Bill C-26 (Historical)

An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act

Part 1 of this enactment amends the Canada Pension Plan to, among other things,
(a) increase the amount of the retirement pension, as well as the survivor’s and disability pensions and the post-retirement benefit, subject to the amount of additional contributions made and the number of years over which those contributions are made;
(b) increase the maximum level of pensionable earnings by 14% as of 2025;
(c) provide for the making of additional contributions, beginning in 2019;
(d) provide for the creation of the Additional Canada Pension Plan Account and the accounting of funds in relation to it; and
(e) include the additional contributions and increased benefits in the financial review provisions of the Act and authorize the Governor in Council to make regulations in relation to those provisions.
This Part also amends the Canada Pension Plan Investment Board Act to provide for the transfer of funds between the Investment Board and the Additional Canada Pension Plan Account and to provide for the preparation of financial statements in relation to amounts managed by the Investment Board in relation to the additional contributions and increased benefits.
Part 2 makes related amendments to the Income Tax Act to increase the Working Income Tax Benefit and to provide a deduction for additional employee contributions.

[Hassan Yussuff, President, Canadian Labour Congress]

First of all, Chair, members, good afternoon.

Thank you for the opportunity to appear before you today. It's a pleasure for me to speak to the bill. I'm very proud to be here today in regard to this discussion.

The Canadian Labour Congress speaks on behalf of 3.3 million workers across this country. Every day in this country, unions bargain pensions on behalf of our members. The labour movement believes that all workers should be able to retire in dignity after a lifetime of work, regardless of whether or not they have a union. The Canada pension plan is a critical part of retirement security for Canadians. The universal CPP delivers a secure and predictable benefit in retirement and is protected against inflation. The problem is that the CPP benefit was set too low when it was created in 1965. It pays a benefit of just 25% of pensionable earnings below the average wage. We have been fighting to improve the CPP from the very beginning. Seven years ago, the Canadian Labour Congress, in 2009, and its member unions decided to once again redouble our fight to expand the Canada pension plan.

If we had not campaigned tirelessly for the last seven years to expand the Canada pension plan, we would not be here today having this discussion. There is no exaggeration in regard to this point. Both our allies and opponents acknowledge that the labour movement was pivotal in getting this agreement. In the beginning, we had little support. Not a single province supported the expanding of the CPP. The federal government was opposed, and as always, the banks and the insurance companies opposed any expanded CPP.

We were not deterred. We mobilized our activists across this country. We educated our members and the public about an expanded CPP. We patiently explained to anyone who would listen why it makes sense to expand the Canada pension plan. Gradually, we began to win over seniors, students, anti-poverty organizations, provinces, and politicians. The Federation of Canadian Municipalities unanimously endorsed our call to double the Canada pension plan. The Canadian Federation of Students backed our proposal. Pension experts and economists were on our side. Newspaper editorial boards endorsed the expanded CPP. Polls showed that Canadians supported an improved CPP in every region, in every age group, and in every income bracket, regardless of party affiliation.

Gradually, the provinces came to understand why Canadians need a better CPP. Only the federal government stood in its way. At one time, even then, the late finance minister Jim Flaherty supported an expanded CPP. The labour movement made CPP expansion an election issue in the last election in 2015. We helped change the federal government. I am happy and proud to say that the labour movement's consistent efforts are what got us here today.

Critics tirelessly continue to make the same arguments against expanding the CPP. They say that most Canadians don't need a better pension. They say that rising house prices and RRSPs will provide Canadians with dignity in retirement. They say the sky would fall if contributions were to rise modestly over a gradual phase-in period. These arguments have been discredited in the past. They have been rejected by Canadians.

Bill C-26 is the result of a long struggle, and we are proud to see it proceed. This is a historic achievement on behalf of Canadians and our country. For the first time in 50 years, the Canada pension plan benefits will improve.

I want to thank personally Minister Morneau and the provincial governments for their hard work and leadership in getting us this deal.

The bill before you today, Bill C-26, isn't perfect by any stretch of the imagination. For instance, we fail to see why the child-rearing dropout provision isn't extended to the enhanced benefit. This may have been an oversight and it needs to be fixed before the legislation is adopted by the House.

