Bill C-501 (Historical)

An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay)

This enactment amends the Bankruptcy and Insolvency Act to ensure that the claim of a clerk, servant, travelling salesperson, labourer or worker who is owed termination and severance pay by a person is secured as of the date of the bankruptcy or receivership by security on the person's current assets.

Pensions

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Chair, the member from the Bloc raised earlier the issue of the guaranteed income supplement.

The government knows the people's age and it knows how much money they make. Would it not be nice if the bottom of the assessment said that in the future they may qualify for this and they should check it out, or something to that effect? It should be that simple because it is an entitlement really.

We heard the member for York West talk earlier about the Nortel situation with the LTD workers. The LTD workers at Nortel had a problem because, instead of premiums being paid to an insurance company, the company was self-insured. That is why when the assets went down there was a problem.

We have talked in the House under one of the bills I proposed, Bill C-476 and now C-501, about protecting workers' assets in their pension funds at the time of bankruptcy and insolvency or the CCAA because corporations are hiding behind CCAA, in particular, to get out of their responsibilities to the pensioners.

I am very curious. Would the Bloc be supportive of Bill C-50l, which was before committee today?

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

Madam Chair, I would like to change tack a bit and not get into all the arguments they are having. This is a question for the member that I hope he can answer at some length, if we still have time.

Today marked the third day of committee hearings on my bill, Bill C-501, which is an act to protect pensions for six million Canadians and their families right across this country. While there are some problems and some difficulties, we are working on them, and I hope that all the parties are working together on this.

One of the things that happened today was that we had a lot of witnesses from industry. They seemed very concerned that defined benefit plans are going to disappear or they are going down. They said, “Woe is me; what are we going to do?” I suggested an alternative and I would like the member to make a comment on it.

The alternative was the we have the best pension plan in the country that we can be part of, and it is the CPP. The Canada pension plan is the best pension plan we have. Everybody can participate. Everybody can be protected and, most importantly, the government cannot get its hands on the money.

I would like to ask the member if he would expand on his thoughts about the CPP and the value that it will have on an ongoing basis as we move forward in this debate.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Madam Chair, I am most pleased to take part in the debate on those pension reforms that are needed to protect and enhance the lives of Canada's seniors as they live out their sunset years.

From my reports, the House will know that over the last 19 months, I have been crossing Canada, holding some 39 community meetings, so far, on what I call the listening to seniors tour. I want to assure the House that these seniors have been very quick to tell me of their fears and their concerns about the future.

Today far too many of our seniors are forced to live in fear, just one crisis away from financial catastrophe. Seniors are worried about their private pensions and how they might be significantly less than what they were told they would be, or, as in the case of companies like Nortel, where there was a significant loss to the amount of pension income, they worry if they will have a pension at all going forward.

The genesis of my listening to seniors tour was when I was visited by a prominent group of seniors. One of my guests stated that seniors felt invisible to their government. This group also wondered why the government had given $14 billion a year in corporate tax breaks while, as they said, doing nothing for them.

The government will argue that there were things done over the past five years on behalf of seniors and some of that is factual. However, from the point of view of the seniors, they do not see that immediate impact for them.

One of the things we heard today was the corporate tax rate in Canada as compared to the United States. I may be incorrect but it is my understanding that the corporate rate in the U.S. 36% and we are nose-diving to 15%, and we are taking the fiscal capacity out of the government to respond to seniors needs.

Last fall, I told the House something worth repeating. It is the story of a senior who came to my office. He had a letter from the government saying that his pension had been increased 42¢ a month. I am pleased that the finance minister is here to hear this. This man was so upset, he had tears in his eyes. He said, “Not only does the government not give a damn about seniors, but it goes out of its way to insult us by sending us a notice that cost more to post than what it cost in the increase to the government”. He was very concerned.

We faced down the worst recession in years and some credit should go to the government, but Canadians throughout that process were vividly reminded of why we had a social safety net in the first place.

I am pleased to see the government has taken an interest in reviewing the benefits paid under old age security, GIS and CPP. I have to stress that this has also been done with an eye to increasing benefits for seniors.

Repeatedly tonight we have heard references between 200,000 and 300,000 seniors who live below the poverty line. An economist at the Canadian Labour Congress reported that an annual infusion of about $700 million would raise all seniors above the low income cut-off, what is more commonly known as the poverty line.

We heard the Bloc speak about a motion that it had before the House calling for an increase in GIS.

