Finance Committee on April 22nd, 2010

[The Chair, Conservative, James Rajotte]

I call to order the eleventh meeting of the Standing Committee on Finance.

I want to welcome all of our witnesses here this afternoon.

Pursuant to Standing Order 108(2), we are continuing our in-depth study of the retirement income security of Canadians, focusing on pensions and other issues.

We have with us here today two people appearing from one organization, and three persons presenting as individuals. We have, from the Canadian Office and Professional Employees Union, Mr. Serge Cadieux, national president; and Pierre Gingras, legal counsel to the national executive. As individuals, we have Mr. Lee Lockwood; Ms. Norma Nielson, professor and chair of insurance and risk management at the Haskayne School of Business, University of Calgary; and as the last individual, Mr. Tony Wacheski.

Thank you all for being with us here this afternoon. We will start in that order with presentations of up to seven minutes, and then we'll have questions from all members of the committee.

Monsieur Cadieux, will you be starting?

[Serge Cadieux, National President, Canadian Office and Professional Employees Union]

Thank you, Mr. Chairman.

On behalf of the Canadian Office and Professional Employees Union, which is affiliated with the CLC, I would like to thank the Committee for its invitation to appear today. COPE represents members in both the private and public sectors. Many of its members are in work places that fall within federal jurisdiction, particularly all the employees working for the Laurentian Bank of Canada.

Because of its concern for the financial security of its members, our union has, over time, succeeded in negotiating private pension plans for approximately 80% of its members. However, the financial crisis has severely affected what we considered to be a secure benefit. Despite all of our efforts, difficult negotiations, compromises and sacrifices, we are now seeing significant declines in terms of retirement income replacement. A deterioration in the fiscal position of pension plans has intensified employers' attacks on defined benefit plans. thereby contributing to workers' insecurity, as they are left to deal with market risks and volatile interest rates on their own.

We think it is important to point out that our pension plans, like most private plans, do not include provisions that protect retirees from inflation. We believe that our prospects of enhancing protection of future retirees' purchasing power are, at the very least, jeopardized. We still believe it is important to establish, maintain and enhance our registered pension plans, despite current difficulties. Employers are neither interested in or able to individually support plans when the number and volatility of those plans may be an obstacle to their potential profit margins.

The problem has far more to do with the inability of public plans, such as CPP and QPP, to provide more than 25% of maximum pensionable earnings. We firmly believe that a public, universal plan that provides better coverage could be achieved in the current environment. Full indexation, universal coverage, risk-sharing among society as a whole, portability and protection from job insecurity or discontinuation, as well as economies of scale in relation to administrative costs, all militate in favour of such reforms.

In that sense, we fully support the proposals made by the Canadian Labour Congress, which are intended to double CPP and QPP benefits. We are also of the view that the way to improve economic conditions in retirement is definitely not to add a second level to the CPP and QPP plans in the form of voluntary RRSP-type contributions. In order to meet our goals, factors such as mandatory plans and plans that can provide indexed predictable pensions are critical, in our view. We also believe that the amount of maximum pensionable earnings must be adjusted upwards, which would allow many workers to benefit from a more acceptable replacement income, in relation to the wages they were earning prior to retirement.

With respect to the financial security of our active and retired members, we are also calling for better protection of monies invested in pension plans in the form of deferred wages, as well as protection for retirees' pensions. We cannot afford not to guarantee protection, from the uncertainties surrounding a business' financial health, of savings accumulated over a lifetime. There is a cloud of insecurity over workers in the pulp and paper industry, and the same applies to people working in companies which are having financial difficulties, are in the process of restructuring or are threatened by globalization. Social security must be reviewed.

Finally, for the benefit of all Canadians, we believe that a social security system worthy of the name must afford the most disadvantaged members of society the financial protection that will raise them above the poverty line. Unfortunately, not all of them have had an opportunity to contribute to a pension plan. It is our duty, through the Old Age Pension and Guaranteed Income Supplement, to ensure the welfare of these individuals who have contributed to our society's advancement. Therefore, immediate and significant enhancements are necessary.

Our union organization has held consultations with its constituency and has passed resolutions that support the CLC proposals. These proposals have been greeted with enthusiasm because they represent accessible reforms that can be gradually implemented. We can do better and we must do better.

