Finance Committee on May 6th, 2019

[The Chair, Liberal, Wayne Easter]

We will call the meeting to order. We're dealing with Bill C-97, an act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures. We are still dealing with officials. I believe we're in part 4, division 5.

Mark, I believe you have already given your overview of the section which relates to clauses 133 to 152. I don't think there's anybody different here or I would ask you to repeat the overview again. I think we're okay.

Are there any questions on what Mark presented the other day on enforcing retirement security?

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Mr. Schaan, as you'll remember, I started talking about the concept of good faith at the end of the last meeting.

Bill C-97 introduces the concept of good faith. All parties to a proceeding are required to act in good faith. I'd like to know what more this amendment would provide than what judges already use. According to some experts, judges can already rely on the concept of good faith to ensure all parties cooperate.

[Mark Schaan, Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada]

Thank you for that question.

First, the provision on the duty to act in good faith would help align Canada's insolvency laws with recognized international best practices. Many countries, including the United States, the United Kingdom and Japan, have established the duty to act in good faith in any insolvency case proceeding.

The Civil Code of Quebec requires parties to act in good faith. The courts that apply the Act respecting the collection of certain debts in Quebec rely on that provision, doing so in some cases to compel parties to change their behaviour. The act mentions the concept of good faith but doesn't define it. The courts have another tool to address the situation in insolvency cases.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So it's more symbolic and won't have any real impact, isn't that correct?

[Mark Schaan]

In some cases, particularly in Quebec, the courts use the provision to correct the behaviour of a party in an insolvency case. Canadian courts may rely on other tools, but those in Quebec use this provision correctly to protect other parties affected by an insolvency proceeding.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I see.

My next questions concern the new provisions on compensation for directors. The courts can already verify dividends and share buy-backs. You're proposing that they have a right of review over other payments made to directors and officers. Can you explain what those payments are?

[Mark Schaan]

The bill provides that, in an insolvency case, the court may verify the salaries and compensation of senior management, but also their stock options and social benefits. However, the court must exercise caution in using this provision.

It is not possible to nullify the collective agreements or contracts.

What the court will be able to do is review the executive compensation package to ensure that if there were an attempt to evade the utilization of the appropriate insolvency statute to ensure that there weren't undue payments made in advance of an insolvency, they would be able to review those transactions and potentially either hold directors libel or use other mechanisms at their disposal in the case of an insolvency.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So that could be the case for salaries, for example.

Could the same be true of stock options?

[Mark Schaan]

Stock options are included in directors' compensation, but the act currently contains other elements as well.

Already, under the existing provisions of the act there is a look-back period that includes the ability for monitors in the courts to review shareholder buybacks, for instance, and share dividends and the utilization of those tools. This in some ways adds an additional layer to that, but there is already a capacity to be able to review those transactions.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I'm a bit troubled by another point.

In the same division, the point is raised that directors may be exonerated from any liability provided under the act stemming from decisions made respecting compensation during the previous year, for example, or immediately preceding insolvency.

The new subsection (3.1) of section 101 would exonerate directors from any liability where they have protested against a payment.

Are we to understand that, if, for example, the decision is made following a board meeting at which one of the officers protested against payments, the directors might be exonerated from all liability in respect of those payments?

I can understand the purpose in a way, but I find it hard to understand the mechanism that will be used to achieve it.

[Mark Schaan]

If a decision concerning the compensation of directors were challenged by a board, the board would be liable for that decision. It is possible, in an insolvency case, that the monitor might decide the decision runs counter to expectations regarding the board's liability.

That creates a

tort law liability that can be pursued against those individual directors.

One of the defences for tort law liability is due diligence. That particular director, for instance, if they had opposed the executive compensation may, however, be able to rely upon that defence in the tort law action against them.

The board of directors is liable for that decision. If the monitor states that the decision runs counter to expectations or to the aims of the act, that creates a liability for the entire board. Several means of defence are possible. This isn't a

summary action.