The 200,000 or 300,000 living below the poverty line is a very sobering statistic, but when we consider of that number, 60% are single unattached women, many of them women who never participated in the Canada pension plan because they stayed at home, this is nothing short of a national disgrace. We can do so much more and we must do much more for all senior Canadians.

Today only 38% of Canadian workers have workplace pensions. Nearly one-third have no retirement savings at all. Earlier today the Liberals presented a bill on guaranteeing a charter for the rights of seniors to save. For the one-third of Canadian workers who are outside the umbrella of having a pension plan and cannot save at all, we have to question what the charter would do for them.

More than 3.5 million Canadians are not saving enough in RRSPs, and I am sure the finance minister could back that up. They are not taking advantage of the opportunity that is presented by the government. Seventy-five percent of private sector workers are not even able to participate in a registered retirement plan. Clearly the notion that retirement savings can be adequately accounted for through the purchase of RRSPs has not worked out and requires urgent government action.

In June 2009 the NDP opposition day motion started, in a very public way, a national discussion on the future of our retirement security system. Members in this place today are continuing that discussion.

Part of the discussion from our perspective centred around increasing CPP and QPP funds. I would remind members that CPP and QPP are self-financing, so it then becomes a question of whether Canadians are prepared to pay more for security in their senior years as part of a secure public pension plan. Canadians certainly face insecurity today in the context of their private options, like RRSPs or defined contribution plans, that leave them uncovered or victimized by the market.

We believe it would also be a benefit to beef up CPP. That would be the cheapest way for Canadians and the government to pool risks, take the burden off individuals and secure their senior years. Any voluntary supplemental CPP system would simply not meet the needs of Canadians any more than what an RRSP has done in the past. The NDP believes it would be better to use the resources of CPP and QPP to enhance a retirement system.

I would like to discuss the need that Canada has for a pension benefits guaranteed fund.

Federal leadership is urgently needed to set about working with the provinces to develop a pension insurance regime. This must be done to ensure workers actually receive the retirement benefits they have earned, even if their employer goes out of business.

As I said, we insure our cars and our homes and we have deposit insurance to cover our savings. Why not insure our pension plans? The system would be funded by contributions from federal workplace pension plan sponsors administered by the federal government and designed to ensure efficiency and fairness to all parties.

Another notable model that is worthy of study is the American Pension Benefit Guaranty Corporation, and there are some issues with that. Similar to the Canada Deposit Insurance Corporation, the Pension Benefit Guaranty Corporation is not financed through tax revenues but by premiums paid by sponsors of defined benefit plans, assets from plans that are taken over, recoveries from refunded pension liabilities from plan sponsors' bankruptcy estates and through investment income.

Canada may choose not to follow the American model, but it could create some form of pension insurance uniquely its own or a hybrid of other plans, such as those in Switzerland, Sweden, Germany and Japan and even the Netherlands, which is probably not an option that we would look at here. The government of the Netherlands insures the plans.

Once a guaranteed plan is successfully combined with funding rules or other protection measures, it can effectively perform as a last resort benefit protection measure.

Another clause in our opposition day motion called for ensuring that workers' pension funds would go to the front of the line of creditors in the event of bankruptcy proceedings. My colleague from Thunder Bay was responsible for putting forward Bill C-501. He has worked hard on that file, trying to protect the pensions and severance of workers across the country.

Canadians need to know that there will be a level of pension income for their retirement to ensure that they will spend their final years with financial security and live in dignity.

[Judy Sgro, Liberal, York West, ON]

Madam Chair, yes, I have been attending the industry meetings dealing with Bill C-501, which I am sure we will hear more about as the evening progresses. We have had a lot of very important people come in and give testimony, whether it was Nortel pensioners, Bowater or the many companies across Canada that are very concerned about the impact Bill C-501 will have. As parliamentarians, I think we are all trying to make a difference and many of us have different opinions.

This bill is important. It will soon have an opportunity to be looked upon in discussion with the department. At the appropriate time, we will make the appropriate decision.

[Mike Wallace, Conservative, Burlington, ON]

Madam Chair, it is my pleasure to take part in tonight's discussion on pension reform.

The Minister of Finance and the Parliamentary Secretary to the Minister of Finance have spent a lot of time over the last number of years looking at this issue. I am fortunate enough to be on both the finance committee, which dealt with this issue last spring, and on the industry committee at present where we are discussing Bill C-501.

Parliament and this government have been engaged in this issue and we have made a number of changes over the last couple of years.

