Finance Committee on Oct. 17th, 2022

[Andy Fillmore, Liberal, Halifax, NS]

Okay, thank you for the concise answer.

I raise it because, of course, the worry here is that, in our very good intentions—all of our good intentions, our collective good intentions—in trying to protect pensioners, we might make a mistake such that we provoke a perverse outcome, an unexpected outcome. That outcome would be to create a financial hardship for the company that's at risk such that it would be forced into bankruptcy and unable to discharge any of the pension requirements. The idea is that we want to provide as much protection for the pensioners as we can without harming the company such that the pensioners don't get anything.

One of the things our department and the Department of Finance have heard from external stakeholders is that three years would be.... I heard one person use the word “catastrophic”, that it would have the impact of forcing creditors to call loans. It could also have the impact of having companies switch out of defined benefits and into defined contribution plans. I know that the NDP is tied very closely to the unions in the country, and the unions, of course, are very interested in defined benefits, so this is a serious consideration.

The change we would like to make to your bill, then, is to move from three to five years. To be frank, 10 years would be ideal. That would give a lot of runway for companies to restructure and maximize the opportunity for pensioners to receive the equity that they put into the company for so long.

The second amendment would be to agree with you to move the priority of the pensioners a few notches up the food chain to just below secured creditors. So, it would be above unsecured creditors but below secured creditors.

With those changes, I think we could support your private member's bill. I think that we could perhaps convince members of the committee of those changes if we were able to hear the full slate of witnesses that's already been published for Wednesday, which includes the Association of Canadian Pension Management, CARP, the Canadian Chamber of Commerce, the Canadian Federation of Pensioners, and United Steelworkers. These are folks who have gone to the trouble of preparing a presentation already. I think it's incumbent on the committee in a democratic process to hear from all the stakeholders and not just some.

If there's any time left, is there anything in there that you'd like to respond to?

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Sure.

First, let me say that I certainly wouldn't support extending this to a 10-year frame. I do think that even five years is a bit long. I also don't want to put secured creditors ahead of pensioners. Secured creditors include these banks that are making multi-billion dollar profits at this point in time, and I don't think they're going to not extend credit. We saw how the banks supported people through the pandemic. There were many businesses that were struggling. They were extended a lot of credit and were given many opportunities to restructure their loans, etc.

I believe the banking community will support those who are working to repair their funds. At the same time, I definitely would not support moving the secured creditors ahead of pensioners. Pensioners are suffering. Hundreds of thousands of Canadians have lost what was due them, and I think now is the time to act.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

The Department of Finance and the Department of Innovation, Science and Economic Development have heard from external stakeholders—including banks and other organizations, such as the ones scheduled to come on Wednesday—that putting the pensioners ahead of the secured creditors will, in fact, cause a rush to the doors for everyone to get out of defined benefit plans. It will cause a recall of loans and a downgrading of eligibility for lending from lending institutions. It would have.... This is the perverse outcome that we want to be so careful about not provoking again in our collective good intention of doing better.

I hope that, by hearing from some of these other witnesses on Wednesday, we can shed a bit more light on the importance of that change.

[The Chair, Liberal, Peter Fonseca]

Give a very short answer, please.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

There have been 10 years of bills and many witnesses speaking on this issue. It's clear that there is no agreement from those two camps. It's a balancing act. How do we, who are elected to protect Canadians, do a better job for them?

That would be my advice.

[The Chair, Liberal, Peter Fonseca]

Thank you, PS Fillmore.

Now we're moving to the Bloc and MP Ste-Marie for two and a half minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Ms. Gladu, my comment is related to Mr. Fillmore's questions.

Can you explain to us again the ranking of creditors under your bill in the event of a corporate bankruptcy?

As I understand it, pension funds would be lower in the ranking, not at the top, to give companies the opportunity to refinance, if necessary.

I'd like you to reiterate that for us—I believe you had already done so. It will also answer Mr. Fillmore's question.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Excellent. I'll say it in English because there are a lot of financial terms that I probably can't say in French.

Basically, the order of operation is all of the taxes that are due, all of the pension plan funds that are due and the employment insurance program funds. Then suppliers are able to repossess their unpaid goods that were delivered within 30 days of the bankruptcy. This is a great protection for small businesses, essentially.