COPE is proposing to double defined benefits under the CPP and QPP, in order to guarantee a better minimal pension for all Canadians. It would be funded through a minimal, gradual increase in contributions over a seven-year period. Increased contributions would double the average amount of replacement income provided by CPP pension benefits, raising the maximum benefit to $1,635 per month, in 2009 dollars, but over a seven-year period. Because CPP benefits are indexed to the cost of living, stable and portable from one job to the other, they would provide everyone with a minimal pension income in the form of defined benefits.

We are also proposing to raise the Guaranteed Income Supplement benefit by 15% in order to keep seniors out of poverty. This would stimulate Canada's and local economies in these difficult times. This would be done on a continuing basis given that low-income seniors, who are paid that additional amount every month, would be more likely to spend it to meet essential needs.

We are also calling for mandatory pension insurance, similar to other types of insurance available in Canada for critical assets. A pension is one of the most important assets a worker can have. That insurance would be funded by pension plans and by a 0.1% tax on financial transfers of securities in Canada. Speculators who were responsible for the recent financial chaos would thus be required to protect pension funds.

COPE also believes that other measures are required, in addition to the three previous proposals. With respect to private pension plans, there is a need to amend the Bankruptcy and Insolvency Act in order to make workers who contributed to the pension plan secured creditors.

[The Chair, Conservative, James Rajotte]

You have one minute left, Mr. Cadieux.

[Serge Cadieux]

Thank you.

We would also like to see all forms of premium holidays abolished. I know that Parliament has already tackled this. In my view, there should be no ceiling on contributions.

Furthermore, there is a need to increase the maximum pensionable earnings, in addition to doubling the defined benefit rate of replacement income for everyone, by raising it from 25% to 50%; to raise the ceiling from $46,300 in 2009 to $62,000, and to index it on a yearly basis so that there can be an actual doubling of benefits for more workers. COPE is opposed to a system of voluntary contributions as a way of improving CPP.

In conclusion, COPE believes that the Canadian government must act on an urgent basis to adopt this important series of major changes, rather than simply bringing in changes on a piecemeal basis. It is by introducing these major changes that we will succeed in providing adequate protection to all Canadian citizens, leaving no one behind.

Thank you for your attention.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

The next presenter will be Mr. Lockwood, please.

[Lee Lockwood, As an Individual]

My name is Lee Lockwood and I reside in Langley, B.C. I've been a Nortel LTD wage replacement recipient for 14 years.

Industry Minister Clement stated in the House on Monday that governments should not be superseding a settlement agreement reached between parties in the private sector. As someone directly involved with what happened, I believe the government needs to know that Nortel imposed a settlement of duress by its threat to stop payment for LTD medications effective March 31. A contract entered into with a gun to your head is extortion and cannot be considered a valid contract.

The judge rejected approval of the settlement agreement on March 26, having reserved judgment on the same for three weeks. On Sunday, March 28, 93 LTDers were sent an e-mail by the self-appointed steering committee and given four hours to consider acceptance or rejection of a revised agreement, which had to be approved by the court prior to March 31. I saw no evidence that there was significant approval for the settlement. It was not given notice of same by council.

This revised settlement gave me nine months of medical benefits, yet we had to forfeit all rights of remedy to over $100 million missing from the health and welfare trust. The second settlement also had me give up my right to benefit from a potential BIA amendment that would have solved the poverty that the missing money will now cause our group. Had the CCAA and BIA protected the long-term disability claims, we would never have been exposed to these tactics.

Industry Minister Clement must supersede this extorted deal with the reposed amendment to the CCAA-BIA to give preferred status to LTD claims.

I wish to put a human face on employees who are on long-term disability benefits. Employees who are on LTD benefits are already severely compromised from a health and income perspective. They shouldn't have to worry about the physical integrity of the employer LTD benefit plans they rely on to live.

Having joined a Nortel subsidiary as a strategic account manager in February 1990, it has only been since they filed for CCAA that I have learned my LTD wage replacement income is being paid by a bona fide third-party underwriter. My other 400 colleagues receiving LTD wage replacement benefits are not as lucky as I am.

In October 1996, rapidly declining health dictated my years as a road warrior with Nortel were finished. At this point in my career with Nortel I was earning in excess of $140,000 per annum. I was operating a farm raising purebred beef cattle, as well as providing financing alternatives for small business. Immediately my income took a 64% reduction. In addition, I had to retain legal counsel and threaten to sue Nortel for release of a copy of the LTD policy, even though I was an implied party to the agreement.

