Evidence of meeting #5 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was nortel.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Donald Sproule  Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee
Bernard Neuschwander  Chair, Québec Region, Nortel Retirees' and Former Employees' Protection Committee
Gaston Fréchette  President of the Subcommittee, Retraités et actifs de Mine Jeffrey d'Asbestos, Association des retraités d'Asbestos Inc.
Diane Urquhart  Independent Financial Analyst, As an Individual
Gladys Comeau  As an Individual
Diane Contant Blanchard  Secretary, Regroupement des retraités des Aciers Atlas, As an Individual
Pierre St-Michel  As an Individual

3:30 p.m.


The Chair Conservative James Rajotte

I call this meeting to order.

Welcome, everyone.

Pursuant to Standing Order 108(2) we are continuing our study of the retirement income security of Canadians.

We have with us two organizations and four individuals as witnesses. We have two individuals from the Nortel Retirees' and Former Employees' Protection Committee.

We have the Association des retraités d'Asbestos Inc.

As individuals we have independent financial analyst Diane Urquhart, Gladys Comeau, Pierre St-Michel, and Diane Blanchard.

I'll ask each of you to make an opening presentation. I believe you have a maximum of ten minutes, but if you can use less time to allow more questions from members it would be greatly appreciated by all members.

We will start with Mr. Sproule, please.

3:30 p.m.

Donald Sproule Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee

Thank you very much.

Thank you, Mr. Chair.

My name is Don Sproule. I am the National Chair of the NRPC, or Nortel Retirees' and Former Employees' Protection Committee. We me is Bernard Neuschwander, NRPC Quebec Region Chair.

If we could just move to chart 2, please, very quickly, I wanted to put a face on the 19,000 pensioners in Nortel who are going to be affected by this insolvency. Just remember that the people you see in front of you here are healthy enough to come to these kinds of functions. This gentleman here was healthy enough to make it to the Parliament Hill rally, but again, this is affecting 19,000 pensioners.

Next, chart 3 has statistics that show what the 19,000 is made up of. There are 11,700 people currently on pension. Of that, about 11,000 of them are receiving health plan benefits. The average age is 73. These are not golden and gilded pension plans. The average pension plan for people on retirement right now is $17,000. If you segregate that, the people in union plans are getting $12,000 a year.

On top of that, there are the people who will be reaching retirement age. There are some people who have left the company. There are about 5,800 of them. As for new deferred pensioners coming on board, the long-term disability group will be terminated at the end of this year and will become deferred pensioners. We think the majority of them and people laid off within Nortel will become deferred pensioners.

That's how we come up with a total of 19,000 people who will be affected from a pension point of view and about 11,000 people from a health and welfare benefit point of view. Again, the deferred people do not benefit from the health plan.

Across Canada, we have over 9,000 people in Ontario and 6,000 people in Quebec. The remaining 9% are outside of those two provinces.

I made a presentation to you in June of last year on the Nortel situation. Since then, hopefully everybody has been reading the newspapers. Nortel is liquidating under CCAA. Major assets have been sold. The last major asset is the intellectual property. The company will probably be down to about 400 people by the second quarter.

Our pension claims have not been totally calculated, but certainly for the two registered pension plans, we're talking about $1.1 billion of deficit in those pension plans.

On the Canadian estate, we're far from being close to understanding what we're going to get from the Canadian estate when it is finally settled. We do know that there's no cash left in Canada--just enough to manage operations. The payout will come from global assets. They've all been put into a global lockbox, but it is far from determined as to how those global lockboxes will be unwound and what will come to the Canadian estate.

Now, having just said that I think the whole thing is highly speculative, I'll put my speculation forward. I think we're going to get maybe between 10¢ and 30¢ on the dollar, but again, it's too early to tell.

It's been a year of worry for pensioners. There is no end in sight. I suspect we have another two years of going through this process before we find out the final outcome.

Next is chart 5. In that environment of uncertainty, we're waiting to hear from the judge in the next couple of days, but there is a settlement agreement with Nortel Canada for existing benefits, and our health plan will come to an end at the end of December of this year. Also, our pension plan is going to be wound up as of September 30 of this year. At that time, we expect a cutback of something worse than 31%, so that's something below the 69% level.

That cutback is determined by the expected cost of converting that plan to annuities. The Nortel requirements for annuities will not fit within the Canadian marketplace--both the size and the type of annuities that we're talking about--and because of that we expect to suffer more in terms of annuity payout to the pension plan.

