Finance Committee on March 30th, 2010

[The Chair, Conservative, James Rajotte]

I call to order meeting number 6 of the Standing Committee on Finance, where we are continuing our study of the retirement income security of Canadians.

We have with us this afternoon five organizations, including the Canadian Association of Retired Persons.

We have the Fédération des travailleurs et travailleuses du Québec.

We also have the Bell Pensioners' Group, the Association of Canadian Pension Management, and the Nortel Retirees' and Former Employees' Protection Committee.

Thank you all for coming to the meeting today.

Mr. Sproule, you have the last slot for up to five minutes, and we have up to 10 minutes for each of the other presenters.

We'll start with Ms. Eng, I believe.

[Susan Eng, Vice-President, Canadian Association of Retired Persons]

Thank you very much for having us here.

We had some documents that were not translated in time, which I understand will be provided to you at a subsequent meeting.

CARP is Canada's largest national organization for older Canadians. We are a national, non-partisan, non-profit organization committed to advocating for a better quality of life for all of us as we age. We have 300,000 members across the country and 34 chapters.

We're focusing today on the need for pension reform. The current economic crisis has exposed flaws in the current pension regulatory regime. It has focused attention on the need for Canadians to better save for their own retirement and has highlighted their sudden realization that there isn't a vehicle allowing them to do so adequately.

We believe that the existing regulatory regime needs some amendment to rebalance the interests of employers and employees, including a governance role for members and retirees, to prevent the underfunding and insecurity of existing pension funds and of course to facilitate the outside chance that it we change these rules, we will encourage more employers to establish workplace pension plans.

In the absence of this kind of effort, we are recommending that there be a supplementary retirement savings vehicle. Many options have been proposed. The one that CARP proposes is a universal pension plan that is mandatory and affordable and capable of providing adequate income replacement while being sustainable, able to withstand the kind of demographic and economic shocks that we have witnessed, and independent of both government and the various employers.

Obviously, there are options that are available through the private sector and elsewhere, which you will hear about elsewhere.

I wanted to bring to you today the message from our membership. As you may or may not know, we have a newsletter that goes to 85,000 opt-in subscribers, all of whom are members, and we include in that newsletter a survey of advocacy priorities on which we can regularly expect 2,000 to 6,000 responses, often overnight.

By way of example, on Friday we issued another survey. We were referencing the Ontario budget mostly, but we did add a question knowing that we would be here today. We asked our members what they thought was necessary to solve Canada's pension problems. We gave them various options, including increasing CPP contributions, the creation of a voluntary or mandatory supplementary plan, and increasing RSP contributions or TFSA room, etc. I can just tell you right now that only 4% of our membership thought that nothing needed to be done. They made various selections and indicated various priorities, the greatest being that we should increase the CPP. Nonetheless, the point is that they believe there needs to be reform.

Who are they? These people are mostly already retired, mostly over 55, with the vast majority over the age of 65. In our sample, they indicated they were not badly taken care of in their retirement. Nonetheless, they want us to have the benefit of their own advice and experience to make things better for the next working generation.

By and large, they are fully supportive of the need for a supplementary pension plan. They reject the position of bankers' and investors' associations that Canada does not need another one-size-fits-all plan—as if that's what we are recommending—but they certainly reject the idea of doing nothing. They certainly put a priority on helping people who have pensions but whose companies have gone bankrupt and are now unable to look after them. So they have supported the idea of enforced improved protection in the event of bankruptcy.

The government's actions to date have been very disappointing. There have been two years of what I might call serial stalling. Yes, there have been consultations, and we're entering yet another round of consultations, but as to specific proposals for change, there have been very few. So we have very little to report to our members on what has happened in the last two years to address the economic downturn we have faced.

What is worse than doing nothing? It's telling us that nothing needs to be done. That's the situation we are in right now, and I want to spend the last couple of minutes of my time to address the issue of whether or not we can allow the status quo to stay.

