Industry Committee on Nov. 16th, 2010

[Donald Sproule]

Just to elaborate on that, I've been well aware that in the U.S., the Pension Benefit Guaranty Corporation will protect the assets of the pensioners up to $54,000 a year in bankruptcy. That's $54,000. In Canada, with the exception of Ontario, it's zero.

So there's a fallback mechanism, a safety mechanism for pensioners in the U.S., and in the U.K., where it's 28,000 pounds a year. That's probably why they don't have higher-priority status in bankruptcy: because they don't need it in the U.S. The land of free enterprise actually protects the pensioners.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Mr. Sproule, you mentioned that the U.S. estate was going to have more assets for their pensioners than the Canadian. Maybe you can explain that, because I'm not sure that a lot of members of the committee quite understand what you're saying there.

[Donald Sproule]

All of this is subject to negotiation and working its way through the bankruptcy courts, but certainly I think the Canadian estate on a cash basis is being depleted and is probably heading towards zero. There is a large amount of cash sitting in the U.S. estate. I forget what the number is--$300 million or $600 million. Actually, some of that has been depleted as well.

When the final reckoning is done, the assets that were sold off will actually get divided, but included in that will be the cash assets themselves. Everything we are hearing is saying that the U.S. estate is going to get significantly more than we're going to get in Canada.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Maybe some of our other witnesses could explain how they see that the government could help protect pensions in addition to a preferred status.

[Brian Rutherford]

Well, you do it through two ways. You do it through regulation, and we're discussing that with the Ontario government now, because 80% of the pensions are regulated out of Ontario. That's where we'll be tomorrow. You also do it by amending the Bankruptcy and Insolvency Act. Currently, pensions have no rights in bankruptcy, so you have to get them to the table, just like the bondholders and the suppliers. Why should they be treated any differently? I mean, I've talked about deferred payments. A pension is a deferred payment.

In reference to what is going on in the rest of the world, a study that was done in September on global competitiveness and was published in the Star shows that of the ten top countries in the world, Canada was number ten. There were Switzerland, Sweden, Singapore, United States, Germany, Japan, Finland, Netherlands, Denmark, and Canada. As for the only countries that did not have any bankruptcy protection, Canada has a meagre one, and Singapore has none. The rest of those countries all have either preferred status, or an insurance status, or, in the case of Denmark, super-priority status. This is nothing new. This is not groundbreaking. This is just trying to put the Canadian pensioners where the rest of the world is and give them some protection in bankruptcy.

[The Chair, Conservative, David Sweet]

Mr. Walsh, please, just briefly.

[Jack Walsh, Provincial Vice-President, Canadian Federation of Pensioners]

I will just add a comment regarding your own riding, Mr. Brown, and the other ones. To put you in the picture, the Canadian Federation of Pensioners was formed five years ago when we looked down the tunnel and we didn't see the light at the other end: we saw a freight train coming. The freight train was the ineffective regulatory regime here with regard to bankruptcy, mainly in Ottawa, and in the provinces and the Province of Ontario as well.

Immediately we ended up with 15 members, including Chrysler and IATA. These folks all have members in each of your ridings and they are very, very concerned. These are: Chrysler, IATA, Sears Canada, Bell Canada, Ciba-Geigy, DuPont INVISTA, Stelco, General Motors, Slater Steel, Air Canada, OPG-Hydro, and of course Nortel, just to make that point.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Walsh. I'm going to have to cut you off there. Our time has run out. Thank you very much.

Mr. Rafferty might actually allow you to continue on.

We'll have Mr. Rafferty, for five minutes.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

I will actually, but I do have a question first.

I would like just a very brief answer from Mr. Hilton and Mr. Sproule, in particular.

You've already indicated that this bill is not going to help you at all.

[Robert Hilton]

Certainly in my case it won't.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Things have, in your case, wound up, and Nortel is very far along.

