this in 1965, labour representatives appeared and said that they endorsed the creation of the Canada pension plan that year, but were sharply critical of the too-limited level of the benefits that were provided. The 25% replacement rate that was set out that day remains today.

At the time, labour representatives called for CPP benefits to be doubled. The government did not listen and implemented what we saw as a very modest pension system. In choosing a very modest public pension plan, Canada really put all their eggs in the basket of a private pension system that needed to work very well.

The CPP just turned 50. This is a good time to look back. We now have 50 years of evidence showing us quite clearly that this private pension system wasn't working very well for most Canadians. We've never had a situation where most Canadians had a pension at work. Today, six in 10 Canadians don't have a pension at work. Those who do have pensions are seeing their plans become less generous and less secure over recent decades. The individual systems of the RRSP and the tax-free savings account simply aren't working for most Canadian workers. You add all this up and it's no surprise that study after study showed we were facing a big problem, that Canadians simply weren't saving enough and that future generations of retirees were looking at very steep drops in living standards unless something was done. That problem was projected to get worse with each subsequent generation.

Clearly, something had to be done, so in 2009, as the CLC said, the labour movement revived our 50-year campaign to see CPP benefits increased. The labour movement and CUPE were very strongly supportive of the deal that was struck in June. We recognize changing the CPP is not an easy thing to do. The two-thirds/two-thirds rule makes this harder to do than changing the Canadian Constitution, so we applaud the federal government and the provincial governments for sitting down and getting that job done.

Like others here, while we recognize this as an important step forward, we also can't escape the fact that we were calling for a doubling of CPP benefits. The increase provided in Bill C-26 goes only about a third of the way to getting there. CUPE is still going to continue to fight for better public pensions for all Canadians.

Like the CLC, we are extremely concerned about the dropout provisions in Bill C-26. The child-rearing dropout and the disability dropout provisions, which I know you discussed at committee yesterday, have been long-standing provisions of the existing CPP. In Bill C-26 we were surprised to see that these provisions would not apply to the expanded portion of CPP. At first, we thought this must have been oversight and should be an easy fix, but yesterday departmental officials confirmed that this was actually intentional.

These two provisions have been long-standing aspects of the CPP. The child-rearing provision was introduced under the Liberal government of Pierre Trudeau in 1977 with much fanfare. Ministers of the day said the provision “would ensure that a contributor who remains at home to care for young children will not be penalized for that period during which he or she has low or zero earnings” and that “parents should not be penalized under the CPP for undertaking a socially desirable and necessary task”.

This child-rearing provision has mostly been used by women. It has helped women narrow, but not close, the gap between what they earn under the CPP and what Canadian men earn under the CPP. On average, for every dollar a Canadian man earns, a Canadian woman earns about 70¢ in the CPP. That's with the child-rearing provision intact. If the child-rearing provision were not there, that 70¢ would certainly be lower.

It's the same point on the disability dropout. This has been a long-standing provision of CPP. Since day one, this has been part of the Canadian pension plan. It ensures that workers who are forced to collect CPP disability payments do not see their CPP retirement payments suffer as a result. They're simply allowed to drop those years of zero or low earnings from their CPP calculation.

In our view, these are very important principles within the CPP. They're equity provisions within the plan. They've worked well for decades, and we don't see why they should not continue to work well into the future under the expanded CPP. They're still going to apply to the base CPP going forward; they should apply on the same basis to the expanded CPP.

We wonder whether the provinces were aware that these provisions would not apply when the deal was signed in June, and whether they know now. The discussion yesterday at committee clearly showed this has not been costed by the chief actuary's office or Department of Finance officials. We would suggest it's a pretty simple first step, which could be taken at the committee, to find out what this is going to cost on that side of the ledger, but then on the benefit side of the pension ledger to run some numbers to find out what this is going to mean for women going forward, or for Canadians with disabilities, in terms of the CPP cheques we expect they're going to receive under the expanded portion of CPP. These are important principles. They've applied for decades and they should absolutely continue to apply.

Thank you for your time.