Bill C-228

Pension Protection Act

An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985

This enactment amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to ensure that claims in respect of unfunded liabilities or solvency deficiencies of pension plans and claims relating to the cessation of an employer’s participation in group insurance plans are paid in priority in the event of bankruptcy proceedings.
It also amends the Pension Benefits Standards Act, 1985 to provide for the tabling of an annual report respecting the solvency of pension plans.

Pension Protection Act

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Madam Speaker, it is a pleasure to be here, or least to be with the House virtually. It is always an honour to rise on behalf of the good people of Central Okanagan—Similkameen—Nicola.

I would like to thank the member for Sarnia—Lambton for her leadership in this Parliament on this issue. God knows we need these issues brought up because, in some cases, the issue around pension reform and the need to resolve it is long standing and has happened over periods, not just of governments, but of decades.

We have two issues in this particular space when it relates to pensions. One is legacy pensions, which is broadly what we are dealing with today. The other one is new ones, meaning that fewer companies are deciding to use the standard defined benefit pension plan. I am just going to take a quick moment to share a few reasons why that is.

Obviously the business environment has changed. Technologies have come in. We have seen new business models operating that challenge the status quo and have created all sorts of issues for legacy businesses as technology continues to change things.

The government tried to deal with this by bringing in Bill C-27 in its first mandate, but that particular bill went nowhere because the government probably did not do its homework and got hung up over one particular area that people were contesting around conversion, the conversion of a defined benefit to a target pension plan.

The reason why I raise this issue is because the government has failed when it comes to addressing both legacy issues, as well as trying to invoke new methods for bringing in benefits, whether they be a target-based benefit or a defined benefit. If we want to see more people having secure retirements, then that is part of the solution. I do not think the government has done a very good job, which brings me back to legacy issues.

Defined benefit pensions, those are usually handled, most of the time, by the companies themselves. There is no legislation that says that when they are in a surplus position, who actually owns that. Is it the actual company or is it the pensioners or the current workers? That problem, unfortunately, does not happen that often because it is very seldom that these particular private, defined benefits are running at a surplus. In fact, it is the opposite.

We have seen cases such as Sears. I represent a riding that has a large percentage of seniors. They rely on that income. It breaks one's heart when one finds out that they are no longer going to be receiving the benefit they paid into.

There has been inaction on this by the Liberal government since it came into office, but I would not put it all on them. If we just look to those who are fortunate enough to have a pension program, and it is usually in the public sector, the answer has already been given by successive governments over the decades. If there is a shortfall, the taxpayer will fill that gap. However, for these private pensions, that has not been answered.

Unfortunately, we have seen recessions. We have seen where stock markets have been hit hard, in the early 2000s, obviously in the financial crisis in 2008-09, and the subsequent great recession, and now we are looking at where there is a lot of talk about a possible recession. This is the worst time to be bringing these things up.

When these issues happen, when scarcity is abound, this is where everyone tightens up and demands to have what they are owed. The member for Sarnia—Lambton has been trying, struggling through the process of a private member's bill, working through committee, to put a new balance in place that would at least address this.

We do have the Office of the Superintendent of Financial Institutions. Bill C-27 that I referred to earlier did talk about having more rules and oversight in place that would force new target benefits to come up with plans to bring themselves back into a surplus position when there is a drop.

That is really important because joint-sponsored pension plans often have these things where they will, on a temporary basis, cut some secondary benefits to smooth things out, and once the plan comes back into balance, then the regular benefits continue. Those kinds of tools, where a pension plan can smooth out those outflows to make sure there is always a plan to get back into surplus, work. It has been shown in joint-sponsored plans, and it could work in defined benefit programs as well, but the government has a responsibility to start the discussion.

Unfortunately, the government seems to have taken the opinion that, if one touches it, one has basically bought it. It has, so far, decided not to enter into this space since its retreat from Bill C-27. Again, this country deserves better. It deserves to have both certainty for the existing legacy pension plans out there in the federal space and, I believe, an overall discussion on provincial plans. So far, when it comes to that kind of discussion, successive ministers of finance, whether it be former minister Morneau, who is the minister no more, as I like to joke once in a while, or the current Minister of Finance, they have not made this a priority. Thus, this is where members of Parliament need to fill the gap.

The superpriority, although it is an essential process that has been pointed out by the Canadian public, where they feel that if the government cannot put in place a framework that assures them of that, then, by goodness, they should receive superpriority in the Bankruptcy and Insolvency Act at the very end. It is an option that will have trade-offs in the corporate side, where it will make it in some cases harder for corporations to receive financing for their bonds. However, in the absence of better leadership by the government, members of Parliament have been forced to do this.

It is terrible that we have a government in office that votes down, or I should say denies, unanimous consent. Members of Parliament wanted to see the superpriority component of this bill included. For the Liberal government to continually say no and use whatever tools it can just shows the government is completely opposed to anything in this space. That is lamentable because ultimately it is Canadians who do not have an assured pension, such as public servants or most of us, if we are vested, do.

