Evidence of meeting #7 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.
Liberal
John McCallum Liberal Markham—Unionville, ON
I think the first priority is a simple one: to save the current situation.
Liberal
John McCallum Liberal Markham—Unionville, ON
But going forward, it might also be good to have something else, and that is to make it compulsory that companies purchase insurance for long-term disability and/or set up an appropriate fund. If that had happened, we wouldn't have had this problem.
Going forward, would you agree that this would be a good change to the law?
As an Individual
I would agree that would be good, but it's a provincial concern. I would be worried about that becoming a way to shift responsibility back to the provinces. I think the provinces and the federal government share the responsibility. They both have a Charter of Rights and Freedoms.
We've seen some cases where the CCAA and BIA rules have superceded provincial laws, for example, in terms of severance. I think the responsibility is in both places.
Putting in strong federal laws to obligate companies or directors to pay into those funds first when there's a bankruptcy would probably make them ensure it to begin with and they wouldn't be in that situation.
Liberal
John McCallum Liberal Markham—Unionville, ON
I'm told I have one minute left.
I was going to see if Mr. Hanrieder or Ms. Johannink have comments relative to what we've been saying.
I think you told me there's a total of one minute.
Conservative
The Chair Conservative James Rajotte
You have about 30 seconds now.
Do one of you want to address that?
As an Individual
As far as the LTDs, I think the other issue is that they are also part of a settlement agreement that is signed. The bill that needs to be put in also probably needs to be retroactive so that there isn't an impact against the settlement agreement that is signed.
They are also going to be losing their benefits by the end of this year. If something can be done to help them on their side, I know they significantly need the help.
Severed employees are a different issue. We're very distinct groups.
Perhaps something can be put in place for them by then, because I'm sure their drug plans are very costly.
Conservative
Daniel Paillé Bloc Hochelaga, QC
Thank you all for appearing today.
One of the important aspects of this kind of parliamentary committee is the opportunity it provides for witnesses to raise awareness among legislators and provide them with multiple examples. I think you perform that role very well. I agree with Mr. Gagné when he says that it is easy to blame the economic context—a lot of people have talked about that—the recession and the current crisis. I believe a lot of companies and governments are saying that it is the fault of the recession and the current crisis. But we should be wary of such assertions, and I want to thank you for underscoring that aspect of the problem. Too often, people say that someone else is at fault. And because it is all too easy to blame things on someone else, people end up losing sight of what originally caused the international crisis.
You did not really refer to another urban legend. Indeed, it is being said that if we determine that workers and their pension plans are preferred creditors, this will prevent companies from securing proper financing. I am sure you have heard that kind of reaction, where people say that companies would pay too much for their financing if creditors saw that pension plans were included among the preferred assets. I am sure you know this, but I encourage you to keep on telling people that that is bullshit. If that language is deemed unparliamentary, I will be called on it. And, while it is true that this is an additional risk, the job of portfolio managers who make loans or handle registrations in a company is to deal with that kind of risk. I invite you to comment, if you are so inclined.
I see that our government colleagues are on the lookout. This is urgent. Ms. Johannink rang the alarm bell, saying there is a need for quick action. You also referred to retroactivity. That is something that always concerns me. When does that retroactivity begin? There will always be cases of workers or retirees who would have been eligible had the date chosen been the 31st of December, rather than January 1, for example. There is Nortel, of course. It is a famous case, but there are other cases in Quebec and Canada. So, there is a real problem.
I don't know whether you have given this any thought, but I am stunned to hear the Minister of Finance or the government saying they will hold consultations, either in committee or within government. The Minister of Finance says that he is going to consult people, but that his mind is already made up and that things are not going to move too quickly. I want to thank you for coming to tell us that a solution is urgently needed.
I also have some questions about page 5 of Mr. de Margerie's brief, which you might have provided us in French, if I may say so. In the third paragraph on page 5, it says that Nortel pensioners will recover about 80% of their revenue. I would like you to explain that, because that does not jibe with what the people on your right have been saying.
As an Individual
Yes, I can answer that question.
The Nortel Retirees Pension Fund is 69% funded. Therefore, they have 69% to begin with. Furthermore, in Ontario—but, unfortunately, not in Quebec—there is a pension benefit guarantee which, on average—if you make the calculation based on average salaries—gives them an additional 10%. Therefore, 69% plus 10% is 79%, which is very close to 80%.
Bloc
Daniel Paillé Bloc Hochelaga, QC
On the other hand, Nortel employees are saying that they are suffering huge losses in their pension fund, whereas a retiree may only lose 40% or 50% of his pension fund. That does not jibe with the 80% you have referred to.
As an Individual
No, I don't think many Nortel retirees are saying that they will lose 40% of their pension, if retirees on long-term disability are excluded. We, of course, are losing everything. However, retirees who are 65 years of age and over or who retired because of their age are not so badly off. At the same time, it certainly is unfortunate that they will lose 20%.
Bloc
Daniel Paillé Bloc Hochelaga, QC
Yes.
As regards disability, my thought—and our report will probably reflect this—is that there are three parts to this. First, the basic plan. You clearly explained that, in Canada, there should be a basic plan, as Mr. Gagné has pointed out, that provide a minimum level of income. After that, there are private sector supplemental pension plans. Finally, there is everything relating to insurance.
I agree with my Liberal colleague that this should be considered separately. We are talking about a situation where someone buys insurance for an individual who could become disabled, and when the disability occurs, unfortunately, there is no more money left because that insurance has been rolled in with the pension fund.
Bloc
Daniel Paillé Bloc Hochelaga, QC
Okay.
I would just like to know whether you agree with the idea of making room for businesses that fail inside the Canada and Quebec pension plans. That would be for a period of five years.
As an Individual
I am sure that makes sense. That is the bare minimum.
As an Individual
On the severed side, we've lost our value. I don't know whether it's a pension adjustment reversal that we'd need to happen, because we've also lost money on our side as well, or if that goes into an orphanage. Really, you have to pull the money out of the estate, because that's where the money is, instead of putting the liability on the government.
Professional Engineer, As an Individual
If we don't take our pension prior to the company closing, we don't get any pension guarantee on any funds we have. We take the full loss as an employee.
Vice-President, Quebec, Communications, Energy and Paperworkers Union of Canada
I would like to make a comment.
In New Brunswick, Bill 51 set out an eight-year period for Fraser Papers, so that they could invest the money and try and secure a 4% improvement in pension benefits. There is no certainty that will happen, but there is a minimum guaranteed period of at least eight years.
National Executive Vice-President, Executive Office, Public Service Alliance of Canada
On that, we protect the bank deposits of Canadians by having insurance. So you have to ask yourself, why don't we do the same for pension entitlements for workers? Deposit insurance has not undermined business over the long term, so why would an insurance on pension entitlements undermine business likewise?
Conservative
The Chair Conservative James Rajotte
Thank you.
We'll move on to Ms. Block, please. You have seven minutes.