Evidence of meeting #68 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was workers.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Arthur Sweetman  Professor, Ontario Research Chair in Health Human Resources, Department of Economics, McMaster University, As an Individual
  • Michael Wolfson  Professor, As an Individual
  • Vangelis Nikias  Project Manager, Convention on the Rights of Persons with Disabilities, Council of Canadians with Disabilities
  • Frank Zinatelli  Vice-President, General Counsel, Canadian Life and Health Insurance Association Inc.
  • Keith Ambachtsheer  Director, Rotman International Centre for Pension Management

8:35 a.m.

Conservative

The Chair James Rajotte

I call to order the 68th meeting of the Standing Committee on Finance. Our orders today, pursuant to the order of reference of Monday, May 14, 2012, are to continue our study of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012.

We want to thank our witnesses for coming in early this morning. We have four guests with us here in Ottawa, and one individual in Hamilton by video conference.

I want to thank you for joining us here today.

We have first of all, as an individual, Mr. Michael Wolfson; and from the Council of Canadians with Disabilities, Mr. Vangelis Nikias. Welcome as well. From the Canadian Life and Health Insurance Association, we have Mr. Frank Zinatelli; from the Rotman International Centre for Pension Management, Mr. Keith Ambachtsheer, who is back again before the committee; and as an individual from Hamilton, Mr. Arthur Sweetman.

Mr. Sweetman, can you hear me okay?

8:35 a.m.

Dr. Arthur Sweetman Professor, Ontario Research Chair in Health Human Resources, Department of Economics, McMaster University, As an Individual

I can hear you now.

8:35 a.m.

Conservative

The Chair James Rajotte

Thank you, Mr. Sweetman, for joining us.

You each have up to five minutes for your opening remarks, and we will proceed in the order I outlined.

So we'll start with Mr. Wolfson, please, for an opening statement.

8:35 a.m.

Dr. Michael Wolfson Professor, As an Individual

First, thank you for the invitation to address the committee on the very important issues raised by the current budget bill.

Since the invitation only came yesterday afternoon, I have had only a brief time to prepare specific remarks. I apologize in advance if my remarks sound a bit grumpy, but I figure we might as well have, as they say, a full and frank discussion here. I will focus my remarks on changes to the old age security and guaranteed income supplement, the OAS and GIS, specifically the proposal to raise the age of entitlement from 65 to 67 starting after 2020, phasing in over a number years.

To use an impolitic phrase, perhaps, I find the proposal half-baked and ignorant. While these words may sound harsh, let me explain.

The proposal is half-baked in that it starts from a perfectly reasonable premise, that with steadily increasing life expectancy and the improving health status of Canada's population, it is appropriate that the age at which Canadians typically withdraw from the paid workforce should gradually increase.

The proposal is ignorant in that it ignores decades of excellent policy analysis on these issues and charges ahead with a piecemeal, ad hoc change, coupled with poor—and depending on which piece you read—even disruptive explanations of the rationale.

Let me briefly expand on these two characterizations.

The idea of raising the age of entitlement is not at all new. Indeed, at the beginning of my career in the federal public service, more than 30 years ago, I worked on the report on the retirement income task force published by the Department of Finance in 1979, if my memory serves me correctly. At that time we projected the aging of the population, which we have since experienced—and so we can ourselves a little pat on the back for the projections.

We noted that the U.S. had recently legislated a gradual increase in the age of entitlement, and we recommended more than 30 years ago that the government consider following suit. So I'm not at all opposed, in principle, to the idea; indeed, I was involved in the analysis that recommended it ages ago. But that report and many others have all focused on Canada's retirement income system, not on specific programs only.

The OAS and GIS interact with other programs, both explicitly in terms of the various formulae like the income tax, and implicitly in terms of informal relationships, for example, with workplace pension plans. So this OAS proposal is only half-baked because it fails to consider OAS and GIS as part of a system of interrelated programs, including the Canada and Quebec pension plans, income taxes, RRSPs, workplace pensions, etc..

I know from my experience in the public service that the policy branches in various ministries, including Finance and Human Resources, have the talent and capacity to recognize these key factors and to produce policy advice that is well thought out—or at least they used to have this capacity. I don't know now.

I cannot figure out where the failure is occurring with this government, though one fairly consistent theme is an inclination to disregard evidence, indeed to limit or destroy the public service's capacity to produce high-quality information. For example, I read in a recent issue of Policy Options, the magazine of the IRPP, a portion of the Prime Minister's speech at Davos. He said literally that the CPP was fully funded. Whoever wrote that speech clearly does not know the facts.

Just pick up the report on the CPP by Canada's Chief Actuary and you will see that the Canada pension plan is less than 20% fully funded. The apparent attempt to rationalize dealing with the OAS alone without bringing in the CPP looks seriously ill-informed. Both major programs involve intergenerational transfers.

Moreover, some of the words—and I can't point to them specifically—look to be fanning the flames of intergenerational conflict. But our objective, assuming a thoughtful, well-informed, and well-intentioned Parliament, should be to find a set of principles and then legislation that will make all the components of Canada's retirement income system both fair, and understood to be fair by all Canadians.