I just want to clarify for everybody in the room here that no one, neither the Liberal Party, the NDP Party, me, my staff, or anybody else, has ever said or made any promises that this is going to help your cause. That's just so we're clear, because there seemed to be quite a few questions about it. I just wanted to be sure that everybody is on the same page.

I would like to continue that line of questioning.

Mr. Walsh, that was the first time you had to chat. I'd like to give you a moment extra.

Mr. Hilton and Ms. Clark-Stewart, I'd also like to give you a chance to speak. Do you have anything further to say to this committee or to your individual MPs who are not here today about Bill C-501?

Mr. Hilton, go ahead.

[Robert Hilton]

If I may, first of all, when we asked our governments to bring forward legislation to improve the situation, we asked them to do it in a way that would not do harm. And while we support very much what has happened at the federal level, there has been harm done at the federal level, and that harm is in fact the extension of the time span for a company to bring their pension plan into a state of balance. The harm has been done to the pensioner. It has been to the benefit of the company. It has been to the benefit of the bond holders. It has been to the benefit of the government. But it has been to the detriment of the pensioners.

Very simply, if you are required to prepay $200,000 over five years, you have to pay, let's call it $50 million, over five years. So you have to pay it back at $10 million a year. But if you have to pay it back over ten years, you have to pay it back at $5 million, right? That's a big difference.

Now, you take the pensioners. In year five, if you've only paid back half of it, the pensioners are still going to lose the other half they would have lost if the company had failed before. So that's the additional harm.

It was mentioned that federal legislation truly only affects 20% to 25% of the pensioners. That's true from the pension aspect, but it is not true when it comes to bankruptcy. Your bankruptcy act supersedes all provincial legislation. So when a company goes into bankruptcy, it's the federal law, but that's not going to create any additional payments for the companies. Okay? I think that's important. Twenty percent, maybe 25%, is federal. The rest is provincial.

Now, federally, Air Canada, in trouble, talked to the union and their associations, and they negotiated up to ten years, because they felt that it gave a better opportunity for them. But should the government institute that rule, or should the pensioners and the active employees who will eventually collect a pension have a right to have a say in that? I think we should have a say in it.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you, Mr. Hilton.

Mr. Walsh.

[Jack Walsh]

Just to finally wrap up, our pensioners and their widows from these companies I outlined to you are very deeply concerned about the pension scenario as it's developing in this country. They also are aware of the critical role that getting Bill C-501 right could play when other companies start to hit the wall, which I'm sure is going to happen over the next couple of years. We haven't seen the end of this Nortel kind of scenario. That's one thing we all have to be concerned about.

We thank you legislators, first of all, for listening to us. This is kind of rare. Normally, pensioners are completely ignored, so it's good to see that parliamentarians are finally saying that they want to listen to the people who are being affected. That's terrific, but we look forward to you really pushing and getting Bill C-501 right so that we can go back to our people and tell them that we're on the right track and that this thing is going to get fixed.

[Anne Clark-Stewart]

I just have two points I'd like to make.

First of all, Mr. Laver talked about the issue of all of the legislation being put in place to change pension laws. That is all federal. That's 7% of the pension funds in Canada. It doesn't affect us one little bit. It doesn't affect one private pension plan. They're all federally-regulated plans.

On the issue of retroactivity, I did a lot of examination of the retroactivity of laws, because when I had a meeting with Minister Baird, he indicated to me that it has never happened, or it couldn't happen. Well, in legislation, the only way retroactivity is not allowed to happen is in criminal law. Even though the Supreme Court may have made some rulings on some previous legislation, there's no reason in law why they can't make this law retroactive.

[The Chair, Conservative, David Sweet]

Thank you, Madam Stewart. I'm sorry, the time is our biggest enemy here, and I did allow you to go over a bit. Somebody might allow you to complete your point.

Mr. McTeague, for five minutes.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Yes, I'll share my time with Ms. Sgro again.

You've raised a very interesting point, Ms. Stewart, about the question of retroactivity. It sounds to me, from all you've said, that Bill C-501 won't do all the things that we need to do to address the problem down the road. It will only go so far.

