Ladies and gentlemen, good afternoon.
My brief is available in French, but I intend to make my presentation in English.
Dear sirs and madams, I am Sylvain de Margerie. I am speaking on behalf of my spouse, Doris de Margerie, a Nortel long-term disability beneficiary. My daughter is also disabled.
I was for a long time, and still am, an executive and director in various corporations, so I can speak with some confidence about the impact on the private sector of any legislation you may make.
The intent of my brief is to ensure that any consideration of retirement security deals with retirement in its broadest sense, which includes long-term disability pensions. Doing otherwise will lead to discriminatory treatment. Furthermore, there are means within the government to correct these issues.
First, this committee is charged with looking at retirement income security for Canadians. I will ask you first to look at the definition of pension and retirement. From the Encyclopaedia Britannica we have this definition:
[a] series of periodic money payments made to a person who retires from employment because of age, disability, or the completion of an agreed span of service. The payments generally continue for the remainder of the natural life of the recipient, and sometimes to a widow or other survivor.
Similar definitions can be found in many other reference texts, in legal documents, and in jurisprudence.
The point I want to make is that although age and years of service are criteria by which most of us become eligible for retirement pensions, long-term disability is also one of the criteria that hits a few of us. If you remove that from your consideration, you are only looking at part of the problem.
In relative terms, long-term disability pensioners represent about 2.5% of the total number of pensioners. That's the number I get from Nortel. There are about 400 people on long-term disability and about 17,000 on pensions. The precedent for considering retirement because of disability and old age together exists in our very own CPP and in the Quebec RRQ. Since 1966, these programs have included both facets of retirement. Many other countries do so also.
I'll go into the consequence of inequitable pension treatment and of not having this overall view.
Canadian provinces have instituted legislation to protect employer-sponsored defined benefit pensions but have chosen, either in the text of their legislation or through its interpretation, to exclude pensions associated with disability. As a result, long-term disability pension benefits are unregulated, and employees who have become disabled can find themselves with no pension fund or income guarantee whatsoever. Unregulated pensions are vulnerable mainly in the case of sponsor insolvency. When everything goes well, you get your money, but you're vulnerable to insolvency.
For example, in the Nortel insolvency, recipients of long-term disability pensions find themselves with no income security of any kind. All of our income benefits from Nortel are due to stop. In contrast, other Nortel pensioners will recover about 80% of their revenue. Approximately 69% will come from the underfunded but regulated pension fund and an average of about 10% will come from the Ontario Pension Benefits Guarantee Fund.
Yet Nortel employees on LTD contributed to a plan that in all aspects was a defined benefit pension plan. Each month, the employer and the employees contributed an agreed upon amount to a plan that promised to pay these employees a portion of their salaries should they ever be forced into retirement because of disability.
Who are the long-term disability pensioners? They are Canadians who were promised by their employer the security of a defined benefit pension if they became disabled. Most of these plans included employee contributions, as in any other pension plan.
These people are also younger than most pensioners, since by definition they had not reached the eligible criterion for old age pension. This means that in most cases they are also poorer because they were stopped in mid-life by disability, having no savings, having still young families to care for, having no assets, and having liabilities, such as student loans, still left to pay.
They are also, by definition, disabled by conditions so crippling that they cannot work. They include victims of cancer, car accidents, surgical procedures gone wrong, strokes, multiple sclerosis, schizophrenia, and other mental disorders, to name but a few. Thus they are doubly poor, as they typically must bear extraordinary medical costs and often need to pay others to care for them and their families.
Long-term disability pensioners also had no choice in the matter of retirement, in contrast to many other pensioners, who can choose when to retire or who have the option of finding other employment to compensate for the shortfall in pension revenue.
The impact of income security is much more severe on long-term disability pensioners than on others. It affects them for a much longer period of their life, since they start retirement earlier. It also worsens what is already a severely degraded quality of life. Many once dynamic and proud contributors to Canada's economy, who had paid for income security, are now at risk of the worst kind of poverty.
What is the cost of disability pension? The point I want to make here is that this is affordable by any means. The cost of insuring income benefit promises of employers must be borne by the private sector as part of the cost of doing business. This is only fair and relieves the public purse of the burden of supporting many of our disabled.
Insuring the income security of long-term disability pensioners is not prohibitive by any means. This is so because a relatively small number of Canadians find themselves disabled, for which we are fortunate. Using CPP as a benchmark, the cost of disability benefits is only at .02% of the total cost of the pension program. This is by far not something that is going to crush industry or anybody else if these payments are forced upon them.
The federal government controls the outcome. As pointed out above, income security for long-term disability is vulnerable mostly in corporate insolvencies. Even if the provinces had stronger regulations for protecting LTD pensions, the Companies' Creditors Arrangement Act and the Bankruptcy and Insolvency Act supersede provincial laws and are the only reliable backstop to ensure that income security for those on long-term disability.
Several options exist, and among them are to provide unconditional priority to claims related to unregulated pension plans, such as those for long-term disability; second, to place a responsibility with directors and officers of companies for any remaining shortfall and funding of unregulated pension plans, such as for long-term disability. This is actually very similar to the position of director entailing liability for payroll remittances by a corporation.
Whatever solution is adopted, special attention must be paid to unregulated long-term disability pension plans, as they suffer much more prejudice. It would be unconscionable to only look at the problems and solutions for 97.5% of Canadians, letting 2.5% flounder in poverty because they have been forced into retirement by disability.
The Canadian government has the obligation, under its own Charter of Human Rights and Freedoms, and the means, through its CCAA and BIA legislation, to assure the income security of employer-sponsored long-term disability pensions.
The recommendations of this committee depend largely on the meaning you attribute to “retirement”. If, in this meaning, you exclude the 2.5% of people who retire because of disability, you are entrenching the systematic discrimination of this group.