Just so you are aware, we are exploring at an early stage with the Ontario government the concept of a pension orphanage, whereby we avoid having to go to annuities and avoid some of these key windup charges. But the implication is that by the end of this year, the average pensioner will lose about 40% of their income, both in pension and in health payments. This will be a hardship for all and poverty for some pensioners.

Chart 6 asks, “How did we get here?” I looked at other corporations and we worked on this as a committee. We believe we spent something close to 75,000 man-hours on this activity.

Nortel is not an ongoing entity. We had negotiating power in terms of what GM had available to them, and what Stelco and Algoma had available to them, in terms of cutting deals with the federal government and certainly with some of the provincial governments. The negotiating power with ongoing entities, of course, is jobs, jobs, and jobs. In the case of Nortel, there are no jobs. It's all being sold off. What's left is the rump of the pensioners and other people affected by this.

In Canada, there is no viable pension insurance scheme. There's another day set aside for that, we understand.

There is a very limited Ontario scheme, the pension benefit guarantee fund, which will help Ontario pensioners or people who worked in Ontario. We're probably talking about $310 a month in terms of what that scheme will pay out. And certainly all those pensioners who worked outside of Ontario will get nothing in terms of pension insurance.

If you look across the global stage in terms of OECD countries--and again, there's another day for this--there is no priority for pension deficits in the bankruptcy courts. We have sunk to the lowest of unsecured creditors.

Very quickly, the bankruptcy courts seem to be all about equals negotiating what's left of the corporation. I maintain that the pensioners and other employees affected by this insolvency are hardly equals among the people who are the unsecured creditor class.

Bondholders are extremely sophisticated people. They manage risk not only with Nortel, but across other investments. They can actively manage risk in terms of shortened maturity dates. They were able to cross-guarantee their bonds between Canada and the United States. And they can actually purchase default insurance called “credit default swaps”.

The suppliers equally have risk distributed across many customers. In some of the cases they had negotiating power as the assets were sold off because they were critical to the business. Some suppliers managed to get 100% on the dollar.

The U.K. government, as you're probably aware, is making noises about trying to make claims on the Canadian and the U.S. estates. It did not get leave to make those claims, but it's going to be coming back.

In 2006 the U.K. pension administrator negotiated a deal with Nortel Canada, with the parent company, to cross-guarantee some of the pension obligations for the pension administrator in the U.K.

Finally, pensioners never contemplated company default. All our risk is concentrated in a single entity, Nortel Canada; it is not spread across all of the Nortel entities. When they took pensions, pensioners did so to avoid personal risk--would they live too long and not have enough money, would they not live long enough and their wives not be taken care of, and would they become sick.

I maintain that pensioners are hardly among equals when it comes to being unsecured creditors. Our request is that pensioner claims be given preferred creditor status under the bankruptcy laws. We would certainly rank below multiple classes of secured creditors--and hopefully that would not impact the ability of corporations to restructure--but we do wish to rank at the front of the line of unsecured creditors. Our pensioner claims would include pension deficit, health, and other claims.

Now, in making a decision and trying to understand the impacts of what that means within the bankruptcy environment, we do ask you to weigh the societal costs. My colleague has actually calculated that at being in the order of $355 million. She's also done work in terms of what it means--because people say there are going to be increased capital costs in terms of changing the bankruptcy laws--and in her estimation there will be an increase of 0.02% to 0.11% for all corporations. For those corporations that are in pension deficit, her estimate is 0.16% to 0.79%. So there will be a cost of capital increase, but let's think about what it means to the societal cost.

As I went through these charts, I began to think about what would happen if corporations actually had to pay that amount. It might make them top up their pension plans and not get into the situations they're in now.

From a summary point of view, I will turn it over to my colleague Monsieur Neuschwander.

3:40 p.m.

Bernard Neuschwander Chair, Québec Region, Nortel Retirees' and Former Employees' Protection Committee

Thank you.

To conclude, we think it is high time to amend all of the bankruptcy legislation, which we feel is no longer in sync with today's world. While governments are giving more and more time to distressed companies to offset the accumulated deficits in their pension plans, they are not providing retirees with any measures to protect them in the event that their former employers become insolvent. That is simply unfair and appalling. They are shamelessly playing with the income of retirees and not providing any measures to protect them in the event that their companies go bankrupt during that time.

Canada is a country that is recognized for the quality of its social programs, and yet it is the only country in the G20 that does not offer any form of protection to pensioners in case of bankruptcy, whether in the form of a pension security program as is the case in the United States and Great Britain, or by giving them a preferred creditor status. We are told that introducing such measures would increase capital costs and undermine business competitiveness. As Mr. Sproule indicated, our studies show that the increases would be minimal and would mainly affect those companies that are already challenged.

