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.