We urge the committee to include a child-rearing provision in the new benefit, but make no mistake; Bill C-26 is a historic and significant improvement in the CPP benefits for working Canadians. At a time when public pensions are in retreat around the world, Canada's leadership sends a beacon to working people everywhere. This is a proud moment that we Canadians can celebrate.

On behalf of the congress, thank you very much for inviting us to present before the committee today.

[The Chair, Liberal, Wayne Easter]

The meeting is called to order. Thank you.

Pursuant to Standing Order 108(2), subject matter of Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act, we have witnesses here today to speak on Bill C-26.

First of all, welcome everyone. We would like to hold witnesses to about five minutes, if we could, so that we have plenty of time for questions.

Pat Trask, I believe you're going to be first, with the Saskatchewan Seniors Association Incorporated. Good to see you. You and I used to be colleagues 25 years ago.

Second Reading

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, it is a pleasure for me to join this important debate on the government's fiscal update and the fiscal policy of the government in general.

To be frank, there is a lot to sink one's teeth into in terms of objections to the government's direction. I can say, having just come back from constituency week and having spoken with constituents in my riding, that people in Alberta, but I think across the country, are being hit very hard by the policies of the government.

As I think through it and talk to business leaders, I am reminded of the fact that every single tax they pay is going up. Small businesses in my riding face a higher small business tax rate as a result of the fiscal policy of the government. They face a carbon tax, a carbon tax brought in by the provincial government but which the federal government will do everything it can to prevent any subsequent provincial government from repealing.

We have the elimination of the hiring credit for small business. Bill C-26 would raise payroll taxes that individual employees as well as small businesses would pay. There is the undoing of employment insurance reforms, which would, in the long run, force up employment insurance premiums. Of course, small businesses are facing higher business tax rates in general from the provincial government and are grappling with the minimum wage hike and other changes that are happening, and there still has been no serious effort when it comes to market access for our resources.

We have a government that is hitting businesses again and again and again. The reality is that these are the job creators in our economy. These are the people whose investments and ingenuity create jobs and opportunities for our country. I just went through the list, objectively, of things that are happening to businesses in my riding, and I have to say that I find the continuing optimism and the continuing desire of business leaders in my constituency to move forward and build truly inspiring. The government should be there to try to help them succeed, not make their job more difficult when it comes to creating jobs and opportunities.

I will mention one specific thing in this fiscal update, and that is the implementation of certain regulations with respect to credit unions. There are credit unions in my constituency. The application of one-size-fits-all regulations, perhaps designed for the big banks, to every small credit union is a huge red-tape burden. Again, we have a government that is not listening, that is not paying attention to small businesses. This deals with one specific sector of the economy, credit unions, but it is another example of how the government is simply out of touch with the needs of the job creators in our economy.

Moving beyond that, I was to talk about two general points: deficit spending by the government in general and the issue of the employment insurance changes contained in this fiscal update.

The government's approach to deficit spending is, yes, to run deficits, but it is more than that. It is to undertake a policy of constant structural deficits. This is very different from the traditional arguments made for deficits. There are, I think, good arguments for running deficits in certain situations. The basis of that would be the Keynesian economic principle of counter-cyclical government spending, a government doing more spending during times of economic challenge to offset the pullback happening in the economy as a whole and then the government pulling back and running surpluses during times of economic prosperity.

The importance of this is that the government is providing that stimulus for economic activity during relatively difficult times but is still balancing its budget over the long term. It is still in a position, in the long run, to balance its budget. I think we should all accept that we have to balance the budget in the long term. We cannot constantly, over a sort of forever time horizon, spend more than we have. Eventually, the capacity to borrow will run out. There is nothing wrong with running deficits in certain situations, provided that we intend to balance the budget over the long term.

When we talk about stimulating the economy, the important thing is that it needs to be in times that are relatively less good. Of course, even during good times, there will be people who are struggling. There will be people without jobs. There will perhaps be a desire to increase growth. However, if the government always spends more than it has in good times as well as bad times, then eventually, it is going to run out.