It is fair to say that pension plans constitute liabilities that, in our opinion, are on par with other corporate debts. Pensions are deferred wages, not gifts that companies agree to give to their former employees.

We are also aware of the fact that the government is considering reforming Canada's pension system, and that related consultations are underway. Under those circumstances, we understand that the government does not want to take a piecemeal approach to the review. However, our demands are perfectly consistent with a comprehensive reform and in no way compromise its future success. Amending the bankruptcy legislation does not compromise the restructuring of the pension system.

Our pensioners and those from other distressed companies cannot wait any longer. Our plan will be liquidated by September 30 at the latest, and that will have disastrous consequences for many of us. The changes that we are calling for will provide our pensioners with adequate protection without costing Canadian taxpayers a penny. I think that is something we should keep in mind: It won't cost Canadian taxpayers a cent. Mr. Sproule has indicated that we might even generate savings of $350 million. Clearly, that is an offer you cannot refuse.

Our 19,000 pensioners and former employees are counting on your support. Thank you for having welcomed us here today, and we remain available to answer any questions you might have.

3:40 p.m.


The Chair Conservative James Rajotte


Thank you for your presentation. We will now move on to Mr. Fréchette, if you will.

3:40 p.m.

Gaston Fréchette President of the Subcommittee, Retraités et actifs de Mine Jeffrey d'Asbestos, Association des retraités d'Asbestos Inc.

Good afternoon, Mr. Chair.

My name is Gaston Fréchette, of the Jeffrey Mine, in Asbestos. With me is René Langlois who is the Secretary of our committee.

First of all, I would like to begin by thanking you all for having invited us here. If you are taking the time to invite all these people to look at what might be done, that proves that there are problems with our pension plan system.

I would like to talk about the 1,300 asbestos miners who spent their working lives mining asbestos. On the morning of October 25, 2002, the mine's CEO told us that it was all over; no more big pensions. We could forget about our insurance. That was a thing of the past. We learned that our pensions would be cut by at least 20% or 25%, and were later told that our pensions would be cut by 35% to 40%. That represented an annual shortfall of $5.5 million for the city and region of Asbestos.

Those who have been to Asbestos know that it always used to be a rather small city. Today, it's a village. The Jeffrey Mine was the only real employer. I already said that there were some 1,300 employees. They worked on three shifts. That did not leave any time for their spouses to work outside the home. That means that 95% of Asbestos households had a single earner. In most cases, it was the father and husband. As a result, those pension cuts affected two people. The spouses who stayed at home were not entitled to QPP benefits. They could only depend on old age security. If you added all that up, it made for very substantial losses.

Once we realized that, we took matters into our own hands: we became mobilized and formed a committee. We did everything that was possible and, in 2003, we ended up meeting with the Premier of Quebec. We received $4.5 million, a substantial amount that helped us cover 11 months of lost income. At the time, we also met with Christian Paradis, who was a minister and a neighbour of ours. He is very knowledgeable about asbestos, and neither does he fear its use. We also met with your former minister, Maxime Bernier, the MP for Beauce. I do not want to make a bad joke, but I wonder whether he did not forget our documents somewhere, because we never heard from him again.

3:40 p.m.

Some voices

Oh, oh!

3:40 p.m.

President of the Subcommittee, Retraités et actifs de Mine Jeffrey d'Asbestos, Association des retraités d'Asbestos Inc.

Gaston Fréchette

We had handed him a huge pile of documents and called him repeatedly. However, I can say that we received replies from many of you, to whom we had sent a letter. Many of you sent us responses.

That leads me to talk about the same issue raised by people from Nortel: the Companies' Creditors Arrangement Act, or CCAA. That legislation really has to be changed. It is costing us at least $20 million. Why? Because the banks, credit unions and QPP investment board got their share in the bankruptcy. We were treated as if we had been selling Pepsi. We received $1,000 each. That was the amount received by our mine. That is to say that, to date, each Jeffrey Mine worker has lost at least $100,000. The average age of our pensioner-members is 75 years.

People think that Mr. Bellavance's bill, C-290, which we talked about, will be too expensive. If only the Companies' Creditors Arrangement Act had placed employees on the same level as the secured creditors, our losses would have been quite minimal. Yet, we are told that, with such an arrangement, banks would not be able to raise money as easily.