Many people have been quoted as saying that reform is unnecessary because Canadians are saving enough, yet there are people who are much more experienced than me on these issues who have talked about the need for reform. They include the C.D. Howe Institute, the TD Economics group, and the former governor of the Bank of Canada, etc., all of whom have indicated, among a number of different things, that we are not saving enough for our retirement.

The hard fact is that the public pensions we have in existence were never meant to provide sufficient retirement income in and of themselves. Room was left for the private sector to fill, and that has not happened.

We have to pay attention to the official measure of poverty among seniors, because the whole point of having a pension system in the country is to do two things: prevent poverty in old age, and allow people to maintain their standard of living in retirement. Have we done that? The answer is no. The official measure of poverty among seniors in Canada that we praise ourselves for is 4.4%. It's one of the lowest rates in the OECD countries, but it's still over 200,000 people.

A better measure of poverty is the number of people whom the government is already providing some support to in the form of the GIS. Some 1.6 million Canadians are taking advantage of this income support program. This is the kind of measure indicating the people affected by lack of retirement income security.

Are they able to maintain their standard of living into old age? The fact remains that they don't. In his recent report, the Parliamentary Budget Officer indicated that the OAS rate, what he calls “elderly benefits”, is 14% of the average annual wage. If the OAS program is not enriched, the average benefit will fall by 60% to about 5.7% of the average annual wage by 2084. Now if that's too far into the future for us, then look at 2031, at which point the average benefit will have fallen to about 10%.

So people who are using or receiving public pensions, the way these are structured now without any enhancements—and the increase last year was exactly 0%—will fall behind and not participate in the increased living standard of everybody else.

While public pensions are proving to be insufficient to replace our pre-retirement incomes, you often hear people talk about how they have 70% income replacement at the lower rates. Think about it for a minute and you'll realize that when you combine the OAS and GIS, you will get about $14,000 in total. When somebody has a pre-retirement income of $15,000, certainly you are replacing 93% of their pre-retirement income. However, $14,000 is still well below the poverty line that we've set ourselves. So there's clearly a need to rely on third pillar savings, and that's the challenge we have to focus on.

Other economists have identified what we need to have saved by the time we want to retire, and they've made some frank calculations. To get an annual pension of $20,000, you have to have saved $283,000. If you want an $80,000 pension when you retire, you have to have $1.1 million, which is a lot more than some of us here have—and these numbers are not even indexed for inflation.

To figure out what this means for the average person, the C.D. Howe Institute has indicated that to get a pension that replaces 70% of your pre-retirement income at age 65, you will need to save between 10% and 20% of your pre-retirement earnings every year for 35 years. If we're not doing that, we will not have enough to live on. That's part of the problem.

It's for this reason that we believe it's absolutely important that we must understand, first of all, that we need to find consensus that something has to be done. Once we have found that consensus, then we can get down to the brass tacks of articulating what needs to be done. When we sit around the table at the pension summit that we are calling for, we have to ensure that retirees have knowledgeable representatives there.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Eng.

Monsieur Bellemare, s'il vous plaît.

[Réjean Bellemare, Union Advisor, Fédération des travailleurs et travailleuses du Québec]

Good afternoon. I would like to thank the committee for inviting the Fédération des travailleurs et travailleuses du Québec.

The FTQ represents over 1 million workers in the private and public sectors of the economy, including several federal sectors. Our members rightly believe that their pension plan is one of the most important benefits earned during their working lives.

However, historically, the FTQ has always believed that private pension plans are the union's solution to a public pension system which falls short. When the CPP/QPP were created at the end of the 1960s, it was a great step forward, but the fact remains that it was just the first step.

The CPP/QPP coverage rate was set at a maximum of 25% of eligible earnings. For decades, we have been calling for the creation of a public and universal pension plan with a higher rate of salary replacement—50% to 70%—applicable to the maximum threshold of eligible earnings, which would be higher than the current threshold.