I would encourage the government to come clean. I would encourage Canadians to talk to their members of Parliament. Most of all, I would encourage the government to start taking this issue seriously, put forward consultations with both provincial governments and the Canadian public on how it intends to deal with legacy issues if it is not going to go forward with the Bill C-228 provisions presented by the good member for Sarnia—Lambton.

I appreciate the opportunity to speak today and wish all of my colleagues a good day.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Madam Speaker, I want to begin by informing the House that Quebec is currently in mourning. We just learned of the death of Jean Lapointe, a great writer, composer, performer, actor and comedian who was very involved in society.

On behalf of the Bloc Québécois, I want to extend my sincere condolences to his son, Jean-Marie, to his family, friends and loved ones, and to all Quebeckers. We will remember him for his comedy shows and his songs. He used to say that we learn to live through song. Many of his acting roles had a profound effect on me. Take, for example, his role in the series Duplessis, where he did an extraordinary job of playing “Le Chef”, his roles in various films by my favourite filmmaker Marc-André Forcier, and the role he played in Les ordres. We pay tribute to his memory, his political commitment and the rehabilitation centre that bears his name.

Farewell Jean Lapointe, and thank you.

Let us now talk about the important Bill C-228

We are at third reading of this bill in the House of Commons. That is amazing. I want to sincerely congratulate the hon. member for Sarnia—Lambton for her masterful sponsorship of this bill and for managing to build consensus around a common goal. In committee, members of all parties contributed to the bill, including people like the hon. member for Elmwood—Transcona, who participated in the work and helped improve the bill.

In the House this afternoon, we are beginning third reading of a bill that will make a difference in people's lives, in the lives of workers and especially of the retirees who are entitled to these pensions.

As everyone has acknowledged, there have been several instances in recent decades when companies declared bankruptcy and their defined benefit pension funds were underfunded. That had a devastating impact on the company's retirees. They could no longer collect their full pension because the pension fund they were entitled to was underfunded.

In life, in a market economy based on supply and demand and capitalism, there are risks and bankruptcies occur. If a worker sees his company close and declare bankruptcy, it is a difficult situation, but that person will try to find another job and get on with their life.

What happens to pensioners? As the member for Sarnia—Lambton was saying, what happens to people who are 70 or 75 years old and depend on their pension when they suddenly learn that the company is bankrupt? The company has failed to meet its obligations and pensioners will no longer receive their pension, which is often the minimum amount required to live well or to survive. Those pensioners will no longer receive the full amount. They might lose half of their pension, for example, but they are too old and do not have the energy or the strength to return to work. These are terrible situations, unspeakable human tragedies. That is what Bill C‑228 would fix.

It truly is an extremely important bill. I am very pleased that it has reached third reading stage. I look forward to it receiving royal assent and making a real difference in people's lives.

I also want to acknowledge all the hard work done by my colleague from Manicouagan who was especially invested in this bill. She had introduced a similar bill in a previous Parliament that did not make it through the House. She continued trying, working with the member for Sarnia—Lambton, to see Bill C-228 through the legislative process.

My colleague from Manicouagan has been working closely with union members representing the workers who have gone through this kind of human problem. It was really a good faith, goodwill approach. What can we do to better protect workers? We know that a pension plan is a form of deferred wages.

During the negotiation, the union and management decide on salary and the terms and conditions. A lower salary is accepted in exchange for entitlement to group insurance or more generous pension funds, for example. The pension is therefore a type of deferred salary, and workers are entitled to it. However, we know that under the law, a company can underfund their pension fund for several years and allow shareholders to make more money on the backs of workers because it is failing in its duty.

This bill would make pension funds a greater priority for creditor payment in the event of a bankruptcy. This would take some of the pressure off the shoulders of workers and retired workers and would improve things. As the member for Sudbury said, if this bill is passed, it will not solve every problem. There is no ironclad guarantee and not everything will be resolved. The risk will remain, but it will not be as high. What this bill does is give particular consideration to underfunded pension funds and give them higher priority for creditor payment in the event of a bankruptcy.

One thing we observed in committee and in studies of similar bills was that none of the experts who came to talk to us, including unions, said they should be the top priority. Both pensioners and union members told us they want to give the company a chance to restructure, refinance and come up with a plan to save itself from bankruptcy.

This bill gives mortgage holders priority over pension funds. Everyone recognizes that that is important, although the Liberal Party still seems unsure. Some of our Standing Committee on Finance colleagues are, anyway. I have had personal conversations with a few ministers. Judging from the Liberal member's speech on this bill, there still seems to be some confusion about this.

This is about giving pension funds higher priority while still enabling the company to restructure to avoid bankruptcy. That is what everyone here wants, obviously. That is a very important element.

Several cases have been mentioned, including Sears, Stelco, Nortel, Cliff Natural Resources and White Birch. In all of those cases, the pension plan was not fully funded when the company went bankrupt and the workers are the ones who got shortchanged.

