Finance Committee on June 1st, 2010

[Louis Plamondon, Bloc, Bas-Richelieu—Nicolet—Bécancour, QC]

This bill was drafted following meetings with the law clerks here, whose job it is to draft bills so that they abide by the rules. After explaining what we were seeking, they drafted the bill as you see it. They arrived at 22% after checking the current Income Tax Act. According to the law clerks, everything that needed to be here was here and, if the bill were to pass, it would be consistent with the current act. This is an amendment to the current act. They said it would be consistent with the act and these amounts could be paid.

Our research officer may want to add something.

[Jean-David Beaulieu, Researcher, Bloc Québécois Research Bureau, Bloc Québécois]

It would be up to the Canada Revenue Agency to determine exactly which mechanism would be used and where on the actual tax return taxpayers would be requesting that credit, once the law is in effect. I don't think the bill should be setting out the specific conditions under which the tax credit would apply. It is up to the Canada Revenue Agency to decide how to implement this, based on its own guidelines.

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

Just as a point of procedure, or precision, if you will, usually there is a clause of some kind that says “in the event that so-and-so is found, the Government of Canada or Revenue Canada must do this”. It may well be that it's in paragraph 2(1)(b), but I read it three or four times and it wasn't clear to me.

I'll leave the point there, but it seems to me to be a bit obscure.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McKay.

[Louis Plamondon, Bloc, Bas-Richelieu—Nicolet—Bécancour, QC]

In clause 2(1), it says:

“[...] the amount of tax, if any, deemed by subsection [...]”

The subsections are named—they do not appear in full but they are named. That is where you will find the answer to your question: in the 35 subsections of the Income Tax Act that are affected by this.

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

You may well be right.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Bellavance and Mr. Plamondon.

Colleagues, we will take a two-minute suspension and then bring forward our next panel of witnesses.

Merci.

[The Chair, Conservative, James Rajotte]

Order, please.

We will begin the second panel.

Could we have some order, please?

I believe there will be three presentations in this panel.

Our witnesses today are, first of all, Mr. Pierre St-Michel, representing the Regroupement des retraité(es) des Aciers Atlas, as an individual; second, the Association des Retraités d'Asbestos; and, third, the Fédération des associations de retraités du Québec. You will have five minutes for your presentations. We will be begin with Mr. St-Michel.

[Pierre St-Michel, President, Regroupement des retraité(es) des Aciers Atlas]

Mr. Chairman, I would like Ms. Blanchard to begin because she has prepared a statement. After that, I will comment, if that is all right with you.

[The Chair, Conservative, James Rajotte]

Fine. Ms. Blanchard.

[Diane Blanchard, Secretary, Regroupement des retraité(es) des Aciers Atlas]

Mr. Chairman, members of the Standing Committee on Finance, ladies and gentlemen, I would like to begin by conveying my greetings and once again expressing our appreciation for your interest in our cause.

On March 25, as part of your study on the retirement income security of Canadians, we had an opportunity to make you aware of our difficult living conditions. In your own words, you, the members of the Standing Committee on Finance, said that you appreciated the chance to put a human face to the questions and gather information, with a view to passing legislation that might put a stop to the widespread hemorrhaging affecting the pension funds of ordinary Canadians. For us, these discussions were an opportunity to gauge the misunderstandings and incomprehension.

Today, June 1, 2010, marks our 60th pension cut, representing a personal loss of tens of thousands of dollars, and 60 months of having to juggle with a budget that has been cut by between 30% and 58%, in order to meet our financial obligations. It is five years since we began the process of alerting governments to the gaps in the administration of private sector pension funds in cases of bankruptcy, as well as the devastating consequences for retirees and all sectors of the economy.

At the time, this was a relatively new phenomenon. Before us, only retirees from Singer and the Jeffrey Mine in Asbestos, Quebec, had suffered losses, as their pension funds had an actuarial deficit at the time their employer's company went under. So, we began working on a number of different fronts. Our analysis confirmed that only a political solution could solve our problem.

So, we went knocking on the door of our federal member of Parliament, Louis Plamondon, of the Bloc Québécois. As luck would have it, Asbestos was represented by André Bellavance, an activist from the same political party. It was therefore as a result of a joint effort that Bill C-445 was introduced in May of 2007, then introduced again in February of 2009, as C-290, An Act to amend the Income Tax Act (tax credit for loss of retirement income).

During the two-hour debate in May of 2008, at second reading, the Liberal Party and the NDP stated that they were in favour of more in-depth study of the bill, thereby giving it a chance of survival—an expression of empathy for which we are deeply grateful. The Conservative Party, however, felt it was poorly drafted and, because it might veer off in many different directions, likely to result in astronomical costs for the Treasury.