Then there is the value of unpaid agricultural and aquaculture products delivered 15 days prior to the bankruptcy. Again, farmers and small businesses will be advantaged there. Then, the value of unpaid salaries and allowances up to a maximum of $2,000 per employee. In some of the bankruptcy cases that we've seen, people did not receive their wages. There were people who had worked and had hours banked, and they were not receiving any money for that.

Then, there's making sure that people's contributions to their pension plans are in. We can't have them receiving it if they haven't actually donated everything they were supposed to donate. Then, there is the cost incurred by a government to decontaminate land. That's so that we don't have companies walking away from contamination issues.

We would then put the pensions in place. My suggestion would be that severance goes after that or that we somehow make sure that the severance we're talking about doesn't include large executive bonuses, which could be a huge amount of money.

Then, it will be secured claims, preferred claims and unsecured claims.

That's the recommendation in the bill. That's certainly what was at INDU previously with Marilène Gill's bill, which was considered to be excellent. If there was a mechanism to allow people to get their fund in order, everybody was happy to support it.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Now we're moving to the NDP and MP Blaikie for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

Parliamentary Secretary Fillmore talked a little bit about the kind of perverse outcomes or unintended consequences that you can sometimes get by passing legislation. It seems to me that we've had a perverse outcome for a long time now. There is a fair bit of cross-party agreement that something wrong is happening in the case of bankruptcies where workers are losing their pensions. The failure to get a working coalition, if you'll excuse the term here, in Parliament to get legislation passed has meant that this wrong has persisted.

If we take the statements of people around the table at face value, that's not an intended consequence. You talked earlier about the moment that we're in. How long it has taken to get here has been part of our conversation.

I just want to give you an opportunity to speak to the kind of perverse and unintended consequence—I think people around this table anyway would want to say it's an unintended consequence—that people have been short-changed on their pensions in the case of bankruptcy and also about the moment that we're at, in this Parliament at this time, where there does seem to be a working majority that's willing to get something done.

Perhaps you could speak to that, please.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Yes, thank you for the question.

Absolutely, Canadians have suffered. After working their whole lives, they have ended up having to continue to work, sometimes when their health was not good, and that was a real struggle. Sometimes it has meant the loss of their homes, etc. There was a lot of that.

I did not hear any of the small business folks I talked to being concerned about this, because what has actually happened in the private sector is that 70% of people don't have pensions at all. They don't. Small businesses can't afford to pay into it unless they belong to an organization like HOOPP that pools a third party, which is a great idea.

Essentially, the people who are making the loudest noise here are the large corporations or the large banking institutions, which have, in fact, the most resiliency in terms of surviving one company going bankrupt.

To me, in all the talk over the 10 years, everybody was well intentioned, but now is the time to say, “These are the things from various bills that have been agreed on. They are all here together. Let's agree on these, and then we can continue to work on this in the future.” We can move forward in an improved direction. Certainly, if the government has additional things it wants to do, it is the government and can put those things forward.

This is the moment when we need to help Canadians who have worked their whole lives and protect their pensions.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

Now we'll hear from the Conservatives for five minutes. We have, new to our committee here, MP Morantz.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

First of all, I want to say that it's great to be back on the finance committee. I see some familiar faces around: Ms. Dzerowicz, Gabriel Ste-Marie, Peter. It's nice to be working with you all again. I'm looking forward to working with all the new faces that we see here today.

I just want to say thank you, Marilyn, for being so strident in bringing this bill forward. I think one thing we can all agree on around this table is that we need to find a way in a country like Canada to protect pensioners. We need to find a way to protect these pensions.

We've talked about this before. I mentioned to you that I come from a law background. I was a corporate commercial lawyer. I did many securitization packages for banks. Banks are really concerned about one thing, which is that they want to make sure they have enough security in place so that if things go wrong, they'll get their money back.

Pensioners have the same grievance. They want to make sure that the benefits of their labour are also secured. It strikes me that we have a bit of a Solomonesque problem here. We need to find a way to protect pensioners but also make sure there is stability in the financial markets so that we don't have adverse macroeconomic consequences to industry across Canada. I don't know what the answer to that is, but I think all of us around this table should be able to find the answer to that question.

I do have some concerns about the idea of simply putting pensions ahead of secure creditors and what impact that might have on the lending community. I'm not so sure that they would just go on with business as usual. I think we need to hear from them about that.

I also worry about the fact that we need to protect the pensioners' pension nest egg. We don't want to kill the golden goose that lays that egg along with the workers and the business. There needs to be a solution that works for both sides of this equation, in my view.