The only thing that companies could do is not to promise pensions if they are not able to pay them. If they do promise them, then there should be a 100% solvency ratio. Since 1991, Jeffrey Mine has never had a solvency ratio of 100% for its pensions, and I can prove that to you anytime.

You must realize that the retirees are the biggest losers in all of this. Just put yourself in the shoes of these retirees for a moment. I have something to say. If the teachers of Quebec lost 35% of their pensions, people would be talking about nothing else. There would be more people who would stand up and defend themselves.

What we want are things that we have really lost. We think we have the right to go after them. Thanks to a great deal of diligent work, we finally managed to get people to listen to us.

Why are we the only creditors who cannot deduct their losses from their taxes? All other creditors of Jeffrey Mine who lost money were able to deduct it from their taxes on their tax return the following year. Why not us?

Remember this: you are the ones who make the laws. You invited us today to try to improve them, and we appreciate that very much. We just want to be able to live decently in Canada.

I can tell you that we are prepared to answer all of your questions. I don't want to take up too much time either. We are 73, 74 years old and we have been working on this for eight years flat out. We have just settled out of court for our class action suit, and we received $7.5 million. The court ruling was handed down on Thursday, so you can see that we have not been twiddling our thumbs.

We are here today to say thank you for listening to us, and if you need us, we are available anytime. We want to see the end of this matter before we are dead and buried.

Thank you very much.

3:50 p.m.


The Chair Conservative James Rajotte


We'll now hear from Ms. Urquhart, please.

3:50 p.m.

Diane Urquhart Independent Financial Analyst, As an Individual

Good afternoon.

Canada lags the world in its protection of terminated employees, pensioners, survivors, and long-term disabled employees during bankruptcy. I did a study over the Christmas and New Year season and found that 40 out of 53 countries studied by the OECD have preferred or better status for employee benefits, or they have a public pension benefit guarantee insurance program. The impact of preferred status for employee benefits on the cost of credit is nominal. Despite several efforts to find research reports by the investment community, no research studies have been produced to demonstrate otherwise.

Corporations that liquidate with cash on their balance sheets should not be permitted to shift their employee benefit costs onto the public purse, as this places a burden on all taxpayers. The social security programs must be preserved for Canadians who are most in need, for the Canadians who did not work for the large employers who offered employee benefits.

The unregulated credit default swap market and the proliferation of leveraged private equity acquisitions have made bankruptcies a for-profit business. These two new forces in the economy encourage business liquidations rather than restructuring as ongoing concerns. Distressed debt buyers, the hedged credit default swap junk bond owners, executives, and the bankruptcy professionals are generally making a profit from the liquidations. It is questionable whether the liquidations are protecting jobs in Canada.

Government must ensure that the economy is functioning on the basis of sound drivers and that business is conducted in a fair manner. Society expects government to intervene when unfair business practices take advantage of Canadians who are unemployed, who are senior, who are survivors, and the long-term disabled.

I support the federal bankruptcy law amendments to give pension fund deficits and unpaid severance preferred status ahead of the unsecured creditors. In addition, I strongly recommend that the long-term disabled receive distinct protection in Canada's bankruptcy laws. The long-term disabled must be given priority over the other creditor groups, including other employee groups.

My level of concern about long-term disabled employees getting priority over other employee groups has risen in recent months. I have learned there is limited to no funding within current health and welfare trusts to pay for the long-term disableds' wage loss replacement income. Millions of Canadians who work for private sector employers think they have secure long-term disability benefits when they do not.

In my review of Nortel, I was surprised to learn recently that there was over $100 million missing in the Nortel health and welfare trust. This is causing a funding ratio for wage loss replacement income and essential medicines of the disabled of only 17%.

There is an alleged breach of trust, since Nortel failed to make employer contributions into the health and welfare trust for the long-term disability benefits plan for many years. In addition, Nortel borrowed $37 million from both the disabled and the survivors' money held in the health and welfare trust. Both abuses are in contravention of the trustee agreement. The group most deeply affected by the missing money in the health and welfare trust is the disabled.

As a consequence, we have 400 long-term disabled Nortel employees who are being needlessly driven into poverty. A single disabled person who once worked for $70,000 a year is now expected to have an effective income after medical costs of under $16,700. This is below the poverty line. That income would be typical of all of the 400 long-term disabled.

Meanwhile, in the bankruptcy estate of Nortel, there is $6 billion of cash for disbursement to creditors throughout the world. How is it possible that the $100 million in missing money and the $37 million loan weren't put back into the trust for the benefit of the survivors and the disabled before the company entered bankruptcy protection?