The government talks about stimulus, but it is really abusing these arguments, because its position is not that the government can do counter-cyclical spending at certain times to stimulate the economy. Rather, its position, stated by the finance minister, is that we can just run deficits all the time. The finance minister responded to a question I asked earlier during committee of the whole about whether the government would ever balance the budget. He would not say yes to that very simple question.

If we look at what is happening in the economy, the government is constructing arguments that are entirely resistant to the evidence. If things are going well, Liberals will say it is an indication of the fact that they can spend more. When things are going poorly, they say that they need to spend more. Every situation, good or bad, every data point, in their minds, is proof that they need to constantly be spending more money. Of course, there are limits.

Although Canada has a relatively low federal debt-to-GDP ratio, our total government debt-to-GDP ratio, which includes what the Kathleen Wynne Liberals in Ontario are doing and other spending programs of provincial governments, is comparable to countries like the United States and the U.K. It is important that we look at the total debt-to-GDP ratio, because in Canada we have relatively more public services provided at the provincial level than we do federally. For the federal government to say that it has lots of room to run deficits just is not true, because it needs to look at the overall debt-to-GDP ratio.

We see in this fiscal update the government making promises to people, increasing spending, and announcing the indexing of the new child benefit program. The Liberals are just not dealing with real money, because they are making promises into the future that are not costed, and that, in the long run, they should know they will not have the capacity to do. I think it is wrong to promise people that the government is going to spend money on things it knows it does not have the capacity to. When it has this kind of policy, when it undertakes government spending and assumes that it can run deficits forever, what it leads to eventually are significant cuts. The benefit of running surpluses during relatively good times and stimulating deficits during relatively less good times is that the government is able to spend more during challenging times, whereas countries that have consistently spent more than they have find themselves during bad times also in a position where they are forced to cut spending before they go off the fiscal cliff. That is the situation of some countries in Europe. We know that this has happened. We do not want to see Canada go down this road.

Just to complete blowing a hole in this stimulus argument, if we look at government spending, it is not targeted or temporary stimulus spending. Liberals are instituting what they would like to propose as permanent new social spending. They are proposing spending that is not targeted to economic stimulus. It is permanent new promised spending, a promise they know, or should know, simply cannot be kept.

I will conclude with a few comments about employment insurance reforms. In the last government, we brought in some very sensible reforms for employment insurance. Under new rules we brought in, it was expected that individuals would be actively involved in a job search to receive benefits. That is a reasonable requirement. We worked to define suitable employment in a way that said that even if individuals could not find exactly the same job they had before, there should be a broader definition of suitable employment but also that the government should provide more help to people in terms of finding jobs. We instituted a stronger system of providing job information to people who were seeking jobs.

It is important that individuals be actively involved in a job search when they are on employment insurance, that employment insurance be a meaningful insurance system, and that it be designed to help people get back to work, not something that can be constantly relied on year after year. I think that is a sensible way of structuring the program. The government, in undoing those employment insurance reforms, is creating additional costs for small businesses as well as for individuals, because everyone has to pay into that EI fund.

Therefore, if we take away those reforms to encourage job search on the payout side of it, then we have to increase the burden on those paying into it. This has a real cost for the creation of jobs and for people who work in our country. I prefer a policy that makes it easier for people to get jobs, not one that cuts back on jobs.

This is the wrong direction for our country, and I will be voting against this.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Okay. That's a different answer. I'm glad you clarified that.

Bill C-26 has provisions pertaining to the insufficient rates section of the current CPP act. This section deals with what happens if the actuaries show that the contributions flowing to the CPP are insufficient to fund the benefit. Can you describe what happens if the same pressure came on to the expanded portion of the CPP?

Bill C-26—Notice of time allocation motion

[Bardish Chagger, Liberal, Leader of the Government in the House of Commons and Minister of Small Business and Tourism]

Mr. Speaker, I regret to inform the House that an agreement could not be reached under the provisions of Standing Orders 78(1) or 78(2) with respect to the second reading stage of Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act.