I'm just wondering if you could comment on what I've suggested.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

This is a very good question. If you picture it.... Let's say we have a lot of companies that have come through the pandemic and, of course, the stock market has been a bit volatile and there's been the war in Russia and Ukraine, etc. Let's say their fund has become insolvent. They can find a third party insurer to transfer the risk to. This is something that would make creditors more confident that they aren't going to be on the hook. I think it allows the time that's needed to transfer money into the fund until the pension fund is solvent again.

I think this bill allows for that kind of balanced solution that gives a mechanism to fix it. It gives time to fix it. There is an opportunity and mechanisms that already exist to transfer the risk or cover the risk, so that would address the creditors.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Just to go back to the insurance issue, in your opening statement you said that you wanted that amended out. I'm wondering if you could elaborate a little bit on why you've come to that conclusion. I agree with your brilliant idea, and it was a brilliant idea. I'm wondering what made you decide that you didn't want to see it be part of this bill.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

My idea was originally.... Look, people get mortgages on houses, and you have to get insurance on your mortgage. It's insurance on money you can't pay or money they don't know you are going to be able to pay. I thought, wouldn't it be great to create a place where we can have that kind of service? The service doesn't exist today. I was kind of thinking “Build it and they will come.”

In fact, the Canadian Federation of Pensioners hated it. Many of my opposition colleagues hated it. The whole point of me bringing this bill forward was to get those things that we can agree on passed. Then there's an opportunity in the future to do additional improvements. Because there wasn't going to be unanimous agreement on that, I said, okay, we'll just get rid of that.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Gladu.

MP Morantz, you have about 15 seconds.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Okay, I have a very quick one, and maybe the experts, when they come in, can comment on this. With respect to existing loans, are they captured by this, or is it only about new loans that would be initiated after the coming into force of the legislation?

[The Chair, Liberal, Peter Fonseca]

Give a very short answer, please.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I think that's a better question for the Department of Finance, but my understanding is that it would cover future loans.

[The Chair, Liberal, Peter Fonseca]

Thank you again.

Thank you, MP Morantz.

We are moving to the Liberals. MP Dzerowicz will be our last questioner, and that will conclude this panel.

You have five minutes, please.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank you, Ms. Gladu, for presenting this private member's bill.

I will tell you my bias automatically. Many residents of my riding of Davenport have worked for a number of companies that have gone bankrupt and have been impacted in terms of their pensions. They have very much talked to me through the years about this. I have a very big heart, and I do believe that we need to provide stronger protections for them, unequivocally.

I will tell you that I was reading through the INDU testimony. I was reading through some of the comments that were made because I want to understand why it has taken so long to have this bill passed. For me, it seems like it's been more than just needing to get all the parties onside. It seems like there's a bit of complexity that needed to be talked through. There was a need to hear from a number of different stakeholders to understand what the issues are so we could make sure that we have strong legislation and that we put into place the protections we desperately need for pensioners.

One thing we've mentioned in this session is that there seems to be a concern that some companies can't get interim funding to help them restructure. Are there any other issues that have been raised with you that you believe have been addressed in your bill?

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I think there are probably all kinds of improvements that can be made. In a perfect world, I would love to see in Canada people who today don't have a pension through the company they work for being able to donate to a HOOPP-like conglomerate so that they can build up their pension there, which is held by a third party. If I was going to take a blank piece of paper and write, that's what I would love to see, because I think everybody could plan for their retirement in a better way.

When I was talking with some of the banking organizations about their concerns about this bill, I asked if there was a way of breaking down “secured creditors” into a different granularity so that we could define which secured creditors we're concerned about—because those are the people who would have difficulty surviving and have a negative consequence—and then there may be larger ones that would have more resilience. They were unwilling to break it down further, and they didn't think they would like it even if it was broken down further, so I abandoned my hope on that and stuck to what I thought we could agree on.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you. I have two more quick questions for you.

You mentioned that your bill would affect only federal pensions. I guess my question to you is this: Is part of the reason you're proposing this bill that you believe the provinces are not serious enough about reducing their pension deficits?

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

That's an excellent question.

Ontario is the only province that backstops the pension so that, if a company goes bankrupt, people will still get something, so there is more work to do. What happens is that when federal regulations are put in place, the provinces sometimes follow suit, so my hope is that they would see that we're not going to have disastrous circumstances and that we have struck the balance that's needed, and they would follow suit and implement those in the provincially regulated pension funds.