It is unfair for the long-term disabled to be put into poverty while executives are receiving retention bonuses and annual incentive payments together totalling close to $500 million. The disabled are not treated equally from a perspective of social security pensions in Canada and from that of the regulation of health and welfare trusts. Disability pensions are much lower and less secure than retiree pensions from both government and employer sources. You would know that the Canada Pension Plan disability income for a single person is a maximum of $13,521. The combination of the Canada Pension Plan and old age security benefits is $17,400.

On March 11, Canada signed the United Nations Convention on the Rights of Persons with Disabilities. Under that UN convention, the federal government must ensure that within its sphere of responsibility it promotes equality for persons with disabilities. We clearly have much to repair in terms of equal treatment of the disabled in bankruptcy law, within the CPP disability payment system, and of the combination of both the employer pension and CPP government pension.

Most disabled persons are young. They are not able to accumulate personal savings for their retirement. So it is a group who will not retire well; their pension accruals through age 65 are also very, very low.

I want to make a brief point that Canadian bankruptcy court procedures are not protecting disability income and pensions from abuses in health and welfare trusts throughout Canada. It is not just Nortel but also other very large and reputable companies who are operating their affairs on the basis of self-insured disability and medical benefits without providing full funding within their health and welfare trusts. We are seeing settlement offers being made under duress and being imposed on the disabled. The disabled face threats that their medicines could be withdrawn within eight weeks if they do not accept an offer put before them.

There is not special care taken in the bankruptcy courts to ensure that the settlement offers made to the disabled relating to their wage loss income replacement—which will determine whether or not they will live in poverty for the rest of their lives—are providing them with sufficiently clear information and adequate time for them, their guardians, and second opinion legal counsel to make informed decisions.

The disabled will always be a minority creditor group. That's in the nature of being disabled. It could be any one of us struck by disability next week, next year, or in the next twenty years. Once disabled, you are in a minority in the country. It's very important that bankruptcy proceedings can give distinct protection and priority to the disabled over other employee groups due to their vulnerability from illness, because they need the peace of mind to have quality of life.

In conclusion, I urge the federal government to play its role in ensuring that the economy is functioning on sound drivers and that business is conducted in a fair manner. The unfair business practices that have been enabled by credit default swaps and leveraged private equity acquisitions and our archaic bankruptcy laws cannot be permitted to take advantage of Canadian taxpayers, the unemployed, seniors, and, as I have said today, the most vulnerable among us, the disabled.

4 p.m.


The Chair Conservative James Rajotte

Thank you very much, Ms. Urquhart.

We'll now go to Madame Comeau, please.

4 p.m.

Gladys Comeau As an Individual

Bonjour. Good afternoon.

Mr. Chairman, honourable members of the committee, mesdames et messieurs,

Thank you for your invitation to appear before your committee.

First, I applaud you: retirement income security for Canadians--I like that. I sincerely hope I can make today a positive contribution to your efforts.

I am Gladys Comeau, née Murray, born in Alberta. I have also lived in B.C. and now live in Quebec. I have been widowed 15 years, the surviving spouse of Gilbert Comeau. Gilbert worked 41 years for Northern Electric, Northern Telecom, Nortel. He was a compassionate, hard-working husband and father and always looked forward to his due pension--I repeat, due pension. He opted for a reduced pension to ensure that I would be financially protected with the survivor's pension.

I can still picture him during his last four months of life when we knew the inevitable. He worried if I would be able to make ends meet, despite the survivor pension that he had made provision for, never thinking that Nortel would default on its promise and enter into bankruptcy.

We both worked, I not as long, of course, as Gilbert. We reached middle class. Not today--I'm at the bottom of middle class.

In 2009 I received notice from the appointed monitor of Nortel's intended bankruptcy that my survivor pension would be impacted immediately. On my own, I requested that my federal MP, Madame Marlene Jennings, and the provincial MLA, Monsieur François Ouimet, provide documentation on the government stand on the effects of bankruptcy on company-sponsored pensions. I have only recently been a resident of Lachine. I lived many years in Châteauguay. I also contacted Madame Carole Freeman, the MP for Châteauguay. These people were there for me, and they still are.

The legal implications were not familiar to me, but I soon learned that I would be entering near poverty if the government did not change the legislation to protect all Canadians. I am 75 years old, receiving minimum old age pension, rentes du Québec, and the Nortel survivor pension, which survivor pension keeps me above the poverty line.