8:35 a.m.

Conservative

The Chair James Rajotte

You have one minute, please.

8:35 a.m.

Professor, As an Individual

Dr. Michael Wolfson

This is doable in terms fairness. I refer you to the 1983 report of parliament's Special Committee on Pension Reform. Members of Parliament worked together, and despite substantial political and ideological differences, they were able to agree unanimously on an approach to intergenerational fairness.

Let me just close with one point.

The one inconsistency is that this is not an austerity measure, at least in terms of the current fiscal situation of the government, because it won't have an effect on the budget for at least a decade. It's about fiscal sustainability.

I find it interesting that last summer, when the Chief Actuary tabled a report saying that TFSAs would have a billion-plus dollar impact on the GIS, that didn't cause any concerns on the part of the government about long-term sustainability. Yet in January, the government suddenly decided there was a problem with fiscal sustainability.

You have to appreciate that I spent 35 years in the federal public service. I'm now a professor. When I started in the federal public service, I was proud of our role in providing impartial and extensive information for Canadians generally and for public policy discussion. I'm not sure I'd feel the same way today.

Thank you.

8:40 a.m.

Conservative

The Chair James Rajotte

Thank you for your presentation.

We'll now hear from the Council of Canadians with Disabilities, please.

8:40 a.m.

Vangelis Nikias Project Manager, Convention on the Rights of Persons with Disabilities, Council of Canadians with Disabilities

Thank you, and good morning.

The Council of Canadians with Disabilities, the representative voice of Canadians with disabilities, is pleased to have the opportunity to present to the finance committee and thanks the committee for this invitation.

Budget 2012 has created some new initiatives that CCD believes will help us build a more inclusive and accessible Canada, as well as some initiatives that raise serious questions and, possibly, new barriers for people with disabilities.

With regard to the positive measures, the creation of an employment panel to report to Ministers Flaherty and Finley, by December, on best practices within the private sector on the employment of persons with disabilities is welcome, and CCD is eager to be of assistance.

Equally important and positive were the revisions to the registered disability savings plan, RDSP, that removed a significant barrier for persons with intellectual disabilities and their families to opening an RDSP account. The RDSP continues to be a program of significant benefit to Canadians with disabilities and their families.

As well, CCD was pleased to see the allocation of 10 million new dollars to the opportunities fund, a program that helps Canadians with disabilities get jobs.

On old age security, OAS, reform, what is of concern to the CCD is the raising of the age of eligibility for old age security and the guaranteed income supplement, GIS, from age 65 to age 67. There are a disproportionate number of Canadians with disabilities living in poverty. Between 45% and 60% of those living on social assistance—welfare—are persons with disabilities, and this number continues to increase. Many Canadians with disabilities have been and will continue to be excluded from the current labour market unless significant new initiatives are created to remove barriers to employment.

The old age security benefit, coupled with the guaranteed income supplement, is better than any social assistance program in Canada, with the exception of Alberta's AISH program, where a significant increase was announced in December. Suddenly, many Canadians with disabilities look forward to turning 65 because they will have a better income benefit and they will be raised out of poverty.

Increasing the age of entitlement for OAS will force persons with disabilities to live in poverty longer. OAS, while the foundation of Canada's retirement policy, does not exist in isolation. In fact, many other benefits are designed to work in tandem with OAS.

Therefore, the CCD recommends that your committee carefully weigh the following questions: Will the raising of the age of entitlement trigger a change in the age exemption in the Income Tax Act?

Will long-term disability plans and workers' compensation policies now extend benefits to age 67? Presently, LTD claims and workers' compensation claims end when people become eligible for OAS. Will this change increase premiums?

Will Canada pension plan benefits also change the age of eligibility? Will this apply to both the early retirement and full benefit?

We believe that the points raised by CCD are worthy of study. The new policy initiatives should enhance the status of Canadians with disabilities, not create greater disadvantages for them.

There is time to ensure that the OAS reforms cause no negative impact or extend the poverty of Canadians with disabilities. CCD urges the Government of Canada to consider and ameliorate the negative impact that the OAS changes will have on Canadians with disabilities.

As for employment insurance reform, EI, sadly, is of benefit to only some of our members, in that many persons with disabilities continue to be excluded from the labour market or work part-time and are unable to establish enough insurable weeks to be eligible for EI. The proposed EI reforms must recognize that persons with disabilities face additional barriers to employment. Some jobs are simply not suitable, depending on particular impairments and related barriers. For example, I am sure that none of you want me driving a car.

8:45 a.m.

Some hon. members

Oh, oh!

8:45 a.m.

Project Manager, Convention on the Rights of Persons with Disabilities, Council of Canadians with Disabilities

Vangelis Nikias

In other instances, people cannot relocate for employment because their support services are not portable, or accessible transportation systems do not exist. EI reform must include in its assessment an understanding of disability, the barriers to employment for persons with disabilities, and the need for appropriate accommodation.