Imagine the position of my fellow Nortel employees receiving LTD wage replacement benefits who will be deprived of most of their payments from Nortel, effective December of this year. They will be forced to subsist, meet family obligations, and pay medical and dental expenses from their meagre CPP payments of $1,100 a month. Most of these people have prescription medications that cost them substantially more than that on a monthly basis.

Closer scrutiny of the benefits enrolment documents in place in 1996 stated that while ADD and life risks were underwritten by Mutual Life, all medical and dental items were self-insured, with the company paying the full tab. LTD coverage was being offered by the company, but nowhere in the documentation is the word “insurance” used and an underwriter named. Does this represent full disclosure of pertinent facts for a prospective hire or current employee to make an informed decision as to who the true supplier of this critical indemnification would be?

My Nortel compatriots had signed up for an LTD benefit plan wholly ignorant of the planned obfuscation of the true details by Nortel's use of weasel words. These people were hired for their engineering and management talents, not to determine if they were about to be potentially misled or defrauded by their employer. If I as an individual who was used to dealing with complex contracts, agreements, and legal actions on behalf of the company did not detect anything out of line, what chance would the average legally unsophisticated employee have?

The only benefit major human disasters can have is supplying the impetus and appetite for change to ensure they will never reoccur. For example, the inquiry into the sinking of the Titanic mandated there would be life jackets and lifeboats on board for all. Bank failures during the Great Depression mandated the formation of the CDIC, which guarantees a minimum of coverage for every bank and credit union account in Canada.

We must immediately address the current needs of employees on self-insured LTD wage replacement benefits who are about to lose their benefits due to the insolvency of their employer. We must realize and acknowledge that companies are increasingly using the CCAA as an effective business tactic to rehabilitate their balance sheets. This rehabilitation process generally consists of but is not limited to blowing off trade creditors, repudiation of debt and lease obligations, and beating recalcitrant labour back into line. Needless to say, the self-insured LTD wage replacement programs are shed with the other obligations.

The Nortel scenario is unique in the unusual fact that there are no secured creditors. The unsecured creditors are trade creditors, employees owed severance, junk bond holders poised to double dip, the pension deficit, LTD wage replacement recipients, and future medical and dental benefits for retirees and employees on LTD.

To top it off, there's expected to be $6 billion in cash available from operations and from the sale of the business units, with the sale of the intellectual property yet to take place. It is unfathomable that this much cash is simply sitting there with 400 disabled employees about to sink into an economic black hole in December 2010.

The only realistic hope these people have is input from this committee to move the government to some form of acceptable positive action to force Nortel and other employers currently in bankruptcy protection to pay all of their promised disability benefits, and the adoption of either Bill S-216, tabled by Senator Art Eggleton in the Senate, or of MP Wayne Marston's bill on its reintroduction into this session of the House of Commons.

The CCAA-BIA amendment for the preferred status of LTD benefit claims not only addresses the humanitarian crisis at hand for the Nortel employees, it provides for a permanent backstop to protect all future disabled persons.

After adopting the CCAA-BIA amendment for the disabled, governments should revisit making it mandatory for employers to insure their long-term disabled wage replacement income and medical benefits. The notion of safe self-insurance by employers because they are too big to fail is nonsense when one considers the implosion of GM, Chrysler, AbitibiBowater, Canwest, Nortel, and many others who were merely a 20-second clip on CBC's The National.

Please note that the requirement for long-term disability benefits to be insured is a private sector solution that does not cost the public purse. Insurance underwriters bail each other out in times of crisis, and owing to the industry's Assuris protection fund, there has never been a failure by the insurance industry to pay out on legitimate claims.

In summation, Mr. Chairman, the reason we are in this predicament is the sheer greed of corporations. In order to knock a few basis points off the cost of legitimate LTD insurance provided by underwriters who have been in the business for decades, they're willing to sacrifice the fiscal security of the disabled.

My only hope is that this committee and our government will do the right thing and respond now to the pleas for just and compassionate treatment of disabled Canadians in corporate bankruptcies. Every Canadian will applaud our MPs for their willingness, on a non-partisan basis, to address this Canadian disabled crisis.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Lockwood.

We'll now go to Ms. Nielson, please.

[Norma Nielson, Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual]

Bonjour. Thank you for inviting me to appear before you today.