Please believe me; this is the truth. I live in a mortgaged one-bedroom condo and have no car. I lead a modest life that includes many hours of volunteer community work. I feel fortunate to have this survivor pension. It means I'm not a burden on society or on my children. As a direct consequence of Nortel's bankruptcy, my survivor pension will be reduced by over 30% this September 30, in six months. Who can do something in six months for us? The future looks grim.

I have to agree with Mr. Sproule and Diane Urquhart: Amendments must be made to the Bankruptcy and Insolvency Act and other acts pertaining to business. This, to me, at this time is unjust and bordering on criminal. On September 30—let me repeat—if this government continues to abandon us by not changing the legislation to protect people such as myself, I will have roughly $200 less a month in my hand. That's not much for some people, but that's the difference that, for me, makes ends meet.

Now permit me to address the loss of medical benefits. This issue must not be taken lightly. I am fortunate enough to have no major medical problems at this time. Therefore, I am not counted among the many pensioners with debilitating medical conditions, which are very expensive. I am not to say how long I will live or in what state of health. I could buy private medical insurance later. No, not with the cost, and I will not do so.

The anger, anxiety, and depression—I thought these were my words, but they've already been used today—that many of us are experiencing will lead to serious medical problems, and you can be sure these problems will occur in the not too distant future.

I stand before you today, as others have done many times over and over through the year 2009, requesting enactment of legislation.

I won't go into more than that, but I still say that the deferred wages at Nortel actually belong to us.

I repeat what I wrote many times in my correspondence. If there's anyone here who has not received correspondence from me, I'll be very surprised. Please do not be influenced by anyone opposing our demand for justice through tactics of persuasion.

And yes, I am afraid. I'm a taxpayer; I look towards my government to protect me.

I received Mr. Flaherty's letter, signed by Mr. Flaherty, just a couple of days ago, and his words were “the government's responsibility”. As I lost my envelope, I don't have it with me, but those were his words. Then he mentioned that I did the right thing to send information to Mr. Clement, who I have never heard from.

I am open to your questions and comments.

Thank you for your attention, distinguished members of the committee. I am available to answer your questions. I will allow Gilbert to conclude.

Thank you.

4:05 p.m.


The Chair Conservative James Rajotte

Thank you very much for your presentation.

Ms. Blanchard and Mr. St-Michel, the floor is yours.

4:05 p.m.

Diane Contant Blanchard Secretary, Regroupement des retraités des Aciers Atlas, As an Individual

Mr. Chair, members of the House, ladies and gentlemen, good afternoon and allow me to thank you for listening to us so attentively. My name is Diane Contant Blanchard and I am here before you today in my capacity as Secretary of the Regroupement des retraités des Aciers Atlas.

Our group was founded on June 14, 2005, and our mandate is to call for the fairness to which all Canadians aspire, especially those who, during their working life, made all the sacrifices required to live the last stages of their lives in dignity. I began working for Aciers Atlas in 1966 and I retired in 1997, proud to have honoured my commitments and to have faithfully contributed to the success of the company for 31 years.

Having contributed to the pension fund throughout those years and in accordance with the provisions of the collective agreement, I was to benefit from a pension the amount of which was guaranteed, signed and counter-signed upon my departure, for the rest of my life. This contract included annual indexing and group insurance coverage.

However, on October 1, 2004 things changed. Over seven years after my departure, I learned, as did my 275 retired colleagues, that our pension would be reduced by between 30% and 58%. We could never have imagined a worse tragedy. There was widespread surprise and shock. I had never considered such a scenario. I had never been invited to speak out democratically about a decision likely to influence my future and my quality of living.

How can a pension be cut when it is guaranteed? How can our pension be cut when section 6 of the Supplemental Pension Plans Act specifies that a pension fund is a contract, a financial patrimony, and thus that priority must be given to the interests of the participants? How can our pensions be cut when Groupe-conseil Aon, though its actuarial services and its investment policy, must ensure that a mature pension scheme is funded correctly? How can our pensions be cut when the pension plan's solvency ratio was 120% in 1999?

And yet, since July 1, 2005, our pension income has been cut by up to $900 per month, which, when your pension is already modest, causes great harm and has appalling consequences. For the past 58 months, the dream of Freedom 55, with its sandy beaches, golf courses and tropical climates that so many workers aspire to, has instead become for the pensioners of Atlas a difficult situation where we have trouble respecting our financial obligations. Once again, we are obliged to struggle and make sacrifices: every time we open an envelope, we see that costs have risen. With these cuts and no indexation for close to five years, our impoverishment has reached a critical level.