Under the provisions of Standing Order 78(3), I give notice that a minister of the Crown will propose at the next sitting a motion to allot a specific number of days or hours for the consideration and disposal of proceedings at the said stage.

[Michel Montambeault, Director, Canadian Pension Plan, Old Age Security, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions]

Thank you, Mr. Chair.

I will start my remarks in French and move on to English.

Mr. Chair and honourable members of the committee, thank you for the opportunity to appear before you today. I am Michel Montambeault, Director of the Canada Pension Plan, known as CPP, and Old Age Security, or OAS, Actuarial Valuations at the Office of the Chief Actuary.

I have here with me my colleague Michel Millette, Managing Director. Michel is involved in the CPP Actuarial Valuations and liaises with the Canada Pension Plan Investment Board, or CPPIB. Michel is also responsible for the actuarial evaluations of the employment insurance, or EI, premium rate-setting and the Canada student loans, CSL, program.

The Office of the Chief Actuary, or OCA, is an independent unit within the Office of the Superintendent of Financial Institutions, or OSFI, that provides a range of actuarial valuation and advisory services to the Government of Canada. While the chief actuary reports to the superintendent of financial institutions, he is solely responsible for the content and actuarial opinions reflected in the reports prepared by the office.

The OCA plays an important role in helping decision-makers’, parliamentarians’, and the public’s understanding of some of the risks associated with the public pension arrangements by providing checks and balances on the future costs of the different pension plans under its responsibility. As part of its mandate, the OCA conducts statutory periodic actuarial valuations of the Canada pension plan, old age security program, federal public sector employee pension and insurance plans, and the Canada student loans program.

Since 2012, the OCA has also been responsible for preparing the statutory actuarial report on the employment insurance premium rate. In addition, for the CPP, whenever any bill is introduced in the House of Commons to amend the plan in a manner that would materially affect the estimates contained in the most recent actuarial report, a supplementary actuarial report must be prepared reflecting the change in those estimates. A similar requirement also applies for other plans and programs. The purpose of all the actuarial valuations is to determine the financial status of the plans and to assist the stakeholders in making informed decisions regarding the financing of the plans.

Bill C-26 provides for the enhancement of the CPP as agreed to in principle by the provincial and federal finance ministers on June 20th. The enhancement increases the replacement level from one quarter to one third of pensionable earnings and increases the upper eligible earnings limit, the year's maximum pensionable earnings, by 14% by 2025. The additional contribution rates required are set at 2% below the year's maximum pensionable earnings and 8% above it, with the rates split evenly between employers and employees. There is a scheduled seven-year phase-in of the enhancement between 2019 and 2025. Under the enhancement, the new benefits will accrue gradually over time, with full accrual occurring by about 2065. Individuals with less than 40 years of contributions will receive partial benefits.

As required by the CPP statute, a supplemental actuarial report, the 28th, on the CPP was prepared to show the effect of Bill C-26 on the long-term financial state of the plan. The 28th CPP report was prepared on the basis of the last regular triennial report, the 27th CPP actuarial report as at December 31, 2015. This report pertains to the current or base plan. The 27th and 28th CPP reports were tabled on September 27 and October 28 respectively.

The findings of the 27th report confirm that the legislated combined employer-employee contribution rate of 9.9% is sufficient to financially sustain the base plan over the long term. The legislated rate of 9.9% is higher than the minimum rate to sustain the base plan of 9.79%, as stated in the 27th report. For the enhanced or additional CPP, the 28th report confirms that projected contributions under the proposed legislated first and second additional contribution rate of 2% and 8%, together with projected investment income, are sufficient to fully pay projected expenditures over the long term. The legislated rates are higher than the minimum required first and second additional rates of 1.93% and 7.72% respectively, as stated in the 28th report.

It is important to note that the financing approaches of the base and additional CPP differ. The base plan is partially funded such that contributions are and will continue to be the main source of revenue. In contrast, for the additional plan it is required that projected contributions and investment income be sufficient to fully pay projected expenditures over the long term in order to minimize intergenerational transfers. As such, investment income is the main source of revenue for the additional plan. This means that the minimum required contribution rates for the additional plan are far more sensitive to the rates of return earned on its assets compared to the base CPP.