The CPP/QPP is a pension plan which is almost ideal. It can be fully transferred from one employer to another, it is indexed to the cost of living, it takes into account a worker's very low income periods, and even periods when a worker has no income, such as when a spouse stays home to raise very young children. Lastly, a public system would cost less to administer than an assortment of private plans. A public plan would be more resistant to short-term market variations. The FTQ is convinced that a public and universal system offering better coverage is preferable to the current situation. We therefore join our voice with that of the Canadian Labour Congress, which has called for the creation of such a system.

Where others might see a three-tier pension system, we see a system of social security—old age security—a public system, but which does not provide sufficient retirement income—the CPP and the QPP—and the more-or-less successful efforts of the private sector to compensate for the lack of coverage provided by the public system. Further, we believe, as does the Canadian Labour Congress, that the social security part, that is, old age security, is insufficient. It keeps Canadians in poverty and should be substantially increased.

At a time when many people are thinking about creating a second tier of coverage within the CPP/QPP, private plans are falling short. Too few workers are covered by these certified plans. Further, in the last few years, many private sector employers have been trying to put an end to these plans or, at the very least, deny them to young workers entering the labour market, thus reducing coverage and the quality of pension plans for future cohorts.

There is no doubt that we need to review the public pension system, and not add a new tier of defined benefits, but to clearly improve the current level of benefits. Until that happens within the CPP/QPP, the FTQ will continue to negotiate certified pension plans for its members.

It comes as no surprise that the FTQ wishes to restate its support for defined benefit plans which, compared to defined contribution plans, are better tools for retirement planning. A defined benefit plan lets workers know what their retirement income will be. Market-related risks are assumed by the plan's sponsor, or collectively by the members.

As it is often linked to a member's salary, it is easy to understand the promise of a pension. Lastly, while the costs associated with the actuarial evaluation and the administration of defined benefit plans can be high, they are mostly compensated by the professional management of assets over a long period of time, which should generate a higher return on investment, in addition to lower management fees.

In comparison, defined contribution plans, be they public or private, are less effective tools for retirement planning. Each of our members bears the risks of market fluctuations, and members will only know what their retirement income will be when they actually retire. Their pension income will depend on their level of contribution throughout their working careers, the returns earned during good years, and the level of interest rates when they retire, if they choose to purchase a life annuity, of course. Let's not forget that it costs more to administer these individual accounts.

Since they wish to take advantage of high stock returns, promoters of defined contribution plans have, over the years, adopted increasingly aggressive investment policies. In doing so, they hoped to reduce the amounts they would have to contribute, through any surpluses generated by their investments.

That is indeed what happened. The Régie des rentes du Québec established that, between 1991 and 2000, over 6,000 contribution holidays were taken, for a total value of $5.5 billion. The value of the plan increased by $1.6 billion. It was the same for federal plans.

The adoption of an aggressive investment policy worked. Since 2001, however, financial markets did not perform so well. Two major economic crises forced federal and provincial lawmakers to adopt measures loosening the rules governing the funding of defined contribution pension plans. Were these measures necessary? We at the FTQ believe they were. But we thought that the sponsors of private plans could have done better in years past. Rather than focusing on surpluses and contribution holidays, they could have adopted a funding policy which would have minimized the fluctuations of contributions while protecting members' benefits.

We believe that imposing a funding policy for pension plans is extremely promising. In our view, it is precisely because there is no such policy that sponsors tried to maximize their return on investment at any cost and take as many contribution holidays as possible.

As for an investment policy, we should go further than simply choosing between stocks or managers. The way the companies we invest in are managed holds some guaranteed return on investment. For example, everyone who invested with Bernard Madoff were in for a rude awakening. This is why it is important to assess the character and qualifications of those we ask to invest our money.

The current crisis has also led the FTQ to ask itself whether it is necessary to bring in an insurance system. In Ontario and elsewhere, trying to create a deficit-insurance program for pension funds has proven difficult. The risks associated with each pension fund have to be estimated and tariffed if an insurance plan is to work. As well, there would have to be legislation to force pension plans' sponsors to adopt funding and investment policies based on the demographic profile of a plan's members, and on the plan's purpose, too. However, despite all of this, we support the creation of an insurance system which respects provincial jurisdictions in the pension sector. But some conditions need to be met before insurance plans can be put in place: we need stricter funding rules and stronger powers of intervention for monitoring authorities. We would also have to prioritize the accounts receivable of pension funds, including solvency deficits in case a pension plan's sponsor declares bankruptcy.