In order to cover key points in seven minutes, I have borrowed a format from David Letterman: The top ten things the federal government can do to improve the retirement income system available to Canadians are.... This is my view from 30,000 feet.

I'm an academic, so I have to start with number ten: Support research that will provide better linkages between data sources for registered pension plans, group and individual RRSPs, and other assets. That research also needs to examine the adequacy of retirement income for families, and not just for individuals. The work that was done through the Ministry of Finance last fall was an important first step in this direction, but it leaves many questions unanswered and indeed unanswerable.

Number nine: Amend tax treaties, especially the one with the U.S., to provide reciprocal recognition of other nations’ tax-favoured retirement savings vehicles. Right now those Canadians whose citizenship in other countries requires them to file taxes there as well as here effectively have no access to tax-supported retirement savings. A dollar put into an RRSP does reduce current Canadian taxes, but that reduction may well be converted into a tax increase in the other country.

Canadian tax rules currently permit charitable contributions to organizations recognized under U.S. law within limits. Why not recognize contributions to U.S.-qualified plans on the same terms as contributions to Canadian-registered plans? Why shouldn’t the Windsor resident working in Detroit be allowed to have the same tax treatment for participating in a 401(k) plan that a neighbour working in Windsor might receive on a defined contribution RPP? Rollovers back and forth across the border would also be a wonderful idea.

Number eight: Revisit some government-imposed restrictions--not all federal by any stretch of the imagination--regarding the purchase and sale of annuities. It might be possible to have a qualified outsider, such as a life insurance company, manage the assets and liabilities of a pension plan that's winding up on an administrative-services-only basis. Bring in the insurance company's guarantee on only a small portion of the uncertainty, the unpredictability of those claims, to provide the needed guarantee. That would tie up far less of the insurer’s capital, thereby reducing costs and allowing correspondingly higher payouts. Similarly, restrictions that allow only Canadian companies to service this market keep qualified sellers, such as branch offices of sound foreign companies, from competing to sell annuities. This in turn also results in less competition and potentially higher prices.

Number seven: Definitely within the realm of finance, gradually begin to issue a few longer-duration Government of Canada bonds. Securities that extend to at least forty years and possibly fifty will assist those trying to hedge the longevity risk, whether pension funds or annuity sellers, in matching their assets and liabilities. Removing a portion of the associated reinvestment risk will, in the long run, aid in the development of a more competitive and more complete annuity market.

Number six: Equalize the payroll tax assessment on different forms of retirement savings. Currently contributions to RPPs do not attract EI and CPP contributions, but contributions to group RRSPs do. This differential tax treatment skews decisions and may be hindering the growth of group RRSPs--not necessarily by employers but perhaps by employees--as an important retirement savings vehicle. The unanswered question I'm admittedly leaving on the table for you is, if this change were implemented, how contributions to individual RRSPs should then be treated.

Number five: Extend the super-priority provided to pension plans of bankrupt companies to include due but unpaid special payments for solvency deficiencies and unfunded liabilities; that is, for supplemental liabilities and not just the normal costs. There is a good description of the details of such a proposal and the reasons supporting it in the recommendations of the Alberta and B.C. joint expert panel on pension standards. I won't use any of my time to go further into that today.

Number four: Recognize the special challenges faced by immigrant populations. Those who arrive in Canada at mid-life or later have a limited time in which to earn benefits under OAS and CPP or QPP. They also have less time to accumulate individual retirement savings, perhaps even having been forced to leave assets behind in a country that's not safe to stay in any longer. The recent changes to CPP that drop a few more years of low earnings from the calculation will mean incremental improvements for this population, but perhaps there are other adjustments that can be identified to balance the benefits of our system with the degree to which we wish to support our immigrant population.

Number three: Consider creating the infrastructure needed for the private sector to offer efficient investment vehicles that commingle funds from multiple sponsors. This may be a new registered plan vehicle, but more likely it can be achieved with adjustments to the definition of plan sponsor and specification of adequate disclosure requirements.

Number two: If you proceed with changes to CPP—and I'm still a little bit on the fence on that one—focus first on a gradual expansion of the yearly maximum pensionable earnings, the YMPE, from one times average annual earnings to perhaps 125% of annual earnings. Even maintaining the current 25% target replacement ratio, such a change will gradually result in an increase of CPP benefits by 25% of 25%, or about a 6.25 percentage point increase in the replacement ratio. That number would close a majority of the gap between those who do and do not have RPPs, based on Statistics Canada work. It also would be accommodated automatically into existing payroll systems and existing RPP integration rules, minimizing the administrative costs associated with implementation and transition.