How can couples who only have a single pension income from Atlas live? By limiting their spending to basic needs, such as food, housing, medication and gas. There is nothing left over for anything else. How are couples supposed to get by when one or both of them are in nursing or retirement homes? They have no choice but to settle for shabby homes with small rooms, mediocre services and mediocre food.

Last year, the Harper government created a tax credit to encourage home renovation. Were we able to benefit from it? Absolutely not. You had to spend $10,000 before being able to received a single penny. That is approximately the amount we have to live on each year. You will understand that any excess spending causes problems. You will understand even more clearly that such a situation has many awful consequences, such as having to move into a smaller home, having to sell our property before we are ready, buying less food—because bread and butter costs the same for everybody—and never being able to indulge in the small pleasures of life, such as clothing, entertainment, trips or holidays. That is exactly what makes life worth living: the 30% to 58% of our pension that has been cut that allowed us to indulge in these pleasures.

There are divorces and family conflicts.

Psychologically, the lower quality of life and reduced expectations undermine health and create premature health problems, often driving people to death. Twenty-three of us have already died.

Economically, we are talking about $2 million per year that are not being put into the economy. As people grow poor, the state is deprived of taxes but must at the same time pay more for health and housing requirements of their seniors.

Let us talk about the RRSPs, a program that was set up by the federal government to encourage people to save for their retirement. The equivalency factor took retirement pension funds into account in order to determine eligible amounts. Haven't we been fleeced, yet again?

According to the newspapers, Canadian retirees are amongst the happiest in the world, with smiling, serene faces, freedom, recreation and rest. They even show that the older we get, the more fun we have. Why is that not the case for the retirees of Aciers Atlas? Their dreams have been stolen. And yet they have worked hard for 30 to 40 years. We contributed to our retirement fund for all of these years. We placed our trust in all of these good institutions, in all of these laws designed to protect ex-workers and defend their rights.

We reproduced, paid taxes and, in so doing, we participated in the economic well-being of the country and, despite our advanced age, we are still contributing to this prosperity through our volunteer work and the support we give to our relatives. Retirees see that the situation is different for retirees from the public and parapublic sectors, who have sustainable pensions. Is working in the private sector a bad thing? In having everything taken away, we are becoming increasingly destitute.

Mr. Chair, ladies and gentlemen of the House of Commons, thank you for allowing us to make you aware of our difficult living conditions. You have the power, allow us to finish our days in dignity.

4:15 p.m.


The Chair Conservative James Rajotte

You have two minutes.

4:15 p.m.

Pierre St-Michel As an Individual

Our secretary, Ms. Blanchard, summarized our situation very well. However, I would like to add a few points. I would simply like to point out that we have been living with this social injustice for nearly five years. As far as we are concerned, we find it absolutely unbelievable that we are in such a situation.

During the 30 to 40 years when the Aciers Atlas retirees were working, they were told that a portion of their salary would be kept back, but that when they retired, they would be entitled to a guaranteed pension. We were lied to and, what is more, our money was stolen. The complacency of current legislation is what made this possible. We absolutely therefore agree that the laws need to be changed. In the case of bankruptcy, pension plans should be deemed to have senior debt status.

I would also like to point out that Aciers Atlas retirees cannot take this matter to court. The company liquidated everything. The preferred creditor took everything that was left. We lost 30% to 58% of our pensions. Think about that, 58% is a lot! This has disrupted our lives. I do not mean to be dramatic, but whenever I attend a funeral for a pensioner who has passed away, the relatives come and talk to me about it and tell me that the losses sped up the person's passing. I believe this is true too. When you have worked your entire life and you get to the end of your life and this happens, it is not easy to live through.

An 83-year-old man told me something that struck me so much that I must share it with you. He told me that societies are judged on the way that they treat their elders. He said that in his opinion, we were being treated like expired products that people simply wanted to push aside when they were no longer needed.

I think that is all. Thank you for having listened to us.

4:15 p.m.


The Chair Conservative James Rajotte

Thank you very much, sir.

We will begin with Mr. McCallum. You have seven minutes.

4:15 p.m.


John McCallum Liberal Markham—Unionville, ON

Thank you, Mr. Chair, and I'd like to share my time with my colleague, John McKay.

I would like to thank all of the witnesses for appearing before us here, this afternoon. Thank you for your testimony regarding your often very difficult situation.