If there is one thing the FTQ has learned in light of the current crisis, it is precisely that we need to protect members' pensions at all costs in cases of bankruptcy. Otherwise, workers who lose their jobs are penalized twice: they lose their income today and they lose their income tomorrow. This situation is unacceptable: we need to act. We cannot support Canadian companies with workers' pension funds. If we want to better protect members' pensions, we also need to amend the legislation to force the sponsors of pension plans to fully fund their pension funds in case they cease their operations. The fact that this is not already enshrined in federal legislation demonstrates negligence rather than an enlightened choice.

Lastly, on a note which more properly reflects the FTQ's views, we believe that the legislation should make it easier to create new such plans. Under new regulations made under the Supplemental Pensions Act, which was passed in 2007, the FTQ created a defined benefit multi-employer plan, whereby employers are not responsible for fixing deficits.

Since then, the member-funded pension plan—RRFS—has helped 3,000 workers, employed mainly by small companies, to become members of a good pension plan. Recently, a large group of employees negotiated a MFPP, and this happened just before they fell under federal jurisdiction. We had approached the Régie des rentes, which was immediately open to allowing employees working in a federal jurisdiction to join a MFPP, something which is specifically forbidden in the regulations. Our discussions with federal authorities are more akin to trying to navigate an obstacle course. To this day, we cannot see how these obstacles can be overcome, which will prevent federal workers from accessing a defined benefits plan.

In conclusion, I would like to remind you that the FTQ is calling for Canada Pension Plan and Quebec Pension Plan benefits to be doubled. We would be pleased to discuss with you how this can be achieved. In the meantime, there is no doubt we will have to amend the legislation to better protect the retirement income of all workers.

Thank you. I would be pleased to answer your questions.

[The Chair, Conservative, James Rajotte]

Merci beaucoup.

We'll now go to the Bell Pensioners' Group, please.

[Robert Farmer, Vice-President, Bell Pensioners' Group]

Thank you, Mr. Chairman.

The Bell Pensioners' Group represents the interests of some 31,000 retirees from Bell Canada. We're also a founding member of the Canadian Federation of Pensioners, and, collectively, these two member organizations represent some 150,000 Canadians across the country.

I have handed out a relatively short text, and I would ask that you take the time at some point to give it a quick read. It shouldn't take terribly long. I won't be reading it here, but will be focusing on many of the comments in it.

The focus of both the BPG and the CFP, the Canadian Federation of Pensioners, is the protection of the pension benefits promised to our members. These people have already lived their lives of employment and of course can't relive them again, so if something happens to their pensions, they really have very little recourse to make up the difference. That's why it is so critically important that we mitigate as much of the risk facing pensioners as we can.

The biggest risk to our pensioners is that their plan will be underfunded at the same time the plan's sponsor finds itself in a situation where it can no longer contribute. Clearly, a bankruptcy proceeding is one of those situations.

I want to put the numbers in context here. We're not talking about pensioners with very large pensions that, if they were reduced somewhat, would still leave the pensioners with a substantial amount of income. For Bell Canada pensioners, the average pension income is $22,000 a year.

We think there are three objectives that pension rules should follow so they can mitigate risk for pensioners. What I will do today is to touch on each of them and talk about how the objectives can actually be put into practice.

The first objective is for fully funded pension plans. For these plans, the rules should help them to stay fully funded and keep them from falling into an underfunded state.

The second one is for pension plans that are not fully funded. Then the rules should bring them back to a fully funded status in a relatively short period of time.

The third one is for pension plans that are underfunded and the sponsor is facing bankruptcy. Then pensioners should have a better chance at realizing the pensions that were promised to them by getting better access to some of the assets of that sponsor.

Let me spend just a moment on the first objective, keeping healthy plans healthy. There has actually been a fair amount of work done by the government and others, of course, on this issue over the last year. Last October an announcement was made about the government's plans for pension rules. By pension rules, the government meant not only legislation but regulation as well.

