Evidence of meeting #24 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was estimate.
A recording is available from Parliament.
Conservative
Mike Wallace Conservative Burlington, ON
Right, but a new $10 million bill that you didn't expect would change your estimate, would it not?
Conservative
Mike Wallace Conservative Burlington, ON
Yes. Thank you very much.
Your piece to us talks about $5 million or $6 million at the low end, but even in a very conservative view of what it actually applies to, it could go up to about $53 million. Is that accurate? For me, and I think for most people watching, that jump from $5 million to $53 million is significant. What's causing that gap?
Parliamentary Budget Officer, Library of Parliament
Again, we didn't complete the full three steps that we normally do for these private members' bills in order to do proper costing, but the difference that takes you from $5 million to $50 million per year is effectively the number of plans that you would have to cover under this refundable tax credit. You could go from a handful to somewhere ranging upwards of 60 in what average costs could be in terms of the fiscal framework.
Conservative
Mike Wallace Conservative Burlington, ON
There was a discussion that others are covered because there are provincial insurance programs put together by provincial governments that basically cover deficit. I know that it was a preliminary review, obviously, but from your knowledge and from what you've been looking at, does that actually affect what's in here?
Also, does every province have an insurance program that covers pension deficits if a company goes bankrupt? Or do you know that?
Parliamentary Budget Officer, Library of Parliament
Perhaps Jason might want to talk briefly about the federal-provincial splits and what's available in terms of those types of policies.
Financial Advisor, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
To answer your last question first, not every province has a pension benefit guarantee program. I think one that most members would be familiar with is Ontario's. That would cover approximately 40% of the registered pension plans across the country. The pension benefit guarantee program for Ontario, roughly speaking, would insure up to the first $1,000 of lost pension benefits. That's a rough calculation; the precise calculation takes an actuary to fully understand and appreciate.
Those calculations and those insurance benefits are not explicitly included within the sensitivity analysis. Because again, from a legal perspective, when we received advice on the bill and when we looked at it at the outset, we didn't actually see clear language as to whether those benefits would be included or not.
But I'd like to point out that even if you include the 40% of the plans covered in Ontario, although the numbers would diminish somewhat, you'd still have an annual range of approximately $6 million up to maybe $25 million.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair.
This is a very interesting discussion, given that huge variance of numbers from a few million to a billion.
The issue of plan solvency was raised earlier, but for the purposes of your assessment of this bill, are we able to say that insolvency occurs when a plan cannot meet its current obligations at the moment when they raise the issue of insolvency? Or is it when they look at that moment and include future liabilities in their calculations?
Financial Advisor, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
On the definition first, in the case of solvency, it's current and future obligations, so it's projected obligations over the life of the plan.
But I'd like to point out that when we did the calculations focusing on the Bloc Québécois interpretation, the assumptions, we took a very narrow definition that looked only at plans that had been terminated, so where there's a formal filing of termination with the provincial or federal regulator, and that had been terminated only due to financial distress or bankruptcy of the sponsoring firm.
In those situations, the research, as has been pointed out by many people, clearly indicates that if the company goes bankrupt, typically its pension plan is insolvent at that point as well. There's a tight correlation between those two things.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
One of the things we've been seeing is that within CCAA there seems to be a move occurring within some businesses to use CCAA to hide behind, to offload their pension liabilities. We've also seen, in collective bargaining.... For instance, U.S. Steel in Nanticoke wanted to go from defined benefit to defined contribution, and they had a lockout of their employees for nine months to try to drive to that end.
So I can understand why the Bloc has brought forward something of this nature, because if you go to work for a company and they put some deferred wages away—they call them payroll taxes now instead, but it's deferred wages—in my view, that's the property of those workers.
But this shift calls for some action of this sort. We've talked about a national pension insurance plan, for instance, and of course we can have the debate on the costs and who pays and all those kinds of things, but I'm very concerned.
Mr. Ambachtsheer was here and was talking about the fact that he believes private pension plans, like banks, should be regulated, that we've done relatively well in the banking section. I'll give credit to the government. They had opportunities before to make changes that they didn't make and, as a result, we went into an economic crisis in a better fashion than we might have experienced otherwise.
So in this case, what would you think of the idea of a similar kind of regulation? The government has made moves on how much they can put away on a good day to save towards the crisis we've just seen. Do you think that would be a reasonable thing to do?
Parliamentary Budget Officer, Library of Parliament
Well, sir, to be honest, we've been kind of trained to stay away from the policy issues. We seem to get into enough trouble as it is.
Parliamentary Budget Officer, Library of Parliament
I think you're right, though. When you are designing legislation and when we are costing legislation, you want to look at behavioural impacts.
In that context, if there were clarity, including clarity on Bill C-290 as to what the intent is and whether we have the legislation right, we would make some assumptions of what the potential behavioural impacts could be.
But other than that, sir, we stay away from policy recommendations.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
In the work you do, have you seen any mechanisms across the country that can actually tell you what the viability is of any given pension plan at any point in time? Is there a place that people can turn to in order to say that this plan is healthy and this one is at risk? Perhaps we should be watching plans somehow or making some kind of move politically that might be able to assist.
Parliamentary Budget Officer, Library of Parliament
Sir, I'm going to let Jason answer this question, because he has spent some time with Alberta and Nova Scotia, where they tend to do a better job. This is an area in which I think we could probably do a lot better in transparency across the country.
Jason.
Financial Advisor, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Actually, in comparison with the other witnesses you've had, I don't think we have a lot to add, apart from noting that when we went through the exercise of looking at the number of pension plan terminations owing to bankruptcy or financial distress, the most fair and equitable thing to say was that there is a significant variance across the provinces with respect to what's reported.
Within our correspondence, we indicate that there are only two provinces that report on an annual basis how many pension plans have been terminated owing to the financial distress of the firm; now, they don't report that publicly within their annual reports. But there were another three provinces that don't produce annual reports and there was one province that suggested we file a freedom of information access request when we asked for the information.
I think the easiest thing to say is that for provincially regulated plans, at least, there is a significant level of variance in what's actually out there and what's available.
The other thing I'll mention with respect to Alberta and Nova Scotia is that their reporting of the reason and the rationale behind the terminations is a relatively recent thing. There has been a push for greater transparency on behalf of the beneficiary. This is something that has come about over the past three or four years or so.
Conservative
The Chair Conservative James Rajotte
I'm sorry, but the bells are starting to ring. The committee cannot sit while the bells are ringing unless we have unanimous consent. We do have to go to the House for a vote.
Colleagues, my understanding is that the vote is at 4:30, so we'll resume here after the vote, and we'll do clause-by-clause.
Liberal
Conservative
Conservative