Since I think virtually all of you are concerned with issues surrounding the Bankruptcy and Insolvency Act, I'd like to begin with a couple of words on that, plus the situation of the long-term disabled, and then ask a question or two.

We in the Liberal Party.... Let me put it this way. Judy Sgro, who is the pensions critic for the Liberals, and myself as finance critic, will be recommending that the Liberal Party support the NDP private member's bill on amendments to the BIA, as and when it comes to the House of Commons. We don't know when it will, but as and when it does, we will recommend Liberal support for that.

In addition, just today, I think this afternoon, Senator Art Eggleton presented a bill in the Senate that would give higher status to those on long-term disability, and in the Nortel case and also in other cases would guarantee that those individuals received the money and the medical treatment to which they are entitled. We are hoping--we don't know yet, but we are hoping--given the catastrophic situation facing these individuals should this bill not pass, that this bill in the Senate might command all-party support. But it's too early to know the answer to that yet.

I'd like to ask Mr. Sproule a question. Just today in the House of Commons, Finance Minister Jim Flaherty was asked about amendments to the Bankruptcy and Insolvency Act, and he said the following:

...as was stated in the Speech from the Throne, work is being done on that issue. It is an important issue for Canadians and we have to try to move forward on that issue. But on the broader pension issue, again I say to the member opposite, we have one of the best pension systems in the world....

Blah, blah, blah. That part is not important. The part that is important is.... That part is certainly questionable.

The specific point I want to address is Mr. Flaherty's statement that work is under way by the Conservative government to amend the Bankruptcy and Insolvency Act, and since you and your group, Mr. Sproule, are at the centre of this issue right now, with the Nortel people, my question to you is whether Mr. Flaherty or Mr. Clement or any other member of the government has approached, since the tabling of the budget, either you or a member of your group to advance the cause on amendments to the Bankruptcy and Insolvency Act.

4:20 p.m.

Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee

Donald Sproule

The answer is no, they have not.

4:20 p.m.


John McCallum Liberal Markham—Unionville, ON

You're the most likely. Has any other member of this group been approached by any member of the government on potential amendments?

Has Ted Menzies approached you, Mr. Sproule? He's the parliamentary secretary. Has anybody in the government approached you on the amendments that were promised in the Speech from the Throne to the Bankruptcy and Insolvency Act?

4:20 p.m.

Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee

Donald Sproule

Since the Speech from the Throne and the budget, no, we have not been approached.

4:20 p.m.


John McCallum Liberal Markham—Unionville, ON

Okay, thank you very much. I'll turn over now to my colleague John McKay.


4:20 p.m.


John McKay Liberal Scarborough—Guildwood, ON

Thank you.

A lot of this conversation seems to revolve around the prioritization on a bankruptcy, and you say in your material that it wouldn't have any significant impact on capital. I think both Ms. Urquhart and Mr. Sproule said the same thing. It's counterintuitive. Accepting for the moment the proposition that there should be a priority or a super-priority attributed to situations such as yours, it would seem to me that it would have an impact on the raising of capital and that somehow or other the raising of capital would morph, in some manner or another, to regain the priority.

So I would be interested in your observations with respect to what precedents are out there, and how you would get this super-priority, which would in fact be a super-priority over the long term.

4:20 p.m.

Chair, National Committee, Nortel Retirees' and Former Employees' Protection Committee

Donald Sproule

I'll hand it over to Diane, but certainly the priority for money, I understand, is the top of the pecking order above secureds, and that's what's been given in the case of the WEPPA legislation. Our request was very specific: to fit below secureds, but above the unsecureds, at the front of the line for unsecureds. Again, you need a company's ability to restructure and to get DIP financing, etc., but we wanted to be at the front of the line of the unsecureds.

4:20 p.m.

Independent Financial Analyst, As an Individual

Diane Urquhart

Intuitively you think it must have a material impact on the cost of capital. For me it's the opposite. In the investment-grade markets over any 10-year rolling period in the last century, only 4% of investment-grade corporations become bankrupt. In the junk bond market, 26% become bankrupt. So the cost of capital and any change in the bankruptcy law relates only to that small percentage of companies who go bankrupt. By the time you take that into account for all the corporations as a whole, then the cost of capital is de minimis.

In the work I have done with the investment grade, 0.16% would be the average, based on the Moody's statistics for bankruptcy and the losses borne by bondholders in the bankruptcy's centre.

4:25 p.m.


John McKay Liberal Scarborough—Guildwood, ON

Were Nortel, Atlas, or any of the companies representing your investment grade at some point?