Many of the elements of that announcement were very encouraging. We endorse many of them and we think they do a good job at contributing to the security of pensioners, so we want those to go ahead. I have listed a number of them in the brief document I passed out.

Where they fall short is in not requiring sponsors to contribute in good times in a way that would allow pension plans to better weather the tough times. Though there is a recognition that it is good to have a surplus in the plan and that a sponsor can't take a contribution holiday unless a 5% surplus remains in the plan, there is actually no requirement for the plan to build the 5% surplus. We are somewhat disappointed by that aspect of it. But the other rules really do quite a reasonable job of keeping healthy plans healthy.

I'll turn to the second objective, where we're talking about bringing an unhealthy plan back to health. By unhealthy plan, I am talking about one that is not fully funded.

This was a disappointment to us, I have to say, and I want to contrast the current rules with what is being contemplated for the new set of rules going forward. Today, if a plan is underfunded, a sponsor has five years to bring it to a fully funded status, by making equal contributions over that period of time to eliminate its deficit. Under the new rule that the government seems to be contemplating, rather than taking five years and doing it in five steps, the rule would be that in any year, if there were a deficit in a plan, then 20% of that deficit has to be eliminated through contributions by the sponsor.

I can compare the difference between these two approaches with the simple analogy of walking across a road. I could walk across a road in five steps and get to the other side. That's similar to the current rules. Or I could take an approach that says, every time you take a step, just cover one-fifth of the distance remaining to the other side. So my first step would be the same size, one-fifth of the distance; my second step would be smaller; and my third step smaller still. After five steps, I would still have one-third of the distance to cover to get to the other side. I take more steps and they get smaller and smaller. After ten steps, I still have 10% of the distance to cover, and so on, and I actually never quite get to the other side.

Now, why is that a risk? It's a risk to pensioners because if a pension plan sponsor should ever find itself in bankruptcy, the longer the deficit remains, the more likely this sad circumstance of the sponsor is going to occur at the same time the plan is in deficit. When the plan is in deficit, pensions are cut. That's the risk to pensioners.

Again, to go back to my analogy, if I'm crossing a road, at least I can look both ways and maybe see if traffic is coming. But in the world we're talking here today, a sponsor's world, where there is so much business uncertainty, you don't really know what's coming down the road. You don't know if a truck is coming around the corner, so the quicker I get across the road the better.

I first thought we had taken a backwards step on this particular issue of retiring a deficit, but it's actually not a backwards step, but a step into an area we have never been before. So I would strongly urge that the current five-year rule, amortizing a deficit over a five-year period, remain in place.

Now if the sponsor finds itself having difficulty meeting that financial obligation—and it is a financial obligation—there is the possibility under the proposed new rules that the sponsor and the plan members could negotiate a different contribution schedule than the five-year rule. That allows a pressure valve for some sponsors who find it's too much financial pressure to meet a five-year schedule.

The third objective is that of improving a pensioner's ability to garner assets from the pension plan should the sponsor find itself in bankruptcy at the same time the plan is underfunded. There has been more than one suggestion in this vein. One would be, don't wind up the pension plan in the case of a bankruptcy. That is a possibility, and it may be a very good option in some circumstances. In fact, I think we should hold it out as an option, that is, don't wind up the plan but let it continue to operate. It will continue to invest in the market, and it could be that the plan will come back to a healthy situation. However, it will only do so if there is luck in the market. It's not a solution to the fundamental problem that the sponsor can no longer contribute. It may be helpful, but it isn't a solution.

The second approach was to allow sponsors to access more assets in bankruptcy proceedings than they can today. Again, that's a good approach. There are a number of countries--I've listed them in my paper--that already allow this to happen. I think Canada should really be doing this now. I do want to stress, nonetheless, when talking about the third objective, where the plan is underfunded and the sponsor is in bankruptcy, that there is no really good solution. That's why the first two objectives, keeping plans healthy and bringing them back to health, are so terribly important.