We are neither politicians nor tax experts able to ascertain the implications of its wording, no more than we have the expertise to examine it. We recognize that it is normal to want to engage in verbal jousting and flex one's muscles when one has a grip on power, but there comes a time when the cries and tears of ordinary people must be heard and a solution found to ease their suffering.

We derived no pleasure from having to drive hundreds of kilometres on this awful day. We see our appearance before you as a cruel humiliation. Having to enter the arena once again, at the end of your life, to redress a wrong is an aberration. And yet, ours was a life of work, sacrifice, contribution to this country's economic progress and foresight, because we contributed to a pension plan, with dignity and pride. Being reduced now to the level of welfare because of our income, but with no opportunity to avail ourselves of its benefits in the way of exemptions, is destroying us.

At the previous meeting, Mr. Menzies, in expressing your consternation, you stated that what Mr. St-Michel had said was extremely troubling, and that what had happened to him was terribly unfair. You added that this kind of thing should not happen. And yet, that is what happened, and we know all the reasons behind the current state of affairs: lax management, elastic legislation that favours employers, and tax benefits that allow an employer to escape his obligations, with no concrete protections for workers who bear the brunt of all the inherent risks when a plan is discontinued. Workers can easily monitor the share of wages and social benefits. However, that share of the pension plan is managed at a higher level, away from the watchful eye and control of others.

With respect to provincial and federal jurisdiction, I am sure you know that we have made the same appeal to Jean Charest's team. Five years after our indirect appeal, the Harper government now feels the need to react to this hemorrhaging. What will become of the groups that were sacrificed while the storm raged? Our two ambassadors from the Bloc Québécois are proposing to hand over Bill C-290 to the Conservative Party to amend it as it sees fit, in order to break the log jam and restore some of our dignity. Our demand, as representatives of the Regroupement des retraité(es) des Aciers Atlas, imposes no particular form of redress and can be summarized with this simple image: a blood transfusion is needed to get the patient back on his feet.

Moreover, there is a need to move quickly, because the time we have left is not unlimited. I would just remind you that our income—

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Blanchard.

Mr. Fréchette, you have five minutes.

[Gaston Fréchette, President, Sous-comité des retraités et travailleurs encore actifs de Mine Jeffrey, Association des retraités d'Asbestos Inc.]

Mr. Chairman—

[Pierre St-Michel]

I only have a few comments to make. I was in attendance during the first hour, and I believe that our situation has been thoroughly explained by the Regroupement des retraité(es) des Aciers Atlas, but I would just like to add that—

[The Chair, Conservative, James Rajotte]

Monsieur St-Michel, we have four presentations for this panel. We have votes at 5:15. We do want to have questions from the members, and I believe the witnesses do. The witnesses were told five minutes each per presentation. In fact, I gave Madame Blanchard six minutes.

You can make your comments. I'm sure you'll get questions from members. I think you do want to hear questions from the members.

Monsieur Fréchette, s'il vous plaît.

[Pierre St-Michel]

That is fine. I hope members will have questions for me later.

[Gaston Fréchette]

Good afternoon, Mr. Chairman. My friend, René, was supposed to provide a brief introduction, but we will keep our five minutes.

First of all, I would like to thank you for inviting us to appear again. I also want you to know that you are giving us hope. This is the first time, in seven or eight years of fighting to be heard, that so many lawmakers have been willing to listen. I hope that we will be explicit enough so that everyone will hear us and understand that what we are saying makes perfect sense.

Some people think that it is easy to live with pensions that have been cut. I would like to tell you about a mine back home, in Asbestos. Ninety-five per cent of asbestos workers have a single family income. It is not by working three shifts in the same week that their spouse could both work outside the home and raise their children. That is inconceivable. When you live on a pension that has been cut, it is the couple that is penalized—not just one person. It is very important that you always bear that in mind. In our area, we cannot go and work in a store here or there, because there aren't any. There is only an asbestos mine. Everyone has heard about Asbestos.

I also want you to know that we have presented a brief. We will use the five minutes we are allowed. I hope you have had time to read the brief that we forwarded to you. There is one correction on page 6—Mr. Steven Blaney's last name was misspelled. I actually phoned Mr. Blaney's office to apologize for that.

I would like to briefly come back to the comment made by the federal member of Parliament who referred to the 1,200 or 1,400… Why is this resurfacing at the federal level? Well, because I pay taxes to the federal government and because I am encountering all these problems as a result of Bill C-36, a federal statute that allowed a company to take advantage of bankruptcy protection and discharged our pensions as though we had never worked a day in our lives. And do not forget that, if we are here today, it is because we asked these people to explain why we were the only creditors not entitled to deduct their losses from their income tax.

