Finance Committee on May 7th, 2009

[Ken Georgetti]

Certainly we've considered it. Let's remember, sir, that the people we represent enjoy pension security for the most part. Most of our members have adequate pension plans that will deliver a pretty good pension to them. So when we're talking about these issues, we're talking about most people who work and don't have enough capacity, don't earn enough money to put enough money aside to save for retirement. That's a reality in Canada. Most people don't get $930,000 a year in pension.

If we don't deal with them at the front end in a proactive way, governments--and you're sitting there on the government side--have to take care of that. We don't let people die of starvation in Canada yet, for the most part. We have to take care of them.

So transferring that liability and that risk somewhere else doesn't solve the problem. This crisis, I agree, and I want to be on the record: we have been raising alarms since 2000 on this issue of pension liability and solvency. This is not a cyclical downturn. This happened by design by some pretty greedy people of questionable character who drove this economy into the ground.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Kramp.

Mr. McKay, please.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think Mr. Georgetti should be pleased that Mr. Kramp has noted you represent the people you represent. I think I would be putting that in the next newsletter of the Canadian Labour Congress.

I want to go back to Mr. Braniff. I take it you're not too thrilled with letters of credit.

[Dan Braniff]

I'd have to confess I'm not an expert in that field, but anyone I talk to tells me these are revocable. These are not ironclad in the terms we would really respect. When things get tough and things explode, what's going to happen to that letter of credit?

If you're going to use a letter of credit, that's a washy thing. Why not pledge actual assets? The corporate headquarters, for instance, the real estate it sits on, pledge that against the deficiency in the pension plan. If you did this, you would change the culture.

I've been over there. You'd change the culture. Do you know what would happen? They would never let that pension fund go into deficit.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I don't think I've ever seen a letter of credit that's not revocable under certain conditions. If my entire pension plan is dependent upon a letter of credit, then presumably the entire pension plan is revocable.

[Dan Braniff]

Let's put the proposition another way. If a sponsor can secure the kind of letter of credit we're talking about, he doesn't need it.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Good point.

I wanted to go back to Katherine Thompson with respect to her statement that any increase that may be agreed to should be fully secured through a deemed trust provision. I'm not sure I understand what that means.

[Katherine Thompson]

That means that any pension regulation changes that are granted to Air Canada that would increase the liability for the pension plan participants should be guaranteed with a deemed trust, which would move them up. In the event of an insolvency for Air Canada, we would be higher in the food chain, if you want to refer to it that way.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In effect, you're working your way up the bankruptcy ladder?

[Katherine Thompson]

Unfortunately, it's not a pretty picture.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Presumably you would secure a position ahead of preferreds and secureds?

[Katherine Thompson]

Yes. We would be happy with a 777 aircraft too, though.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Sorry?

[Katherine Thompson]

We'd be happy with a 777 aircraft.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You'd take an airplane as--

[Katherine Thompson]

We'd take an airplane.

[Some hon. members]

Oh, oh!

[John McKay, Liberal, Scarborough—Guildwood, ON]

At least you'd know how to fly it.

The issue here then becomes if in fact you jump to the head of the queue, who's going to lend Air Canada any money?

[Katherine Thompson]

I hate to be trite and say that wouldn't be our concern, but we've all collectively invested in our pension plan and we're entitled to reap the reward of that pension promise. And if other stakeholders wouldn't consider Air Canada to be a good financial risk, why should we?

[John McKay, Liberal, Scarborough—Guildwood, ON]

In effect, if you play this card, you'd potentially precipitate the bankruptcy of Air Canada.

[Katherine Thompson]

No. To that point, Air Canada's ability to raise money is going to rely on a lot of factors, and that would be one of them, but relatively in the larger scheme a small factor, I would think. It's the difference between the current protection we enjoy and any protection we would lose. It's not that every aspect of our pension plan, the entire $3.2 billion, would then become primary claimant in the case of an insolvency.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I have difficulty understanding that from the standpoint that if the liability to the Canada Pension Plan is, we'll say, $1 billion, and Air Canada feels it needs $1 billion to keep on going, it has $1 billion lined up with Bank X and Bank X says “If you're going to take out my billion bucks you're going to have to get the pension plan to rank below my billion dollars”, wouldn't that in effect be the status of negotiations between Air Canada, the pension plan, and Bank X?

[Katherine Thompson]

Yes. They would be asking us, the workers, to accept additional risk in place of those stakeholders.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Bernier.

[Maxime Bernier, Conservative, Beauce, QC]

Thank you, Mr. Chairman.

Today we're talking a lot about pension protection for present and future generations, about regulatory problems. You know that the Government of Canada regulates pension plans under federal jurisdiction, but the provinces regulate the others, which represent the majority of pension plans.

We're having a debate in Parliament about a national securities commission that would be established in cooperation with the provinces. In the pension field, the regulators or the regulatory agencies in the provinces have an important role to play.

Ms. Carbonneau, what do you think about the current provincial regulation? For us to have a more effective regulation and for us to be fair with the various provinces, should they cooperate more? Would the federal government have a role to play regarding a more uniform regulation of pension plans under provincial jurisdiction?

Do you have any comments on that?