That concludes my comments.

I'd like to thank you very much for allowing us to provide our views.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Farmer.

We'll now go to the Association of Canadian Pension Management.

[Scott Perkin, President, Association of Canadian Pension Management]

Thank you, Mr. Chair.

My name is Scott Perkin and I am president of the Association of Canadian Pension Management. With me today is Bryan Hocking, the CEO of ACPM.

The ACPM is the voice of pension plan sponsors, plan administrators, and their allied service providers. Our current membership represents some 300 registered pension plans providing coverage for over three million Canadians. For over 30 years the ACPM has been advocating for the growth and health of the Canadian retirement income system.

Pension headlines are everywhere of late, and Canadians could be forgiven for thinking that a crisis exists. Yes, there are significant challenges, and they do require thoughtful solutions, but the good news is that there are solutions.

We believe that every Canadian should have an adequate retirement income. Achieving this will require a pan-Canadian approach wherein both the federal and provincial governments develop common solutions that will work for all Canadians. Solutions must recognize that opportunities for Canadians to obtain adequate retirement income should not rely on where they live or whether their job is in the public or private sector. Governments working together can make this happen.

Canada has one of the best retirement income systems in the world, according to the 2009 Mercer Global Pension Index. Government programs, that is, the OAS and GIS as well as the CPP and QPP, and the first and second pillars of Canada's three-pillar system are doing their job of providing a basic level of retirement income for all Canadians. Recent studies commissioned by the federal and Ontario governments confirm that the system is sound and that the problem of retirement income adequacy is a targeted one, wherein some Canadians are not able to save enough and others would like the chance to save more or to participate in a pension plan.

The question is, how do we increase the number of Canadians who have an adequate retirement income?

As the voice of plan sponsors and others that provide retirement income plans for Canadians, we believe that the third pillar, workplace plans and personal savings, can provide a much greater range of options for an adequate retirement income, with the right policy and regulatory environment. This flexibility could also provide a more precise response to the savings needs of those Canadians who are not saving enough for retirement.

Workplace plans and personal savings have an important role to play, and yet we know that many employers are reluctant to begin or continue providing retirement income options for employees, especially defined benefit plans, because of increased costs, complexity, and significant policy barriers. We need more employers to offer more retirement options, but current rules discourage new workplace plans and frustrate existing arrangements. Fragmentation and different rules across the country further limit the retirement income system's effectiveness. In addition, a couple of myths threaten to shut down discussion of these third-pillar options in favour of simply extending or supplementing the CPP as some sort of overall solution.

One myth is that expanding the current CPP is the better way to go because it is universal in its application, but the recent studies I cited make it clear that there is not a universal problem. Therefore, a one-size-fits-all solution, with its higher payroll tax and inflexible mandatory contributions, is not what Canadians need, especially when there are better ways to prepare for retirement for many Canadians.

Others hold the view that a supplemental CPP is the better option because it is cheaper, but all retirement income programs have costs of running them, whether in the public or private sector. The question is, what level of services are these programs expected to provide, and what is the value of those services to plan participants?

Third pillar retirement income providers offer expertise in a complex area and more options in terms of savings vehicles that can provide more flexibility at different phases of life. For example, an individual raising young children and paying down a mortgage may need different savings options than later in life when their mortgage is paid off and their children are grown. In addition, third pillar retirement income providers do offer economies of scale and competition, which drive efficiency, choice, and options for consumers.

The bottom line is that every Canadian should have an adequate retirement income. Our CPP and QPP and other government plans provide the foundation, but they cannot provide the only option. We believe that several large plans operating multi-jurisdictionally can provide the flexibility and choice of savings options that Canadians need, while encouraging diversification of capital and retirement savings, economies of scale, and the benefits of competition, such as lower costs.

Changes to the Income Tax Act and provincial pension standards could support this. They could also expand coverage opportunities for the self-employed; remove barriers to expanded enrollment in workplace plans, particularly for small business; and enhance individual options. These changes would support increased competition and diversification of retirement savings, while providing more flexibility and choice for Canadians. A thriving retirement income industry would also support economic growth in terms of jobs and investment for Canadians.