My daughter is a pharmacist. She lost income as a result of what happened at the Jeffrey Mine and was able to deduct that loss on her income tax return. I lost a lot more than she did, and yet I am not allowed to deduct anything. Bill C-36 is a federal statute. If we are here today, it is because we are part of a federation. We are governed by two governments. As long as people continue to make that choice, that is the way it will be. Do not forget that if what happened to us had occurred in the public service—federal or provincial—tomorrow you would have a revolt on your hands. Maybe we should not have been such good little boys, because we did not kick up enough of a fuss. Keep in mind that there are 1,200 of us, 400 of whom now survive on the federal Guaranteed Income Supplement. That is another example that shows that the federal government can provide help from time to time. Because these individuals lost a significant amount of pension income, they are eligible for the federal Guaranteed Income Supplement, which they welcome.

The reason we are here today is that we firmly believe lawmakers in Quebec or Ottawa… They are lawmakers who are part of our governments, and we have every right to make the demands we feel are necessary. We do not feel as though we are being treated like full-fledged citizens.

Mr. Généreux, I understand what you meant. When it seems appropriate to say that this should be a provincial responsibility, then it is provincial. My response is that we pay taxes to the federal government, and therefore we are entitled to a tax credit. We have accepted the idea that the amount we get back will be less, so that people who have nothing will also get something. That is something we agreed to at Mr. Lessard's riding office.

Ladies and gentlemen, there is one thing I would like to say.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Gaston Fréchette]

We want to know whether the work we have been doing for the last eight years… It is hard to understand. You work hard to get elected for six months, and I know what an election is all about. When you wake up after the election, it is great if you have won, and if you have lost, you can try again the next time. But we cannot try again.

In the minute I have left, I would just like to say that I hope to live long enough, even though we spent our lives in asbestos mines, to finally see lawmakers do something to ease our misfortune, rather than… I hope that partisan politics will not enter into this. That is terrible to see, whatever the party that is responsible.

I take my hat off to all of you who are listening to us today and I only hope that we have not come all this way and worked so relentlessly for nothing. Even the unions did not help us. We have always been pretty much on our own. Jacques Beaudoin from the FARQ, who is here today--

Mr. Chairman, I will not take any more of your time. Thank you very much.

Ladies and gentlemen members of the committee, thank you. When the time comes to vote, I hope you will remember us. Vote as you see fit, but we will remember.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Mr. Beaudoin, please proceed.

[Jacques Beaudoin, President, Fédération des associations de retraités du Québec]

Mr. Chairman, members of the committee, ladies and gentlemen, good afternoon.

My name is Jacques Beaudoin and I am president of the Fédération des associations de retraités du Québec.

First I would like to thank the Standing Committee on Finance for giving me the opportunity to present the Federation's views on Bill C-290, which we support.

I also wish to say that we greatly appreciate the fact that the House of Commons is allowing retirees and their associations to express their concerns to the committee and speak to issues related to their retirement benefits.

Our Federation comprises about 15 member associations, representing approximately 25,000 retirees who are covered by private pension plans. Entirely run by volunteers, these associations mainly aim to promote and defend their members' rights under their former employers' pension plans.

Our organization, the FARQ, is making representations to the Government of Quebec and the Government of Canada, as well as to those agencies responsible for enforcing the various laws affecting pension plans. Overall, we are coordinating our action with Quebec's major associations of seniors and retirees, including the Quebec Federation of Senior Citizens, which boasts 260,000 members.

We are currently making representations in relation to a number of different demands by retirees, which are summarized in the brief that I forwarded and which has been provided to you. Several of our affiliated associations could certainly be considered serious cases—pardon the expression—because their retiree members have had their pensions slashed in recent years after their former employers went bankrupt.

I refer here to retirees from the Jeffrey Mine in Asbestos—which you are familiar with—from Atlas Stainless Steel, in Sorel-Tracy, and the Davie Shipyards in Lévis-Lauzon, as well as from AbitibiBowater, who are very worried right now that they could suffer the same fate.

It is these retirees across Quebec who have experienced similar situations, with all the social trauma that this entails for themselves, their family and their region. As was explained earlier, these retirees have seen their retirement benefits cut by as much as 50% in some cases. And yet these now-retired workers had paid into their pension plan and made the mandatory contributions asked of them—or rather, imposed on them—in order to be eligible for a full pension.

Furthermore, when they retired, they received a contract from their employer, as provided for by the legislation, promising a full pension, not one cut by one quarter or one half.

