Evidence of meeting #2 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was employers.
A recording is available from Parliament.
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
It would be a government-run insurance program, and you talked about a floor base of $2,500.
If I'm reading this correctly—because I've only had a chance to read it since I've been sitting here—the program has to do with insurance against a pension plan going under. Is that basically what it's for? But everybody would pay, every employee and employer. Is that correct, or who would pay?
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
Pension plans would pay.
4:50 p.m.
Conservative
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
That's correct.
4:50 p.m.
President, Canadian Labour Congress
No, not just defined plans, all pension plans.
4:50 p.m.
A voice
Registered pension plans.
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Is that both employers and employees?
Say I'm an employee with a company that has a defined pension plan. We'd submit our money and then the government would charge that pension plan a certain fee per person.
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
The idea comes directly out of the Ontario Expert Commission on Pensions, which recommended for the province of Ontario an enhancement of their pension benefits guarantee fund to this exact size. It is plan sponsors that contribute into mandatory insurance, just like banks contributed to the Canada Deposit Insurance Corporation for the same purpose.
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
We believe Canada is way below the average in pension insurance protection, and the Nortel case is a stark example. This would be an insurance mechanism so we wouldn't have the level of worry that we see at Nortel and others.
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Based on my reading here, the risk of the pension plan going under would determine the rate of the insurance premium. Is that correct?
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
There is that flexibility in the Ontario system. There are lots of firewalls built in against what's called moral hazard, employers using the insurance scheme to offload pension liabilities.
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
And it's a valid one, but the Ontario system is built to not emulate the American model, where that risk is far worse. That's certainly not what we're proposing, going forward. We've worked with Harry Arthurs and others to ensure that this is something that gives retirees some security.
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
In addition to this, you have a reserve fund that is funded out of the trading stocks, basically, by the look of things. It's 0.1% of every trade. Is that what you're saying?
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
In the Ontario plan, do they have a reserve fund? So this is something new that you're adding to this, and that reserve fund would be used--
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
If you don't mind me interjecting--
4:50 p.m.
National Representative, Social Economic Policy, Canadian Labour Congress
--the key thing is that it's one thing if a lion falls in the jungle; it's another thing if 10 elephants fall in the jungle. So when GM and the automakers faced their crisis in the summer of 2009, Ontario had to deal with the fact that there wasn't enough money in the pension benefits guarantee fund to cover those promises. That's because the insurance premium that plan sponsors pay is far too low, and pension experts have been complaining about that for a long time.
What we're proposing is that the steady state rate of $2.50 per plan member to a maximum of $12 million a year per pension plan is enough to cover most insolvencies. Only 4% of employers are declaring bankruptcy every year. That would cover most. But when and if a GM catastrophe should happen--a Massey Ferguson in the past, or Algoma Steel in Sault Ste. Marie--we have to have contingencies to bear it. I think that's why you're seeing a consensus on this.
4:55 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
But why are you penalizing the capital markets for this? I don't get why you chose the capital markets to build that.
4:55 p.m.
President, Canadian Labour Congress
How did we get here right now in this crisis? It was abuse and improper use of the capital markets in the crisis with which we've been hit. The system failed, and you're finding yourselves in deficit problems right now because the governments of the world are bailing out that system.
We were taught, as you've been taught, that when you spill milk you clean it up. What's happening right now is that the financial system is not being made to pay for any of the damage it's doing; the taxpayers are. We think that's grossly unfair.
4:55 p.m.
Conservative