This isn't a decision that's up to the court at that point, but the entire board of directors may then be liable.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So it would be up to the director to report that he or she had protested against the payments.

That's all for the moment, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Are there any other questions on division 5, part 4?

Hearing none, thank you all.

It's good to see you again, Mr. Schaan. We've seen you nearly every day for a long while.

[Mark Schaan]

I'm back for one more section. My apologies.

[The Chair, Liberal, Wayne Easter]

That's no problem. We're glad to have you here.

We are on division 6, Canada pension plan, and I believe divisions 7 and 8 are also on the table at the same time.

We are ready to go on the Canada pension plan. I believe Ms. Giordano is making the presentation. She is the director, CPP policy and legislation, seniors and pensions policy secretariat at ESDC. Welcome.

[Marianna Giordano, Director, Canada Pension Plan Policy and Legislation, Department of Employment and Social Development]

Good afternoon.

Under the current Canada pension plan legislation, an individual must apply for the CPP retirement pension in order to receive it. A small but significant minority of eligible seniors currently miss receiving a retirement pension payment because they apply late or not at all. These individuals tend to be people who had a weak labour force attachment and therefore low retirement income.

Clauses 153 and 155 of the bill would amend the Canada pension plan so that, beginning in 2020, eligible seniors who have not yet begun to receive their retirement pension from the Canada pension plan are automatically enrolled when they reach the age of 70.

Automatic enrolment would apply only to persons for whom the government has the information necessary to begin payments.

The proposal will prevent individuals, many of whom have low income, from missing out on CPP benefits to which they made contributions and are entitled to receive.

This proposal will allow up to 40,000 people over the age of 70 to begin receiving their CPP retirement pension for the first time in 2020. Two-thirds of these seniors are women. In addition, going forward, an estimated 1,600 people each year could receive a CPP retirement pension that they otherwise would not receive, rising to approximately 2,000 by 2030. It is estimated that, with these amendments, the average benefit would be about $300 per month.

I'm happy to answer any of your questions.

[The Chair, Liberal, Wayne Easter]

That was short and to the point.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

My question is simple, but the answer to it may not be.

Why was the qualifying age set at 70, since we're eligible for Canada pension plan retirement benefits at the age of 65? Why is there this five-year waiting period?

[Marianna Giordano]

You're correct. The normal age for receiving a retirement pension from the Canada pension plan is 65. However, you may draw your pension starting at the age of 60, but it will be subject to an actuarial penalty, or wait until you're 70 and get an actuarial increase.

There's no further benefit for deferring payments beyond the age of 70. As a result, people receive the largest amount they can possibly get at 70. That's why the age of 70 was chosen; there's no further reason to wait after that age.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I see.

Why was the decision made to grant a retroactive period of 12 months instead of 60 months? I'm going back to the example of the individual who's been eligible for five years but isn't receiving the benefits to which he or she is entitled.

[Marianna Giordano]

All Canada pension plan benefits are associated with a retroactive period of 12 months, and that applies to everyone.

Even if a person applies for a pension at the age of 67 and would like the pension to be retroactive to the age of 65, the limit of the retroactive period is nevertheless set at 12 months. In future, if people are automatically enrolled at 70, the 12 months will amply cover their needs. They will incur no loss. This will be very positive for the future.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

With regard to automatic enrolment, people must report their revenue every year in order to keep files up to date. The Canada Revenue Agency needs that information in order to proceed with automatic enrolment, doesn't it?

[Marianna Giordano]

The criteria are set forth in the act. You must have contributed to the Canada pension plan. If the department knows an individual is receiving another pension, such as old age security or the survivor's pension, or that the individual filed an income tax return the previous year, enrolment will not be automatic.

If people don't meet those criteria, an application will have to be filed. That application will still be received by the department without any problem.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Is there anyone else?

That completes officials' statements on division 6.

We're on part 4, division 7.

We'll now hear from Ms. Martel, director, old age security policy and public pension statistics division, seniors and pensions policy secretariat, income security and social development branch, ESDC.