Mr. Hilton, your point about extension of time, for instance, I think speaks to the need for the government to actually take a proactive position with a larger, more comprehensive and detailed piece of information.

Mr. Sproule, if I have you correctly, I just want to make sure we understand that this will do nothing for your colleagues and pensioners with Nortel.

[Donald Sproule]

Hope springs eternal, but we understand what the current legislation states.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I think the committee, in learning what it is learning from all of you here.... It's not about giving false expectations and creating a scenario where people believe this is the silver bullet that will help. I think we all agree to that.

Mr. Rutherford, you've come up with some very good points, as has Mr. Hilton. Has there been any body, organization, round table, or departmental discussion about putting all of these elements together in the hope of formulating a bill, a policy, driven by government, that will address some of the problems you've raised? Has there been any initiative at this point? Or is this really the first attempt?

[Anne Clark-Stewart]

I've been in discussion with Minister Baird, Minister O'Connor, and I'm trying to get a meeting with Minister Clement. It hasn't happened yet, but it's on the books. We have been talking to them and the government ministers have indicated to us that something is in the works. That something has not been defined. We have given them all of our input on the things that we see need to be addressed. Minister Clement did come back to one of our members who was a constituent of his and indicated that something would be happening soon. We've been hearing that since last Christmas. But as Don says, I'm very positive. Hope springs eternal that something will happen to help us out.

I'm the one who receives the phone calls. I'm in communications with this group. I receive the phone calls and the e-mails and the letters from the widows who are desperate. Ten percent of our population are widows with pensions under $1,200 a month.

[The Chair, Conservative, David Sweet]

Thank you.

Mr. Rutherford, a comment, if you wish.

[Brian Rutherford]

I just want to comment that I taught my girls, “Life is not black and white; life is grey”. You all have an opportunity to put some legislation forward that's going to give some protection to pensioners in bankruptcy. Super-priority...I know you don't like it, but I think we can all live with “preferred”. You've got to talk about it, and you are the ones who have to make it work. If you don't make it work, there's going to be a lot of hurt out there for pensioners who get involved with bankruptcy. There's no reason that pensioners should be treated any differently from any other part of the economy in this country. That's the point I want to make: you have an opportunity to fix a wrong, and I hope you do it.

[Judy Sgro, Liberal, York West, ON]

The difficulty is that Bill C-501 isn't doing that. That's the problem we're facing today. And we wanted it to do it. At least I'm speaking for us, as the Liberals. We wanted this to be able to do that. The bill is crafted in such a way that it can't be amended to accomplish what we need to accomplish, both on retroactivity, as well as being able to widen it so that it's not just special payments. This is that narrow window of special payments that this would help if it was passed, or at least that's what we're led to believe.

The question is what are we doing to move forward? As a result of all of what many of you have gone through, I hope we do end up with changes, which is the reason for the 28 recommendations I put out in the white paper last week. So you don't have to do the changes at the end of the process in the Bankruptcy and Insolvency Act. You do the changes at the beginning.

I believe that pensioners should not be treated like everyone else. I think pensioners have a special place, because you've contributed and you're not getting an equal voice at the table, which is why you're ending up where you are now.

What else can we do? I appreciate Mr. Hilton's comments, but what else can we be doing in the future, since this isn't going to help the people we want to help today?

[Robert Hilton]

Certainly there will be opportunity for amendments to the bill. I believe that the proposer of the bill is open to amendments. Secondly, our association will be having a formal meeting of our board on November 22. We will take a good look at your proposed changes and we will certainly spend time looking at those, and we will respond accordingly.

I'd like to point out that there are 13 steps from the basement of my house to the main floor, and we don't get from the basement to the main floor unless we climb the 13 steps. Some of us can do them two at a time, but some of us can't.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Hilton. I appreciate that analogy.

Now we're going to the last questioner, Mr. Lake, for five minutes.