Number one: Permit plan sponsors to include provisions such as automatic enrolment, so-called opt-out rather than opt-in rules. Employ “save more tomorrow” options, where people can sign up today and they don't actually see anything taken from their paycheque until a year from now, and allow plans to provide default investment options in their registered pension plans that may be age-based, or otherwise well-thought-out expert advice that's the default option, rather than no advice at all being the default option. These types of changes will do much to overcome the negative impacts of human inertia that are evident in lots and lots of this literature.

In conclusion, the system we have now is functioning pretty well for a reasonably large proportion of Canadians, but there is room for improvement, with most of the needed improvements taking the form of fine tuning. What I've presented to you here today are a series of ways that can address incrementally those pockets where the biggest problems have been identified. In addition, there's also tremendous room for simplification and harmonization of retirement income legislation and regulation. I recognize this is not something that the federal government can do in isolation, but I commend you to please take some leadership in the area.

I thank you for your attention today and I look forward to an engaging and interesting discussion over the next hour and a half.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Nielson.

We'll now finish with Mr. Wacheski, please.

[Tony Wacheski, As an Individual]

Good afternoon.

Current insolvency laws are devastating thousands of Canadians’ retirement income security. You must insist that the Companies' Creditors Arrangement Act and Bankruptcy and Insolvency Act be amended now to fairly protect those with no leverage in the bankruptcy process and reduce the tax burden for all Canadians.

On April 30, 2009, after 18 years of very dedicated service, I was terminated. My salary and benefits were halted immediately. I did not receive a penny of severance. I scrambled to survive. I paid the penalty to refinance my mortgage, halted payments to my three daughters' RESPs, halted payments to my RRSP, and could no longer hold life or health insurance. I became a full-time job seeker and received EI for the first time.

The CCAA is being exploited and manipulated by restructuring lawyers and junk bond holders to allow corporate executives to avoid legal obligations at the expense of the most vulnerable in the process. Bondholders are inducing bankruptcies for large profits, lawyers are making millions, and executives are receiving the obscene bonuses. Everyone wins except past employees, the shareholders, and the taxpayers.

CCAA negates the provincial Employment Standards Act. I and thousands of others severed will be lucky to someday get 15¢ on the dollar for our legally entitled severance and pension deficits. Apparently it is true that the more outrageous and extraordinary the transgression the easier it is to commit in clear view.

The Nortel bankruptcy is one of the most complex international insolvency cases in history. You must release the auditors and forensic accountants onto this case to determine the truth.

I am an average Canadian who tried to do all the right things. I worked myself through university, received an engineering degree, and joined a blue-chip company with a defined benefit pension plan, five days after graduation. We worked very hard creating products and patents and building the equity in the company.

Times were good. Nortel was Canada’s darling, with huge profits and skyrocketing stock. Then executives got greedy, twisted the rules, lined their pockets, and started the downward spiral. Nortel's stock price plunged, evaporating retirement savings of thousands of Canadians.

The CEO was fired with cause in 2004 and was charged with fraud affecting the public market in 2008, but by that time the damage to Nortel's reputation and operations proved unrecoverable.

You must strengthen Canada’s ability to investigate, enforce, and deter white-collar crime. These nefarious crimes are too costly to too many innocent people to be allowed to continue.

I received 69% of the commuted value of my pension and have not recovered RRSP room. I emptied my TFSA and watched my debt grow. Saving for retirement, or in fact retiring at all, became a dream, not a plan. Keeping the house became the priority. Thousands of Canadians, from hundreds of companies, are in the same situation.

Initially I believed the law would ensure all creditors would fairly share the proceeds from the sale of Nortel's assets. But all creditors are not created equally, even if they have equal priority.

The suppliers have leverage. Their goods and services are still needed. They sit on the creditors committee and they use their leverage to line-jump. For example, Airvana already received $40 million in payments related to outstanding invoices it had with Nortel.

Bond holders are investors assuming risk as a part of doing business. Yet they are able to use credit default swaps to insure their credit losses in bankruptcy. These hedged junk bond holders influence the bankruptcy process through the unsecured creditor committee and benefit from liquidation, with large profits.

It is legal, and it's happening now. But wait, there's more.