There is no question that we face considerable challenges, but there is also no question that a range of options is what is needed to meet the retirement income needs of Canadians. There is no single solution here.

The time is ripe to shape needed reforms to enhance the third pillar of Canada's retirement income system and to develop a range of options that will work for all Canadians and achieve our collective goal: more coverage for more Canadians.

Demographics are not on our side. There's no time to lose.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Perkin.

Mr. Sproule, please.

[Donald Sproule, Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee]

Thank you very much, Mr. Chairman.

I didn't think I'd be back so soon in front of this committee. I'll be brief, to respect the other witnesses.

The Nortel pensioners have met, and I wanted to give you some idea of some decisions they've had to make over the last five days.

When I was in front of you last Thursday, I stated that we had an opportunity to continue our health benefit plans until the end of the year. We'd also reached an agreement that our pension plan would not be wound up until September 30 of this year, at which time we would take a cutback of about 31% of our pension plan. This wasn't referenced in my handout, but I did state that this was all subject to court approval.

I honestly thought that when we went in front of the judge on March 3, the judge would approve the agreement. In the agreement, we actually gave up the right to higher priority ranking in the winding up of Nortel under CCAA. What we did ask for, and we fought hard for this, was the right, should the BIA law change prior to Nortel's moving into bankruptcy--assuming that the government, under those new bankruptcy law changes, would grant us higher priority status--to argue for that higher priority ranking in the bankruptcy courts.

One day later, at four o'clock last Friday, the judge ruled that he would not approve the settlement agreement with this clause, which I call H2, because it did not remove the uncertainty and doubt of the final agreement for other Canadian creditors, such as the bond holders and the Unsecured Creditors Committee.

Now when I began this process of bankruptcy and bankruptcy litigation with Nortel, I was told by my counsel that this is the Wild West--you never know what's going to happen. We, as pensioners, have suffered in this Wild West in terms of trying to get what we believe is justly ours.

With three business days left, we were left to make a decision. Do we assume that the federal government is going to act on our behalf and change the Bankruptcy and Insolvency Act? And do we stop our health benefits on Wednesday of this week? Do we assume that the federal government is going to work on our behalf and change the BIA, or do we face the possibility of having the pension plan wound up on Wednesday? There's a small group of the terminated who were going to get $3,000 from the termination agreement, and they were going to lose that as well.

So we had to make a bet. We did not believe that the federal government was going to act in time on our behalf. We could not take the risk. The people on long-term disability were facing similar decisions. So this morning, we instructed our counsel to go in front of the judge and remove this clause that gave us faint hope in terms of the bankruptcy laws being changed. We expect to have a full court hearing tomorrow. With that, we will preserve our health payments to the end of the year. And it will give us some time before the pension plan windup on September 30 so that we can negotiate with the Ontario government to implement what we call the “pension orphanage”.

When I talked to you on Thursday, I said that we were looking for fairness in bankruptcy laws. Hopefully you understood that the pensioners, the people on long-term disability, and the terminated are not fairly pitted against the bond holders and other creditors. We are all dependent on a single corporation for our pension plans.

At the same hearing, we heard from a Mr. Fréchette, a pensioner from Atlas Steel. He said that if the bankruptcy laws had changed in time for them, it would have made a difference. The gentleman from Atlas Steel said that they understood that any changes weren't going to affect them and help them out in time but that they came forward to help out the people from Nortel and to change unjust laws.

Every month, when Nortel pensioners open up their pension stubs, we will be reminded of the inequity of the system and of whether governments acted or not on our behalf. The Nortel Retirees' and Former Employees' Protection Committee will continue to lobby Parliament and the Government of Canada for changes to these bankruptcy laws. We figure that they are extremely unjust.

Finally, this is my faint hope clause, and it rests with the Government of Canada: the Government of Canada, being the supreme law of the land, still has the potential to make retroactive changes to the bankruptcy laws and to help some 20,000 Canadians who are affected by this insolvency. At the same time, it can save the downloading of some $355 million to Canadian taxpayers because of the costs of this insolvency.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll start the members' questions with Mr. McCallum, please.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for being with us today.