As the Liberal member for Sudbury was saying, pension fund managers, large corporations, or the employer, came to see us to say that they did not really like this. Obviously, they do not like this because they will have to fully fund the pension plans and recognize that the amount owed to workers must be included in the financial statements and paid within a few years, with the necessary flexibility. In my opinion, we found a good balance, but it means less money for shareholders and less money for executives simply because they are being forced to pay what they owe.

The Liberal member who spoke before me did not mention that. Every time the employer or pension fund managers raised an argument, the seniors' advocacy organizations and unions responded clearly and simply by proving that the argument did not hold water.

Employers tried to scare people. The Liberal Party still brings that up, but every argument raised in committee was immediately refuted by parties representing pensioners' interests. Fear tactics are often employed when economic issues and other somewhat complex issues come up. In this case, I think the committee did a good job of rebutting fear-based arguments.

I feel absolutely confident about this bill, but it does not fix every problem pensioners face. There is still a degree of risk, but it is lower. Employers do not like this because they know they will make less money. That is true, but they have to pay what they owe, plain and simple.

In closing, I want to once again acknowledge the incredible work of the member for Sarnia—Lambton. As I said, I am the member for Joliette, and the Quebec MNA for Joliette was Véronique Hivon, a person who was all about cross-party collaboration and always tried to prioritize the common good over partisanship. She accomplished a lot in that respect, and the member for Sarnia—Lambton has accomplished just as much here. I thank her and congratulate her.

[Viviane LaPointe, Liberal, Sudbury, ON]

Madam Speaker, I am pleased to participate in the debate on Bill C-228. We are studying this bill at third reading in the House after it was examined by the Standing Committee on Finance.

As reported back to the House by the committee, Bill C-228 would amend the treatment of pension claims in proceedings under the Bankruptcy and Insolvency Act, or BIA, and the Companies' Creditors Arrangement Act, the CCAA.

Under current law, unfunded pension liabilities and unpaid special payments are unsecured claims. Unfunded pension liabilities are the shortfall between a fund's current assets and amounts owed to pensioners. Pension special payments are additional contributions by employers that are sometimes required under pension legislation to reduce a pension deficit over time.

Bill C-228 would give both these pension claims a superpriority. In BIA bankruptcies and receiverships, pension claims would be paid out ahead of secured, preferred and unsecured claims. CCAA and BIA restructuring plans would need to provide for the payment of pension claims to obtain court approval.

As originally drafted, Bill C-228 provided for a five-year transition period before the pension changes took effect. The bill that was sent back to the House after study in committee provides for a four-year transition period, as proposed by the government members.

Bill C-228 would also amend the Pension Benefits Standards Act, 1985, or PBSA, under the responsibility of the Minister of Finance. The only PBSA amendment, as reported back by the committee, would amend the federal superintendent of financial institutions' existing requirement for an annual report to the Minister of Finance on the operation of the PBSA, which is tabled in Parliament. It would add additional content to this report related to the funding requirements of a federally regulated pension plan under the PBSA and require it to be transmitted to provincial counterparts.

I would note that Bill C-228, as referred to committee by the House, dealt with the treatment of both federal and provincial private pensions in insolvency proceedings under the Bankruptcy and Insolvency Act, or BIA; the Companies' Creditors Arrangement Act, or CCAA; and the regulation of federal pensions under the PBSA.

However, during the clause-by-clause study of Bill C-228, the committee broadened the scope of the bill beyond pensions by adding a new privileged claim for termination and severance pay owed to a worker by a bankrupt employer under the federal or provincial employment standards legislation or a collective agreement.

These amounts are currently considered unsecured debt. Under the amended Bill C-228, these debts would be paid in full before the claims of any other unsecured creditor.

The government clearly explained in the House and in committee that it understands the challenges that an employer's bankruptcy can present for retirees, current employees and their community. We continue to listen to the concerns expressed by Canadians on the important issues of retirement security, wage protection, and termination and severance pay.

Our government has taken measures to improve the retirement income and security of all Canadians, including retirees, and to improve the protection of Canadian workers who are owed unpaid wages and termination and severance pay by their bankrupt employers.

No one in the House doubts that Bill C-228 was introduced with good intentions in the interests of pensioners. Having said that, we should be mindful in our continuing debate on the bill that significant concerns were raised by expert witnesses and pension plan administrators during committee study that a superpriority for pension claims may have unintended negative consequences for both pensioners and employees of insolvent employers and the much larger number of pensioners and employees in the Canadian workplace as a whole.

We should also take serious note of the fact that the new preferred claim for termination and severance pay was introduced only during the committee's clause-by-clause consideration of the bill. As such, the committee did not have the benefit of the views of the House at second reading on this new priority claim. It also did not have the opportunity to hear the testimony of expert witnesses and ask questions regarding its potential impact on different employee groups, as well as other stakeholders and creditors in an insolvency proceeding.

Even though all members of the House share the desire of protecting the interests of retirees, we must also consider the significant negative consequences that a superpriority of the unfunded liabilities of a defined benefit pension plan could have for pensioners, employees, businesses and Canadian employers.