However, I am not absolutely sure about something. The member for York West has been sitting in on our industry committee on the issue of Bill C-501 but I cannot tell whether the Liberals are supporting that private member's bill. I wonder if the member could tell us. I know that is a private member's bill and probably an individual decision, but based on the work that she has done and whether that bill would actually help Nortel employees, will the Liberals be supporting it coming back to the House?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

This would be after Bill C-501, yes, for sure, so not including Thursday's meeting. It would be starting next week.

[The Chair, Conservative, David Sweet]

Is this after Bill C-501?

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

A final question for Madam Bastien.... For those remaining defined benefit plans, we have talked about risks to employers in terms of access to credit, increases in interest rates, impacts on markets. What about the relationship between the plan provider, the pension provider, and the plan sponsor?

If Bill C-501 is passed, will that create risk for the plan provider that they will want to cost and pass on to the plan sponsor?

[Leigh Ann Bastien]

Are you asking what the case is if that regulation I referred to is not redrafted? No, my comments don't change, because Bill C-501 is worded in such a way that it can do more than Bill C-9 does by itself.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Okay.

I guess the last part is that if none of the things that are to be rewritten for Bill C-9 occur, does the impact of Bill C-501 change for you?

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

What you're saying is that if one is looking at the 30 other countries, most of them are only really dealing with a very limited.... They're looking, as in Bill C-501, at special payment in arrears, and really at just that.

[Leigh Ann Bastien]

I can make a couple of observations, first about Bill C-501.

The stated intention for Bill C-501 is that the entire deficit become one held by a super-secured creditor. The words in Bill C-501 are less definite. I would say that when you're doing your clause-by-clause, it's very important to be sure that the words match what you think they ought to mean.

Bill C-501 refers to regulations made under the Pension Benefits Standards Act. It defines the liability that it's targeting by way of a regulation. Under Bill C-9 that regulation has yet to be rewritten; it's going to be rewritten.

So you have a moving landscape. That's my first observation.

Secondly, what we see in Bill C-9—in the statute itself, prior to seeing the regulation—is that there are special payments that are due up until the date of a plan termination. I think I heard a reference to this earlier today. Some think this is the intended scope of Bill C-501. But Bill C-9 introduced a new element to pension plan funding. That's an obligation to fully fund the deficit after a plan is terminated and to fully fund it over five years.

In my view, the language in Bill C-501 is not clear enough to tell me with any certainty that this liability has been excluded. In fact, I think you can even read it to say that the entire deficit is captured, even though Bill C-9 doesn't require a full deficit funding in one moment but requires it over five years.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

I'd like to ask my question to Madame Bastien.

I know you were here in the previous session, so you may have heard me asking a question of Mr. Breton. It was concerning the issue of arrears and special payments. That seemed to be what Bill C-501 was addressing. I was asking how much effect that would have, really, on the markets. He brought in the fact that it wasn't just Bill C-501; it was also Bill C-9.

I heard you mention that you're familiar with Bill C-9, so I was wondering if you might shine some light on the linkage, to show why it's a bigger thing than perhaps I've appreciated.

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

One last question to Towers Watson.

Your work estimates that this bill would increase the corporate bond market. I know you didn't want to talk about basis points, but you say 12 to 29 points. What you say is certainly in line with other testimony that we've heard. Philips, Hager & North, which I guess you're familiar with, and Monsieur Carte, whom you're also familiar with, both estimated a quarter-point hit in the corporate bond market, about $3 billion to $4 billion in investment-grade bonds. And these are the ones that are preferred. These are the secured ones.

So when we speak of Bill C-501 and we talk about investment-grade corporate bonds being approximately $300 billion—I think that was the estimate in this report—we're really talking about a 1% hit on investment-grade bonds, $3 billion to $4 billion.

[Phil Benson]

The whole issue of defined benefit plans is interesting. For about 40 years of regulation the goal was to encourage defined benefit plans. Quite bluntly, I don't think we'll see another one come into being unless it's through negotiations, collective agreement, or some other thing. It's been an abject failure.

When we're talking about risks and costs, I support the idea of putting funding more securely--more like insurance companies: get out of the marketplace. There are lots of things that can be done in that regard.

There's also another risk, but I didn't talk about risk and cost. I'm at the tail end of the baby boomers. When we all retire, if those pensions that were promised aren't there, we're also going to transfer that risk and cost onto taxpayers. At the end of the day, if some of our members are going to get 26 cents or 36 cents on the dollar, they'll be getting guaranteed income supplements, HST credits, GST credits.

That's another thing for you to think about as the legislators. Bill C-501 is one piece of the pie; it's not the total fix. But I think it's something that will have to be done eventually, if not now.