As shown in the 28th report, for the additional CPP, if the projected real rate of return is reduced by 100 basis points, so that the average real return falls from 3.55% to 2.55%, the minimum additional rates would increase by 32%, exceeding the legislated rates of 2% and 8%—from 1.93% to 2.55% and from 7.72% to 10.2%. In comparison, for the base CPP the same 100 basis-point drop in the projected return for the base CPP, from 3.98% to 2.98%, would result in a projected increase of 8% in the minimum rate, from 9.79% to 10.53%. Although the base minimum rate would also exceed the legislated rate of 9.9%, the relative impact of lower investment returns is much higher for the additional plan, about four times higher than the impact for the base plan.

Thank you for the opportunity to appear before this committee. We would be pleased to answer any questions you might have.

[The Chair, Liberal, Wayne Easter]

Could we come to order, please?

Pursuant to Standing Order 108(2), our subject matter today is Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act, and the Income Tax Act. We have with us witnesses from the Department of Finance, the Canada Revenue Agency, the Department of Employment and Social Development, and the Office of the Superintendent of Financial Institutions.

I think at the steering committee we had asked that there be separate hearings, but we agreed to just put everybody in the mix. If we can get done a little earlier, we will.

The floor is yours, Mr. Purves.

[The Chair, Liberal, Wayne Easter]

Is there anything else?

We will then suspend for a few minutes and start early with the witnesses on Bill C-26.

Budget Implementation Act, 2016, No. 2

[Sonia Sidhu, Liberal, Brampton South, ON]

Mr. Speaker, even though it is Bill C-26, it is related to the budget, so I will answer according to that.

[Sonia Sidhu, Liberal, Brampton South, ON]

Mr. Speaker, there are a lot of big expenses looming in the face of young people these days.

I am proud of the work our government has done to help kids with the repayment of student loans. That makes a real difference for students once they graduate. However, there is still significant work to be done to get young people saving for the future. It needs to be part of the system. They need to have that money going into a reliable, secure place, where it will be there for them once they need it.

Financial experts have been saying for years that financial literacy is important for young people. I would like to commend the Ontario government for making financial literacy part of the high school curriculum and congratulate the Ontario Young Liberals on their work in putting that forward.

Each year, fewer and fewer Canadians have workplace pensions to fall back on. The private sector needs to do its part to support a strong pension system as well.

Seniors receiving CPP put that money back into the economy and into the brands and businesses in their communities.

We all must do our part, public and private, to make Canada a prosperous place for everyone and make meaningful changes to the CPP that will allow Canadians to retire with more money in their pockets.

We have been talking about the baby boomers and the generational shift under way for decades. We always knew that this massive portion of the population would retire, and we knew that we would have to take action to make the system sustainable for them and their children too.

The bill addresses those on their way to retirement by doing more to ensure that they have dignity, security, and stability.

The more than one-quarter of Canadian families nearing retirement, or 1.1 million families, who are facing a drop in their standard of living will be able to retire in dignity as a result of this enhancement.

The revisions in Bill C-26 are designed to help Canadians in every step of their lives: grandparents, parents, and children.

The deal will boost how much Canadians get in their pension from one-quarter of their earnings now to fully one-third. To make sure that these changes are affordable, we will phase them in slowly over seven years, from 2019 to 2025, so that the impact is small and gradual.

When l was going door to door in Brampton South in the last election, I met many seniors. I met seniors who were concerned about themselves but more concerned about their families' futures. They wanted to know if their grandchildren would have the chance to go through life with the same security that was there for them.

That is why the bill is important to me. When we talk about evidence-based and long-term growth, I think of the effects for Canadians tomorrow and five years from now. In both these scenarios, Canadians will be better off.

At the core of our plan is investment. Investment in the future is what past generations did when they built transport corridors that moved countless goods and people every day. Investment in the future is what donors to universities and colleges have done for decades. It is about giving back so others can follow.

Investment in the future is what the government did in the post-war years after World War II in building a system that is envied around the world.