First, this superpriority can only protect pensioners from the consequences of the employer's bankruptcy in certain cases. We all know about past cases of bankruptcy where the pension plan deficits were very large, sometimes in the billions of dollars.

During study in committee of Bill C‑228 and similar private member bills, experts, lenders, promoters of pension plans and employers, and even certain unions, noted that a superpriority would not guarantee that pensioners would be fully protected in the event of an employer's bankruptcy if the employer did not have sufficient assets to cover the liability.

It is also crucial that we take note in our deliberations of the potential impact of a pension claim superpriority on the incentives of pension plan sponsors to continue to provide defined benefit pension plans to current employees. During the committee's study of the bill, pension plan experts and plan sponsors predicted that as many as 40% of private plan sponsors could terminate their defined benefit pension plans during the bill's transition period if Bill C-228 were to pass with a superpriority.

Private defined benefit pension plans currently have 1.2 million active employee members who are still accruing defined benefit pension entitlements. We should be very careful about the potential impact of a superpriority on these employees when we consider whether to support Bill C-228, as reported by the committee.

In some cases, retirees and workers are better served if the company can enter into a restructuring agreement and continue operations, which means pension and benefit plans would be funded.

Let us keep in mind that there have been successful restructurings involving unfunded pension liabilities that have taken place under the current processes in the Bankruptcy and Insolvency Act—including Stelco, AbitiBowater and Air Canada—where pension benefits were preserved even though the pension plans were significantly underfunded at the time of insolvency.

As we consider how to best protect pensioners and workers, we must also consider ways to balance the potential credit consequences of a pension superpriority for employers with pension plans. Lenders will price and allocate credit based on the risks of default and non-payment. If a pension deficit is payable ahead of all other claims, a responsible lender must take this risk into account, either through higher interest costs or reduced credit amounts.

The government made important changes to insolvency and corporate laws in 2019 to protect pensioner and worker interests in an employer insolvency. Corporate restructuring was made fairer, more transparent and more accessible for pensioners and workers. Federal corporate law amendments better aligned corporate incentives with the interests of workers and retirees, and provided greater scrutiny of corporate decision-making. Finally, Canada further improved its strong regulation of federal pension plans that already require full solvency funding.

While these measures have improved the retirement and security of employees, the government has also listened to the voices of pensioners and considered more balanced ways to protect their interests rather than a superpriority.

While no OECD country gives unfunded pension liabilities a superpriority—

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Madam Speaker, I am really pleased to have an opportunity to speak at this moment in the history of Bill C-228 and extend my deep appreciation to the member for Sarnia—Lambton. There have been many attempts in this place to ensure workers are secured creditors in bankruptcy. It should not be so hard. I will be voting for her bill with enthusiasm and merely want to thank her.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Madam Speaker, I want to sincerely commend all the work that the hon. member for Sarnia—Lambton has done on her private member's bill, Bill C‑228. As she so clearly explained again, it is a very important bill to better protect retirees who are entitled to a defined benefit package.

I want to commend her cross-party approach. We were able to work with members from each party and set aside partisan differences for the common good of workers and retirees. I tip my hat to the member.

Since this is a period for questions or comments, I will take the opportunity to make a comment. I tip my hat to the member. As she said, this issue has been raised so often in the House, and she is the one who finally managed, through her approach, to bring all the members of the House together to truly change people's lives.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

moved that the bill be read the third time and passed.

Madam Speaker, I am very pleased to rise to speak to my private member's bill, Bill C-228, today at third reading. It was successfully passed as amended at the finance committee. Bill C-228 is centred on pension protection, working to prevent the loss of pensions for employees whose companies have declared bankruptcy.

Canadians deserve to know that the contributions they have made their whole lives will result in a secure financial future for themselves and their families, but the last few years have shown us that security can disappear in a moment. My bill would remedy this issue.

The bill would do three things. First, it would require that an annual report on the solvency of pension funds be tabled here in the House of Commons for greater transparency and oversight. Second, it would provide a mechanism to transfer funds into a pension fund to restore it to solvency. Finally, in the case of bankruptcy, pensions would be paid out ahead of large creditors and executive bonuses. The acceptance so far by this Parliament and the good work that has been done on the bill by all parties show that there is a common spirit and desire to improve pension security for Canadians. For that, the House has my sincere thanks.

Over the last 10 years, efforts by many parties and senators have been put forward to introduce bills to improve pension protection in Canada. I cherry-picked from all the ideas that were previously supported in the House and put them together in Bill C-228. Learning from both the numerous cases of company collapse and the various pension protection bills that came before to improve pension protection in a way we can all live with is my goal here today.

To put things in context, I want to point out that there have been far too many cases of businesses that have declared bankruptcy to the great detriment of their own employees.

Nortel Networks declared bankruptcy in 2009, leaving 200,000 Canadians to fend for themselves when it came to their pensions. An article published in the Financial Post in 2016 entitled “The big lesson from Nortel Networks: Pension plans aren't a guarantee” gave a detailed account of the battle waged by these employees as they tried to recover even part of their share of Nortel's assets, which were estimated at $7.3 billion. Legal and consulting fees totalled over $1.9 billion, which further reduced the amount these former employees were seeking.