So why, after the fact, are these retirees the principal victims of their former employer's bankruptcy, something over which they had no control and for which they are not responsible? When an employer goes bankrupt and pensions are cut, it is too late for retired employees to start over again or improve their situation because of their age.

Are our laws not adequate, not properly enforced or not complied with? Or are both factors at play in our tolerance of such situations? We honestly think that there is a serious problem of unfairness and that you, as parliamentarians, can rectify it. We are therefore appealing to you to do so.

Bill C-290 is on the right track. Employers and active workers are well organized and able to defend their rights. That is not the case for retirees in terms of their pension plan. Do we need to tell you that retirees urgently require protection from governments and parliamentarians, as well as adequate legislation?

FARQ supports Bill C-290, which would provide a refundable tax credit to retirees who have fallen victim to pension cuts following their former employer's bankruptcy.

In closing, FARQ hopes that the Standing Committee on Finance will recommend that the House of Commons unanimously pass this bill.

Thank you very much for your attention.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Our final witness will be Mr. Hamilton, please.

[Malcolm Hamilton, As an Individual]

Thank you, Mr. Chairman.

I am a pension actuary with 30 years of experience. I was asked to read the bill and come along and comment. Having read the bill and having listened to the earlier presentations, I have three concerns.

The first is that the bill as drafted doesn't really live up to its intent. As I understand it, the intent is to create a tax credit for people who were promised things from pension plans and didn't get them. I believe that what the bill does, as written, is give a 22% tax credit every year to everybody in receipt of a pension. So in order to achieve the intent, it needs redrafting.

Second, it won't be an easy redrafting. It's never easy to change anything to do with pensions in the Income Tax Act, because the pension provisions are so complicated.

Again, as drafted, if we just put in the concept that people getting less than they're supposed to get do get a credit, we're going to inadvertently get things like the Ontario Teachers' Pension Plan found when it rechecked all the pension calculations. It found thousands of people who for years hadn't been paid what they were supposed to be getting, because of clerical error, and then they went and retroactively fixed that.

I suspect that if this bill had been in, even if we fixed it to address losses, every one of those people would have been able to collect a tax credit for their prior years when they were underpaid, even though the error would subsequently have been fixed. So you have to zero in on losses and you have to zero in on bankruptcy.

Third, we heard earlier that this is a problem that exists for two companies, that it doesn't exist in any province other than Quebec, and that it won't happen in the future. I don't see how anyone could reach that conclusion. If you look at the Pension Benefits Guarantee Fund in Ontario, you'll see that it guarantees pensions up to $1,000. It doesn't guarantee any indexing.

This means that any Nortel pensioner who receives more than $1,000 a month is going to have a claim for such a credit. And it also means that any Nortel pensioners who receive up to $1,000 a month will have a claim for their foregone indexing because their indexing isn't going to be guaranteed and they will likely forfeit part of it.

So it's not going to be easy to fix the drafting.

Now, if people think this is a laudable intent, I'm sure the people who draft the parts of the Income Tax Act, who deal with pensions, can figure out a way to do this, but I'll be shocked if it turns out to be an easy way, because they're going to have to look at settlement by lump sum, settlement by pension, settlement by annuity purchase, deferred settlements, immediate settlements, settlements subject to guarantee funds, settlements not subject to guarantee funds, and settlements subject to Bill 30 in Quebec. So it's going to be a tricky thing.

The last thing is the fairness issue. I've heard a lot about the injustice, and I understand the injustice. When people are promised pensions and don't get them, they're right to be angry. If it happens to me, I'm going to be angry too.

But there are a lot of people whose retirement savings take hits. In 2008, almost everybody with an RRSP invested in the Canadian stock market took a 40% hit. People who gave their money to Earl Jones lost all their money. People who invested in Bre-X and Nortel lost all their money.

So in retirement savings, unfortunately, we have financial crises, we have investment frauds, and we have Ponzi schemes. We have a bunch of ugly things that shouldn't happen. We have armies of people who take losses. The concern I have is how we decide that certain losses deserve tax credits and other losses get no attention whatsoever.

I know you're short of time, so I'll end my comments there.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Hamilton.

We'll start our questions from members with Mr. McCallum for seven minutes.

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

Thank you, Mr. Chairman.

I would like to thank all the witnesses for being here with us this afternoon.

Since we do not have much time, I will be sharing my time with my colleague, Mr. Pacetti.

I'd like to ask Mr. Hamilton a question.

I agree with you. In my own comments, I said that I didn't see how the drafting of the bill connected with the intent of the bill, but I do think the intent of the bill is good if you really limit the tax credit to members of plans that go bankrupt.

And if you look at the statistics, even if you take the higher numbers of the Parliamentary Budget Officer, that's not a huge number.