Thank you.
Thanks, Bob. And I thank the committee for seeing us.
I'm going to take a different twist at this. My name's Brian Rutherford. I'm the president of GENMO, which is an organization of salaried General Motors retirees. We formed and incorporated in 2009, when General Motors was in deep distress.
I will talk about the rights of deferred payment first.
Most business transactions have terms of payment, such as net immediate, net 25, net 30. Most of those terms of payment are deferred. The company I worked for had payment terms of second month, second day—there's a new one for you—that stretched the suppliers' payments to 45 days. As for the Companies’ Creditors Arrangement Act, or CCAA, these deferred payments only to suppliers are recognized. Suppliers are unsecured creditors. After their obligations owing to the secured creditors are satisfied, the unsecured creditors have the opportunity to receive payments for goods or services that they provided to the insolvent company prior to and during bankruptcy protection.
Employee pensions are a deferred payment. Employees have contracts with their employers. It is a legal understanding that as an active employee, you will receive an agreed-upon compensation at a set frequency. You're also earning a deferred compensation that you will receive at a future date. This deferred compensation is normally in the form of a registered pension plan. As for federal and provincial pension laws, the employer as the plan sponsor is legally obligated to ensure that the pension plan is adequately funded. A healthy pension plan fund should be in excess of 85% funding on a solvency basis.
The suppliers and their deferred entitlements are recognized in CCAA as unsecured creditors. Pensioners, at the very least, should be no different. This is just.
Current bankruptcy legislation does not reflect the unique circumstances faced by pensioners. In bankruptcy proceedings the pension plan solvency deficiency--that is, a shortfall of assets on the fund as compared to the liabilities of the fund--is treated as an unsecured claim. This claim is addressed after all super-priority claims, secured claims, and preferred claims have been met. After these claims, if there are assets remaining, pensioners must share the assets with the rest of the unsecured creditors.
Pensioners are unlike most other creditors. Other creditors can amend their business plans to help make up for the loss of compensation they had been expecting from bankrupt companies. Current employees have the potential for securing employment elsewhere, albeit with some challenges. Most pensioners have no opportunities. Pensioners have already lived their lives of employment, a life where deferred compensation was promised.
While the provisions of Bill C-501 would not guarantee the pension promised, they would be an improvement over the situation that pensioners face under the current legislation. It is more than likely that a pension plan is in distress in CCAA. Current legislation would provide no aid for the plan. Preferred status, if as amended in Bill C-501, could provide aid for the plan and vulnerable pensioners. Pensioners' rights should be no less than the rights of other creditors.
My own experience with GENMO: The General Motors of Canada salaried pension plan, as of the report of the actuarial valuation as of September 1, 2009, has 12,445 members, of whom 7,361 are retirees and beneficiaries. The average yearly pension is $22,007, which is fixed. The wind-up ratio of the plan was 5.99 at this point. A large portion of this deficiency was due to the Ontario government's 'too big to fail' legislation, which allowed the sponsor to underfund the pension on a solvency basis. Had General Motors of Canada followed its parent into bankruptcy, the value of the average yearly pension would now be $13,182. The current wind-up ratio is approximately 0.8. At this rate, the average yearly pension will be $17,606.
To make matters worse, there is an insufficient capacity in the Canadian insurance market to support the immediate purchase of annuities for all the plan beneficiaries who would want to retain the right to a monthly pension in the event of a plan wind-up. In bankruptcy, pensioners would lose all of their benefits, and that would be an additional financial burden. Most benefits are required, more so for the aged versus the young actives. For the current bankruptcy legislation, everything is stacked up against the vulnerable pensioner. There would be less income to support higher costs due to loss of benefit support and inflation. Independent and secured pensioners could now become a social and economic burden to society.
In conclusion, it is time for Canadian pensioners to enjoy similar protections for their pensions in bankruptcy as are enjoyed by pensioners in most developed countries in the world. Preferred status protection is the norm, not the exception. It is time that the Government of Canada passes legislation to protect pensions in bankruptcy. It is time for economic and social justice for Canadian pensioners.
Thank you.