According to CBC, at the end of 2016, former Nortel employees were pleased with the agreement they reached under which they would get a payout of 40¢ on the dollar. That was an improvement over the 10¢ on the dollar they were initially offered.

However, in 2020, the employees lost out again when the Ontario pension benefits guarantee fund managed to reclaim some $200 million from monies allocated to pensioners in Nortel's bankruptcy proceedings.

In all, the whole mess with Nortel turned into a more than 11-year battle for former employees who failed several times while simply trying to obtain the financial security to which they were entitled. That is just one example.

Sears Canada is another infamous case and perhaps one of the most well known. Between 2005 and 2013, Sears Canada paid more than $3 billion in dividends to shareholders, even as it was operating at a loss and its pension plan was underfunded by about $133 million. In 2017, Sears Canada declared bankruptcy after attempting to restructure. During the restructuring, Sears Canada faced heavy criticism for giving retention bonuses to 43 executives and senior managers, but it did not plan to offer severance to laid-off employees. Allegedly, the bonuses were intended to maintain the morale of senior staff at the cost of providing necessary funds for the company's pension plan, leaving more than 17,000 pensioners cheated of their full pensions.

Sears pensioners learned their pensions were going to be cut by 30%. Seventy-two-year-old Ron Husk of Mount Pearl, Newfoundland, told the CBC that the cut caused his monthly pension payment to drop by $450. Many said they would have to go back to work in sales, in their seventies. Pensioners in Ontario fared marginally better because of the provincial mechanism that protects the first $1,500 of a pensioner's payment, but it made little difference overall. In today's era of extreme inflation, it is helping even less.

Looking back further, when the T. Eaton Company folded in 1999, the vast majority of its 24,500 employees were terminated without being paid termination pay and severance pay, as well as other amounts owed to them. All employee and retiree health and other benefits were cancelled. In the end, the liquidator released payments to employees and retirees of just 53.7 cents on the dollar. There are several other noted cases where courts have ruled in favour of creditors and lenders over pensioners, including Indalex, Stelco and Grant Forest Products among others.

In the Indalex case, Indalex Limited obtained creditor protection under the Companies’ Creditors Arrangement Act, also known as the CCAA. The court authorized Indalex to obtain debtor in possession, or DIP, financing, which would provide the company with loans to continue operating its businesses during the restructuring period. These DIP lenders had superior priority over the existing debt, equity and other claims.

At a hearing for approval of this motion in 2008, two groups of pension claimants opposed this distribution, asserting that the assets equal to the funding deficiencies in the two defined-benefit pension plans administered by Indalex were deemed to be held in trust and should be given to the pension plans in priority over the DIP lenders. The CCAA court ruled in favour of the DIP lenders, not the pensioners. This decision was upheld and became a precedent for the Grant Forest Products case. Sadly, many other examples of workers who did not receive their full pensions exist.

There is no doubt that this has been a problem for a long time. The government needs to intervene by taking stringent measures to rectify this and protect Canadian workers.

I want to acknowledge the contribution of some of my House of Commons colleagues. Many MPs from all parties have come to see me to propose bills on this same topic.

Currently there is a requirement for an annual report on the solvency of a fund, but it goes to the superintendent of finance, and it is not clear what, if any, actions are taken. In fact from 2003 to 2020, there is evidence that companies continued to have insolvent pension funds. My bill would require this report to be tabled here for greater transparency and oversight. Currently the average federally managed fund is at 109% solvency, so it is a good time to implement the measures of this bill.

The second part of the bill is to allow companies with insolvent pension funds to transfer additional funds from other assets in the business into the pension fund, without tax implications, to make it solvent.

In October 2017 and again in 2020, the Bloc member for Manicouagan introduced her private member's bill, Bill C-253, which would amend the Bankruptcy and Insolvency Act and the CCAA. The bill would provide priority status for pensions in the event of bankruptcy proceedings. This bill ultimately made it to committee, but died on the Order Paper when the Liberals called the election. I have incorporated her bill here with some suggestions brought forward.

There was concern that implementing an immediate priority for pensions could have unintended consequences. The suggestion was to have the coming into force of the reporting on the insolvency of funds to happen immediately, along with a mechanism to top up the fund and restore it to solvency. However, it was recommended to have several years for companies to get their funds in order before implementing the priority part.

Five years was the period suggested originally in the bill, but there were stakeholders who preferred to see it be three years. At committee, we were able to come to a compromise of four years for the coming into force of the priority portion of the bill. I want to also acknowledge that the Liberal member for Whitby sponsored an e-petition on pension protection, supporting this very issue.

My bill has been reviewed by a variety of stakeholders, from the Canadian Labour Congress to financial institutions and many pension associations nationally, including the Canadian Federation of Pensioners and the Canadian Association of Retired Persons.