I first have one question for Mr. Sproule. We had hoped that the bill in the Senate for the long-term disabled would have passed by now, and that we would also have supported the NDP bill as and when it came to the House. Are you saying it's too late now, that even if those bills were to pass today, it would be too late for Nortel?

[Donald Sproule]

It would be too late for us, unless there were retroactive clauses in those bills.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay, thank you.

Now I'd like to turn to Mr. Perkin. I don't really agree that you're offering a balanced approach. I think you're offering an unbalanced approach when you summarily dismiss any possibility of a supplementary Canada pension plan. We had this discussion with representatives of banks and insurance companies, and at the end of it, I thought they were not totally opposed to what I had to say, because I do think we can have a system in which many options are offered to Canadians so they have more choice. One of those options would be a supplementary Canada pension plan, and we're proposing a voluntary one.

I notice Ms. Eng's polling shows strong support among her members for a voluntary Canada pension plan. One of the advantages of that is it would offer far lower fees to the contributors than the private sector does, and by a large difference.

At the same time, I'm not opposed to what you propose in terms of opening things up and expanding coverage, including multi-employer plans, and all of those things the insurance companies have also talked about. I'm not opposed to doing that, but I don't think it's either/or. I don't think it's a matter of either expanding the Canada pension plan or expanding the scope of the private sector. I don't know why you can't do both. Then, depending on their circumstances, Canadians would choose one or the other or both.

So why do you insist on this? In the text of your prepared remarks, you called it “Myth Busting”. You wrote, “Don't mess with government programs such as CPP/QPP”, which “don't need to be expanded”. Well, that's a very bald statement. Why do you say they can't be expanded while at the same time saying that the private sector can be expanded and Canadians would have more choice?

[Scott Perkin]

That's a fair comment and question, Mr. McCallum. Let me address the existing CPP. We have three or four concerns about expanding the existing CPP. One is that it's a mandatory payroll—

[John McCallum, Liberal, Markham—Unionville, ON]

No, I'm talking of it being voluntary.

[Scott Perkin]

Okay, let's deal with a voluntary one then. We're agnostic when it comes to publicly run versus privately run plans for Canadians. Our concern about the supplemental CPP, the way it's been put out there and advertised, is that it seems to be the only game in town. So we're opposed to one large megafund, if you will. We'd like, as I said in my comments, to see many large plans operating across Canada. Quite frankly, we don't believe that the governments need to get into the scheme any more than they are, because they are providing, through CPP, QPP, and OAS, a minimum level of retirement income for Canadians.

The concern we have right now, and Ms. Eng suggested that the private sector has failed us here, is that there are obstacles, both in the tax act—

[John McCallum, Liberal, Markham—Unionville, ON]

I understand that.

My question is, if we agreed to remove those obstacles to allow the private sector to expand, why don't you reciprocate and drop your objections to a voluntary expansion of the Canada Pension Plan? I think both entities could be helpful for Canadians in different circumstances.

[Scott Perkin]

Our only concern or objection, if you want to call it that, to a supplemental CPP is that it could become the only game in town, and we're opposed to—

[John McCallum, Liberal, Markham—Unionville, ON]

No, I'm saying it's not the only game in town. I'm saying, do both.

So you don't object to that?

[Scott Perkin]

We don't object to that, no.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay, thank you.

Mr. Farmer, could you clarify your view that pension funds should be required to pay back deficits within five years? As I understand the temporary rule, they could do it over 10 years, subject either to agreement of the pensioners or having a letter of credit.

Is that right?

[Robert Farmer]

That's correct.

[John McCallum, Liberal, Markham—Unionville, ON]

However, the proposal on the table is that they no longer need the agreement of the members or the letter of credit, and they can pay it back more gradually. Is that correct?

[Robert Farmer]

It would be the 20% a year rule. That's correct, and there would be no conditions.