Nortel's Canadian estate is being depleted by foreign creditors who are controlling the process at Canada’s expense. There are many examples. First, the Carling campus was mortgaged to the U.S. estate to continue Canadian operations. You must ensure the Canadian court is equipped to fight foreign estates from extracting money from Canada and hoarding it in their estate. There are provisions in NAFTA to enforce equalized payments.

There is still more.

The pensioners, severed, and LTD are represented collectively by a law firm approved by the corporation. This law firm is responsible to a single person from each group, and that representative is biased to suppress information and limit consultation with the people they are supposed to represent.

The pensioners, severed, and LTD quickly realized the inequity in the laws and began lobbying to change them. Our only leverage was the possibility that the government would correct these archaic laws. The creditors understand that the laws could and should be changed and negotiated a deal with our representatives, taking away our faint hope that you would address these injustices.

Our representative ignored our opposition to accepting the lopsided deal that eliminated all our bargaining power. The group of LTD are appealing this devastating deal. The largest voting group was divided and conquered by our own representation.

Please explain the rationale for keeping these maleficent laws. They are being exploited to make some very rich, while plunging hard-working Canadians into financial ruin and destroying their ability to retire.

A recent plan will pay Nortel's CSO a $4-million bonus, while thousands will never receive employment standard minimums. Timely severance would have provided a means for these people to avoid drastic actions for survival and keep their retirement dreams alive.

There are 34 other countries that have preferred or better status for employment claims in bankruptcy laws along with functioning credit markets. All the studies I have seen indicate that the negative effect on the cost of capital is a myth.

Bankruptcies are costing taxpayers. The government downloading cost in the case of Nortel alone is estimated at $355 million, plus the $500 million the Ontario government put into the pension benefits guarantee fund.

The right path is clear: amend the BIA and CCAA immediately, and have the amendments retroactively apply to all current CCAA and BIA proceedings.

I ask you to consider the following. Voters many have a short memory for the proroguing of a government and become complacent with the opaqueness of a promised transparent government, but they will never forget the actions or inactions of a government that allowed, and keeps allowing, the destruction of their financial security and retirement dreams.

Protecting Canadians' retirement income will require more than specific programs to help workers save money. It will require a constant and unwavering oversight by all Canadian ministries and strong laws to protect Canadians’ dreams of retiring.

However, you can make one positive step in the right direction today. You can protect the hard-working Canadians that build the companies and wealth in this country by amending the CCAA and BIA, and by taking steps to ensure that the Canadian estate is protected from international insolvencies. You have the power, the mandate, and the responsibility to make this change now. Listen to your constituents and do the right thing and stop this great injustice.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll go to questions from members.

Mr. McCallum, you have seven minutes.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair, and I thank all of the witnesses for being with us this afternoon.

Perhaps I could begin with Mr. Lockwood and Mr. Wacheski. I'll basically tell you how I see the state of affairs and then ask you one question.

Certainly we are highly aware of this issue. As you probably know, Mr. Lockwood, we have a bill in the Senate, through Senator Art Eggleton, that would effectively fix the situation for those on long-term disability. We support it strongly. The idea would be to initially improve, in the Bankruptcy and Insolvency Act, the position of people who are on long-term disability—which is what they have asked for. We think this would be sufficient.

In the medium term, I think we'd also want to change the law further so that in the future companies would be obliged to either fund or insure their long-term disability plans, so that problems like Nortel is facing now would not happen again. We've studied this closely and I'm aware of the seriousness of this situation.

We don't have our own bill for pensioners, but the NDP does, and we'd be committed to that.

We have asked the government in question period if they will support our own Senate bill, because I know that time is of the essence, but so far they have shown no inclination to support it. That is where the matter stands now, as far as I can figure it out.

I'd like to ask each of you just one question. Have you or any of your representatives, to your knowledge, representing either the long-term disabled or the pensioners, spoken to anyone in the government on this subject, and what answer did you or your representatives receive?

[Lee Lockwood]

I have sent a couple of letters. I essentially received what I would call “template” responses, which more or less defers the issue to the provincial authorities.

[John McCallum, Liberal, Markham—Unionville, ON]

Can I ask to whom in the federal system you've sent your letters?

[Lee Lockwood]

To Mr. Flaherty and Mr. Clement.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

Mr. Wacheski.