Bill VanGorder, the chief operating officer of CARP, offered this quote:

Most older Canadians have fixed incomes but face rising costs, growing inflation, an unpredictable economy and retirement savings that suffer as a result. The Canadian Association of Retired Persons...believes it is vital that the Federal Government protect pensioners by giving them “priority” status and creates a pension insurance program that insures 100% of pension liabilities. This proposal would go a long way in making that happen.

Some banks and large financial institutions have expressed their reluctance to me. They are concerned that, if pensioners are given priority, companies with insolvent funds will have to pay higher interest rates to obtain credit and will be less likely to apply for credit.

This is part of the reason why the implementation schedule should allow time for companies with insolvent funds to get their finances in order. I would like to point out that, if a company cannot restore the solvency of its fund within four years, it should indeed pay a higher interest rate to obtain credit because it really does present a higher risk.

In summary, this means reporting to Parliament on the solvency of funds for greater transparency so we can ensure actions are being taken to protect pensions, creating a mechanism to top up the funds to restore solvency, and, in the event of bankruptcy, ensuring that people who have worked their whole lives receive the pension they were promised.

An amendment was brought forward by the member for Elmwood—Transcona to include severance and termination pay at the same priority as pensions, ahead of secured creditors, and it was presented at finance committee. Indeed, discussions were held with all parties regarding this, and at second reading I said I would support this measure.

However, it was ruled out of scope by the clerk and the chair of the finance committee. The committee then voted in the majority to overturn the ruling of the chair and add this amendment to the bill.

Subsequently, the parliamentary secretary to the government House leader asked for a Speaker's ruling to eliminate the amendment since it was out of scope. The Speaker did rule it out of scope, and that amendment does not appear in the bill.

I respect the decision of the Speaker, although I am disappointed that this addition did not go forward, since I think people should receive their severance in the case of bankruptcy. However, with the priority falling after secured creditors, preferred creditors and unsecured creditors, it is unlikely they will get it, which contravenes the law in many provinces. In Ontario, for example, the law is that people get a minimum of one week of salary for every year of service.

Other amendments at committee included the deletion of clause 6, which eliminated a mechanism to get third party insurance on the insolvent portion of a pension fund. No one seemed to think this was as brilliant an idea as I originally thought. Clause 7 was also deleted to clean up sections 8.1 and 8.2, which were holdovers from previous legislation.

I want to thank everyone who helped to improve my bill at committee, and for passing it there expediently to bring it to this stage.

In summary, I am now asking all members of the House and the Senate to work to get this bill over the finish line and truly improve pension security for Canadians. We are so close. Let this 44th Parliament be the one to ensure that Canadians are able to live with dignity into their golden years.

Our continued efforts will ensure that Canadians are able to support themselves and their families with the pensions they have worked over a lifetime to earn. Please vote to support Bill C-228.

The House proceeded to the consideration of Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985, as reported (with amendments) from the committee.

Amendment to Bill C-228 at Committee Stage

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Madam Speaker, I appreciate the opportunity to raise this point of order. What I would like to do is just give a brief summary of the issue and give a couple of examples of parliamentary precedent that I think bear on the case and then propose a remedy.

This is with respect to Bill C-228. At committee, an amendment was moved to not only protect the pensions of workers when companies went bankrupt, but to also protect their termination and severance pay. It was an amendment that was agreed to by the bill's sponsor in advance of the second reading vote. It was ruled out of order by the committee chair. That was overturned by the committee itself. Subsequently, in response to a point of order by the member for Winnipeg North, that amendment protecting termination and severance pay was removed by the Speaker as being out of order.

There are a few examples in parliamentary history where amendments that were removed for the very same reason, which was that it was determined it was outside the scope of the bill, have been put back in with the unanimous consent of the House of Commons.

I refer specifically to June 17, 1986, when Speaker Bosley ruled three government motions in amendment at report stage of Bill C-106, at that time, were out of order because they went beyond the scope of the bill. The parliamentary secretary to the president of the Privy Council at that time asked Speaker Bosley whether the motions could be put to the House for unanimous consent. The Speaker agreed, and the amendment motions were reintroduced in the bill with the unanimous consent of the House.

Similarly, on April 28, 1992, the House was about to begin consideration at report stage of Bill C-54. The admissibility of three amendments to the bill, which had been adopted in committee, were called into question on a point of order. The three amendments were ruled out of order by the chairman of the committee, as two of the amendments sought to amend the parent act and a third, like these, went beyond the scope of the bill, but the chairman's decisions were overturned by the committee.

After hearing comments from other members, Speaker Fraser ruled immediately that the inadmissible amendments adopted by the committee to Bill C-54 be declared null and void and no longer form part of the bill as reported to the House. Right after the ruling, the amendments in question were agreed to by the House, once again, by unanimous consent.