CCD seeks a federal labour market strategy for persons with disabilities that will improve labour market participation and, in particular, address the issues of young people with disabilities, including aboriginal people with disabilities. They must be supported to move from school to work. This transition is critically important and new investments are required.

CCD reminds all members of Parliament that Canada ratified the UN Convention on the Rights of Persons with Disabilities over two years ago. Ratification means that Canada has undertaken to continuously improve the standards of living of persons with disabilities, including through retirement benefits, per article 28 of the UN convention. This commitment is especially relevant to the proposed OAS changes, which if implemented without adequate compensatory measures, will have the effect of further impoverishing Canadians with disabilities, not improving our standards of living.

We ask that you take these concerns into account in your considerations, and we thank you for the opportunity to appear before you today.

8:45 a.m.

Conservative

The Chair James Rajotte

Thank you for your presentation.

Mr. Zinatelli, please.

8:45 a.m.

Frank Zinatelli Vice-President, General Counsel, Canadian Life and Health Insurance Association Inc.

Thank you, Mr. Chairman. I am Frank Zinatelli, vice-president and general counsel of the Canadian Life and Health Insurance Association Inc.

I would like to thank the committee very much for this opportunity to contribute to your review of part 4 of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures. With your permission, Mr. Chairman, I would like to make some very short introductory comments.

The Canadian Life and Health Insurance Association represents life and health insurance companies, accounting for 99% of the life and health insurance in force across Canada. The Canadian life and health insurance industry provides products, which include individual and group life insurance; disability insurance; supplementary health insurance; individual and group annuities, including RRSPs, RRIFs, TFSAs, and pensions. The industry protects more than 26 million Canadians and over 45 million people internationally. The industry makes benefit payments of $64 billion a year to Canadians. It has almost $514 billion invested in Canada's economy, and it provides employment to nearly 135,000 Canadians. Finally, life and health insurers are regulated at the federal level under the Insurance Companies Act, and are also subject to the rules and regulations that are set out in provincial Insurance acts.

Mr. Chairman, we welcome this opportunity to appear before the committee as you seek to develop your report to Parliament. The industry is very supportive of some of the divisions contained in the bill. Let me comment briefly on two of these.

First, division 22 of part 4 would amend part III of the Canada Labour Code to require federally regulated private sector employers that provide benefits to their employees under long-term disability plans to insure those plans, subject to certain exceptions. This would require employers who have uninsured long-term disability plans to insure those plans so that in the case of bankruptcy, employees who are on long-term disability at the time of the bankruptcy will continue to receive those benefits as long as they are disabled.

The Canadian life and health insurance industry is very supportive of this legislative initiative. We believe it is critically important to ensure that employees on long-term disability are protected in the event of a plan sponsor's financial stress or insolvency. History has shown that when an employer becomes insolvent and its LTD plan is uninsured, disabled employees can sometimes lose benefits. We have had three examples of this happening in the last three decades.

Currently in Canada there is little regulation of uninsured LTD plans. There is no requirement that employers set aside adequate reserves to cover future liabilities arising from these plans. If reserves are set aside, there is no restriction on how those funds are invested. There is also no obligation to keep funds in trust to protect them from creditors. As a result, there are no protections in place to ensure that there are adequate funds available to support ongoing LTD claims in the event of an employer's bankruptcy.

Requiring that LTD plans be offered on an insured basis will provide the maximum protection for disabled employees, and will ensure that they are paid, regardless of their plan sponsor's financial situation. We believe this is the best route to address the protection of those on LTD. With insured plans, the risk and financial liabilities for providing the LTD benefits are transferred to the insurer. The insurer's responsibility with respect to disability benefits continues even when the plan sponsor experiences financial difficulties, or after the plan is terminated. Indeed, after a plan sponsor's bankruptcy, the insurer will continue benefits for disabilities that began while the group policy was in force.

In order to protect those on LTD, it is crucial that there be funds available to support all ongoing disability liabilities, even if the employer is bankrupt. We believe that the legislative initiative set out in division 22 of part 4 would be effective in achieving the public policy objective of fully protecting individuals on LTD.

As an industry we are making representations to provincial governments recommending that they make equivalent changes.

I will now turn briefly to one other matter. We note that division 2 of part 4 would amend the Trust and Loan Companies Act, the Bank Act, and the Cooperative Credit Associations Act to prohibit the issuance of life annuity-like products. The provisions of the current legislation indicating that only life insurance companies can provide life annuities are relatively clear, and I see this as a technical amendment that will be helpful in reinforcing the rules and the policy objectives already in place.

The industry greatly appreciates this opportunity to participate in the committee's review of part 4 of Bill C-38. I would be pleased to answer any questions you may have.

Thank you, Chairman.

8:50 a.m.

Conservative

The Chair James Rajotte

Thank you for your presentation.

We will hear from Mr. Ambachtsheer now, please.

June 1st, 2012 / 8:50 a.m.

Professor Keith Ambachtsheer Director, Rotman International Centre for Pension Management

Thank you.

I was made aware yesterday afternoon that I had to be here this morning, so you'll be relieved to know that I don't have any prepared notes.

8:50 a.m.

Some hon. members

Oh, oh!