Finance Committee on June 1st, 2021

[Ed Fast, Conservative, Abbotsford, BC]

The amendments contained in division 9 are addressing the solvency of the pension plans themselves. Is that correct?

[Kathleen Wrye]

That's not quite correct. Funding requirements and changes to funding requirements are also part of this revised framework, but all those changes will be done via regulatory [Technical difficulty—Editor].

[Ed Fast, Conservative, Abbotsford, BC]

You broke up there. I do want to get an answer to this.

[The Chair, Liberal, Wayne Easter]

I think we lost Kathleen.

I see Neil chewing at the bit. Maybe he can take over while we're trying to get Kathleen back.

[Neil Mackinnon, Senior Advisor, Financial Crimes Governance and Operations, Financial Systems Division, Financial Sector Policy Branch, Department of Finance]

Just to finish Kathy's sentence, the funding requirements will be done through regulations. There already exist legislative authorities to do that.

[Ed Fast, Conservative, Abbotsford, BC]

Solvency is going to be assured through regulation, then. Is that what you're saying, Neil?

[Neil Mackinnon]

The regulations already contain a solvency funding requirement. As part of the framework we propose, the legislative requirements are simply adding governance and funding policy requirements for these plans. The framework would also remove solvency funding for these plans.

[Ed Fast, Conservative, Abbotsford, BC]

There is another risk to these pension plans, which is the solvency of the employer itself. Is that not another risk?

[Neil Mackinnon]

No, it's not in the same way for the typical defined benefit pension plan that you think of, for which the employer is liable for the funding requirements and puts new funds into the plan. For these plans, if there is ever a funding deficit, the fixed contributions mean that no new funds go into the plan. The only alternative for the plans is to reduce benefits. The intent here, the removal of the solvency funding requirements for these plans, is to prevent those reductions in benefits that typically occur upon solvency deficiencies.

[Ed Fast, Conservative, Abbotsford, BC]

Okay. That's very helpful. Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Kelly is next and then Mr. Falk.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I think the last part of that just captured the part I was a little confused about. The key difference, really, is that the question of the fund's solvency is addressed before the employer's solvency would ever come into question.

[Neil Mackinnon]

It's simply that the funding of the plan is not connected to the solvency of the employer. The contributions for employees and employers are fixed, and regardless of the solvency and of the funding of the plan itself, those contributions do not change.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

It doesn't really resemble a defined benefit plan at all, in that the benefit is only.... If for any reason—not only the solvency of the employer, but merely if the management of the fund were unable to pay out what would otherwise be a defined benefit—the benefit shall not be defined, it will shrink, because the employer is not compelled to make up a deficiency.

[Neil Mackinnon]

It's true. In our legislation, “defined benefit” is used to distinguish between defined contribution plans, which are essentially savings accounts, and plans that have a monthly payment in retirement. That's how we use it, not in terms of the employer liability on insolvency or for a funding deficiency, even though that's how it's commonly understood.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay. Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Falk.

[Ted Falk, Conservative, Provencher, MB]

Thanks for those explanations.

I have a further question. Is the department considering further amendments to make provision for multi-employer negotiated contribution pension plans?

[Neil Mackinnon]

I'm not sure I understand the question. These 14 negotiated contribution plans are all multi-employer plans.

[Ted Falk, Conservative, Provencher, MB]

I don't know if this is the right place to ask this question. On the Canada pension, for example, for folks who have multiple T4s from multiple employers, if they're all getting their CPP contributions deducted, when they file their tax return they get their overcontributions back, based on the maximum, but the employers don't get the refunds back on a pro rata basis, depending on how they funded them. Is there going to be any correction coming to that?

[The Chair, Liberal, Wayne Easter]

I see Kathleen is back.

Welcome back, Kathleen. Do you want to take a stab at that? You don't have to. It's not in the bill.

[Kathleen Wrye]

No, I think can give maybe just a brief.... I'm sorry about that. I had an Internet issue.

I believe you asked this question during the previous meeting, when we were studying these amendments, and I—

[Ted Falk, Conservative, Provencher, MB]

You have a good memory.

[Kathleen Wrye]

Yes. As I understand it, that question has been sent to the department. An answer should be forthcoming from people with more experience with the Canada pension plan than I have. Our role is just with respect to the federally regulated private sector.

[Ted Falk, Conservative, Provencher, MB]

I recognize that, and I realize that it isn't really in this section, but it's talking about pension plans, so I thought I would.... I'm very happy that it's still on your radar. Thank you.