I submitted these amendments again for report stage of the bill, which will begin tomorrow, so it is timely that I am raising this point of order now, with report stage of that bill pending for tomorrow, and—

Amendment to Bill C-228 at Committee Stage—Speaker's Ruling

[The Speaker, Liberal, Anthony Rota]

I am now prepared to rule on the point of order raised on November 14, 2022, by the parliamentary secretary to the government House leader regarding an amendment adopted by the Standing Committee on Finance during clause-by-clause consideration of Bill C-228, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Pension Benefits Standards Act, 1985.

In raising the point of order, the parliamentary secretary explained that the committee passed an amendment to protect termination and severance pay in case of bankruptcy. The chair of the committee ruled the amendment inadmissible on the grounds that it was beyond the scope of the bill. The decision was challenged and overturned. The committee then debated the amendment and adopted it.

According to the parliamentary secretary, this amendment broadens the scope and principle of the bill as agreed to at second reading. In addition, because the amendment introduces a new concept that was not contemplated at second reading, the parliamentary secretary argued that it should be removed from the version of the bill that will be considered at report stage and third reading.

However, the members for Niagara West and Sarnia—Lambton contended that decisions made by committees should not be overturned by the government of the day but allowed to stand in order to uphold their independence. For his part, the member for Elmwood—Transcona is of the view that the amendment should be allowed because the sponsor believed it to be relevant and it had also been referenced during debate at second reading.

After the report of the Standing Committee on Finance was presented to the House, the Chair was asked to ensure compliance with certain fundamental rules and practices and to consider if the committee had exceeded its powers with regard to an amendment included in its report. As Speaker Fraser explained on April 28, 1992, at page 9801 of the Debates:

When a bill is referred to a standing or legislative committee of the House, that committee is only empowered to adopt, amend or negative the clauses found in that piece of legislation and to report the bill to the House with or without amendments. The committee is restricted in its examination in a number of ways. It cannot…go beyond the scope of the bill as passed at second reading, and it cannot reach back to the parent act to make further amendments not contemplated in the bill no matter how tempting this may be.

The amendment at issue would create new clause 4.1 of the bill, which would protect the termination and severance pay that a bankrupt owes to various categories of its employees.

Bill C-228 is limited in scope. The summary of the bill at second reading states the following:

This enactment amends the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act to ensure that claims in respect of unfunded liabilities or solvency deficiencies of pension plans and claims relating to the cessation of an employer’s participation in group insurance plans are paid in priority in the event of bankruptcy proceedings.

The chair of the committee was right to conclude that the amendment is beyond the scope of the bill, as Bill C‑228 is intended to protect only employee pension funds and group insurance plans, not termination or severance pay for certain categories of employees in case of bankruptcy.

The Chair would like to remind members that the scope of a bill is not determined by its sponsor, by the government or even by the committee considering it, but by the House itself when it adopts the bill at second reading.

House of Commons Procedure and Practice, third edition, states the following on page 770: “An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.”

While the Chair recognizes that considering a bill at committee involves its share of challenges, committees must fulfill their mandate without exceeding their powers. Committees overstep the authority granted to them when they pass amendments that go beyond the scope of a bill referred to them after second reading.

In consequence, the Chair must rule the amendment adopted by the Standing Committee on Finance creating new clause 4.1 of Bill C-228 null and void, and order that it no longer form part of the bill that the committee reported to the House.

The Chair further orders a reprint of Bill C-228 so that the new version may be considered by the House at report stage.

I thank members for their attention.

Amendment to Bill C-228 at Committee Stage

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I am rising to follow up on the point of order that was raised earlier this week by the member for Winnipeg North in respect to Bill C-228.

The bill, presented by the member for Sarnia—Lambton, has to do with protection of pensions. The member forWinnipeg North highlighted that the finance committee had ruled a particular amendment having to do with the protection of severance and termination pay in the case of bankruptcy as being out of order.

I would like to call to the Speaker's attention, first of all, the fact that the committee did consider that question—

[Dean Allison, Conservative, Niagara West, ON]

Madam Speaker, with respect to the point of order that was raised earlier by the parliamentary secretary to the government House leader on the private member's bill, Bill C-228, let it be known that, when the amendment regarding severance was introduced, the chair ruled it out of order. The chair's ruling was then challenged and the majority of the committee voted to overturn the decision of the chair and to approve this amendment.

It is the Conservatives' opinion that the decisions of committees are not to be overruled by the government of the day. Therefore, as the Speaker considers the matter, we would ask that you uphold the independence of committees from outside control.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order with respect to Bill C-228, an act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985, standing in the name of the member for Sarnia—Lambton.

Without commenting on the merits of the amendments proposed at the committee stage, I would like to draw to the attention of members an amendment that raises some procedural difficulties.

The amendment in question would add subparagraph 136(1)(d)(d.001) to the Bankruptcy and Insolvency Act. It is found in the new clause 4.1 of the bill. The amendment would seek to protect termination and severance pay in the case of a bankruptcy. This amendment, in my view, seeks to expand the scope and principle of the bill as set at second reading stage. Moreover, the amendment is a new concept that was not contemplated in the bill at second reading and therefore should be removed from the bill for consideration at report stage and third reading stage.