[Tony Wacheski]

I've been talking to my member of Parliament for over a year now. I have met with him twice. The only reason for not implementing these changes has been the cost of capital. At one point, I was offered a meeting with Mr. Clement for a further discussion on this, but Mr. Clement didn't want to talk about it because he said he already had enough information. Then my member of Parliament didn't want to talk to me any more either.

I haven't heard any reason beyond the cost of capital, yet all of the studies that I've seen and that other people have shown to this committee say the same thing, that the cost of capital is not a good reason at all.

I would love to know what the other reasons are. I asked him repeatedly to please give me the arguments for this. I have not heard of anything else.

[John McCallum, Liberal, Markham—Unionville, ON]

You don't have to answer this question if you don't want to, but just to complete this discussion, can you tell us who your member of Parliament is?

[Tony Wacheski]

Mr. Pierre Poilievre.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay, thank you.

The following has to do in part with Mr. Cadieux's testimony. It happens that I came across an article from the Montreal Gazette, dated Friday, November 8, 1963. That's of some relevance, because the headline of the editorial was “Time to Reappraise Pension Plan”.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It's true.

[John McCallum, Liberal, Markham—Unionville, ON]

The article covered all of the arguments in 1963 why it might be a terribly dangerous idea for Canada to adopt a Canada pension plan.

The first problem was that the provinces might not agree. The second problem was the impact it would have on Canada's need for investment capital. They were concerned that the cost would be too high and they concluded that the “The real need is to make use of the delay to undertake a thorough investigation...to determine the place of the particular plan among the needs and capacities of the country.”

It reminds me of this government's attitude to reform of the pension plan. It's always too dangerous, and it always wants to make sure that nothing is broken and that we undertake endless investigations.

My question is addressed to Mr. Cadieux.

I do not agree with the specifics of your proposal. We are seeking a supplemental plan that would be voluntary, whereas you are looking for a non-voluntary plan. So my question is: what has the government's reaction been to your reform proposal? Was it similar to what was described in The Gazette in 1963?

[Serge Cadieux]

We do not agree at all with the Liberal Party with respect to voluntary contributions. In fact, we note that the plan set up in the early 1970s, which encouraged individual savings, has been a total failure. Right now in this great land, 60% of workers do not have an occupational pension plan and one third of seniors live below the poverty line. I think we have to face the facts. Forty years down the road, it is clear that the appetite for individual savings and RRSPs has not met expectations. When the public plan was set up based on a 25% contribution rate, the government and its social partners hoped that employers would negotiate supplemental pension plans to make up the difference. Indeed, the Supplemental Pension Plans Act was in place. However, we are seeing now that the majority of defined benefit plans are in serious trouble.

I represent wage earners from AbitibiBowater who saved their entire lives in order to contribute to their plan. Go and talk to them. The example of the gentleman sitting next to me is a flagrant one. After 40 years, we do not think that non-mandatory individual savings will change what the past was unable to change. We already have an example going back 40 years. It is not as though we were starting on day 1.

I am not yet aware of the Conservative Party's position on this. I attended a conference in Toronto organized by the CLC and the Ontario Labour Federation. Mr. Flaherty, the Minister of Finance, was in attendance to hear the presentations. To my knowledge, the Conservative Party has yet to take a definitive position on this. The Liberal Party, on the other hand, seems to have made up its mind before even hearing everyone's suggestions. We believe a national conference on pensions should be convened. It is necessary that everyone have an opportunity to present their views and that the issues as a whole be debated before the parties adopt a firm position.

[The Chair, Conservative, James Rajotte]

Merci.

Thank you, Mr. McCallum.

Mr. Desnoyers, you have seven minutes.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chairman.

I would like to welcome all our witnesses. I see this as an historic moment. We are turning an important page in our history. We are aware that there are major problems with respect to pensions and that they have a very serious impact on our society.

By way of response to my Liberal colleague,I would just like to mention that the House of Commons Standing Committee on the Status of Women passed a report. That report, which was tabled in the House of Commons last December, states that the Canada Pension Plan replacement rate should be doubled. A majority of members from all parties voted in favour of that proposal. I imagine that this will be on top of retirement savings plans.

My question is addressed to Serge Cadieux.

You talk about the need to find a new way, to show vision. You have presented some important ideas. Has any thought been given to the costs of these proposals? How should we approach this? In the current population, who has a real pension plan and who does not? Under your model, who would be covered and how?