In Brampton, while most of my constituents were born in Canada, there are those of us who were not. We came to Canada with our eyes on the system of compassion and mutual support.

That is why investing in the Canada pension plan matters today more than ever. We cannot wait, as some of my colleagues across the aisle might suggest. If past generations had thought to wait and save their pennies instead of investing them in the Canada around us today, we would be less well off.

Every Canadian deserves a secure and dignified retirement after a lifetime of hard work. Through this enhancement, we have taken a powerful step to help make that happen.

This investment is in the people of Canada and the public system that makes us more equal and more united. That is why I will be voting for Bill C-26, and I encourage all my colleagues from all parties to do so as well.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Mr. Speaker, on a point of order, I believe that we are on Bill C-29, not Bill C-26. The member is speaking on a bill that was before the House previously.

[Sonia Sidhu, Liberal, Brampton South, ON]

Mr. Speaker, I am pleased to rise today to speak about Bill C-26. In my speech, I intend to discuss how this bill is focused on the long term.

I would like to start by simply reminding the House of the stark difference in our approach. The previous government spent a decade seeing the provinces as hurdles or opponents. Negotiation was done one by one. It was negotiation through division. Our approach is different. It is collaborative.

Our Prime Minister and the cabinet of our government have been working with the provinces as partners. Earlier this year, Canada's finance ministers reached an historic agreement to make meaningful changes to the CPP. This is what a collaborative approach looks like.

First and foremost, we believe that every Canadian deserves a secure and dignified retirement after a lifetime of hard work. Today middle-class Canadians are working harder than ever, but many are worried that they will not put away enough money for retirement.

I think about my three kids, who are in their early twenties. They are all in school. They are hard-working and brilliant people. They did their homework, got good grades, and got into post-secondary education with few challenges because of their work ethic and thirst for knowledge. Even so, many of their generation and friends are in a tough place. They are not saving now, because they have to think about paying down their student debt, paying for car repairs, or saving for their first home, let alone the cost of weddings these days. There are a lot of big expenses—

[The Chair, Liberal, Wayne Easter]

That is the request for a project budget for Bill C-26. The paper is going around. The clerk did calculations of how much it will cost to do the subject matter of Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act, and the Income Tax Act. It is estimated to cost $9,500, given the witnesses' expenses that are outlined in the report before you.

[The Chair, Liberal, Wayne Easter]

I think probably procedurally the best way to proceed is we need basically an agreement to adopt the subcommittee report, and if there's anything we want to pull out of it and deal with differently we can do that. Perhaps I could finish quickly going through the report and then come back to those sections that people want to deal with separately.

The second section really deals with the procedure and how we would deal with Bill C-26, which is the amendments to the Canada Pension Plan, the schedule that we would set up. It's listed on the paper.

The third section lays out, on a motion from Steven MacKinnon, the procedure that would be followed relative to votes on Bill C-26.

The fourth section lays out the plan of the committee to deal with Bill C-29, a second act to implement certain provisions of the budget tabled in Parliament on March 22, 2016, and other measures. That procedure on timing is laid out there.

The fifth section in the subcommittee report points out that we agreed to a motion by Steven MacKinnon that lays out how we would consider Bill C-29 and when the votes would have to take place.

The sixth section is laying out that in relation to the pre-budget consultations on the 2017 budget, if we can find the time, the committee would convene an in camera post-mortem meeting before the holiday break to discuss this year's progress and how we could do it differently.

The seventh section of the subcommittee report talks about how we would deal with Bill C-240, an act to amend the Income Tax Act (tax credit—first aid), which was referred to the committee on October 26, 2016, and that the committee consider this bill at the end of January or in February 2017, as the bill must be reported back to the House for March 23, 2017.

That's the subcommittee report. Have we got agreement on that?

You want to come back and deal with the first section, I gather? Okay.

Dan.

Canada Pension Plan

[Andrew Leslie, Liberal, Orléans, ON]

Mr. Speaker, I request that the recorded division on the amendment to the amendment at second reading of Bill C-26 be deferred until the expiry of the time provided for oral questions tomorrow, November 15.