When the member for Elmwood—Transcona proposed the amendment, the chair of the committee ruled it inadmissible. For the benefit of members who do not sit on the finance committee, I will quote the ruling. It states:

My ruling is that Bill C-228 amends the Bankruptcy and Insolvency Act to provide for the solvency of pension funds in case of bankruptcy. The amendment seeks to create new categories of payments to specific former employees that would have to be paid by a bankrupt, which is not envisioned by the bill.

As House of Commons Procedure and Practice, third edition, states on page 770:

An amendment to a bill that was referred to committee after second reading is out of order if it is beyond the scope and principle of the bill.

In the opinion of the chair and for the above stated reason, the amendment brings a new concept that is beyond the scope of the bill, and therefore, I rule the amendment inadmissible.

A majority of the members on the finance committee voted to overturn the ruling of the chair and then proceeded to vote to adopt the amendment, which is now found in the bill as reprinted by the House on November 3.

I submit that the ruling of the chair of the finance committee was correct and that our procedures must be respected. As a result, the proper course of action to address this matter is to order a reprint of the bill without the offending amendment.

Finance

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Mr. Speaker, I have the honour to present, in both official languages, the seventh report of the Standing Committee on Finance in relation to Bill C-228, an act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985.

The committee has studied the bill and has decided to report the bill back to the House with amendments.

I would like to thank our finance committee clerks, Alexandre Roger and Carine Grand-Jean; legislative clerks Philippe Méla and Marie-Hélène Sauvé; committee assistant Lynda Gaudreault; all committee staff, interpreters, services, witnesses and officials; and all members of the finance committee.

[Andy Fillmore, Liberal, Halifax, NS]

They also stated that lenders would react to a superpriority that could take priority over existing loans by requiring employers to pay down their pension deficits. However, a transition period may not incentivize lenders and creditors to require employers to reduce pension deficits. It's also that lenders and creditors may use a transition period to reduce their exposure to potential loss by calling in loans and requiring the employer to pay down their debts ahead of the superpriority effective date. It's more likely that lenders would take such action with employers with large unfunded pension liabilities that are also at higher risk of insolvency as a result of business conditions or other financial distress, like high debt loads.

In such cases, debt repayment triggered by concerns over a pension superpriority would divert funds from potential investment by such employers, reducing their competitiveness and counterproductively increasing risks of insolvency for employers with pension deficits.

During FINA's study of the bill, pension experts and plan sponsors stated that a longer transition period, ideally seven to 10 years, could reduce the risk of these unintended consequences. It was also predicted that 40% of private pension plan sponsors could terminate their pension plans during the transition period if Bill C-228 were to pass. Private pension plans in Canada currently have 1.2 million active employee members still accruing pension entitlements.

We're reasonable on this side of the committee room. We've listened carefully to the testimony of witnesses who have different opinions and we've listened carefully to what our colleagues have said. Today, as you can refer to it in G-6 and G-7, we are looking to meet our esteemed colleagues halfway on the three to five, and propose a four-year transition period in the belief that this extra year will allow companies to reduce their deficits, renegotiate their loans with banks and reduce the risks of bankruptcies.

There we have it. The offer is four.

[Andy Fillmore, Liberal, Halifax, NS]

Chair, this is about the coming into force timeline. The current count is five years, but the bill proposes to reduce that down to three. Of course, as we heard from much of the testimony, the shorter transition period can have these unintended consequences as well. I might have called the pension priority the pension priority problem, but this is the short runway problem that we have here. The short runway increases the risk of loss to pensioners and active employee members of a defined benefit pension plan. The shorter period will exacerbate the negative economic consequences of Bill C-228 and in fact may have other unintended consequences that increase the risk of loss to pensioners and active employee members of defined-benefit pension plans.

Employers already in financial difficulty may be unable to reduce large pension deficits during the transition period. Pension legislation typically provides for at least five years of payments to reduce deficits, but lenders who face the risk of non-payment from borrowers with pension deficits when the superpriority comes into force may use the transition period to require employers to pay back debts instead of reducing deficits, increasing the risk of insolvency for some employers.

Employers may decide to discontinue defined benefit pension plans or group insurance plans during the transition period to avoid the impact of higher insolvency priorities on credit availability. Lenders with exposure to employers with pension deficits may pressure employers to take such action before insolvency.

Under the current pension funding regime, employers with pension deficits are required to make special payments to reduce them over time, typically three to five years, although pension regulators have discretion in some cases to change these timelines. However, employers with special payment obligations, particularly those with large pension deficits, that are also facing financial headwinds often have difficulty making the special payments, particularly if there have been severe market fluctuations or investment losses beyond the employer's control that have significantly increased the pension deficit.

We heard from witnesses at this committee representing retiree groups and unions that they prefer that the Bill C-228 superpriority take effect immediately upon royal assent. However, they also testified that they would accept a shorter transition period, asserting that a pension deficit superpriority would incentivize employers to reduce their pension deficits.

This is not a filibuster; it's almost over, I assure you.