Finance Committee on Oct. 17th, 2022

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

Could you provide that information in writing? How many federally regulated pension funds are currently underfunded?

[Kathleen Wrye]

Yes.

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

I recognize that 109% is an average, so maybe some are 130% and some are 90%, I don't know. It would be interesting to see.

[Kathleen Wrye]

Yes, I can give it to you in writing, or there's a chart that OSFI has on their website that we can provide to the committee.

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

I appreciate your providing that information.

I want to get something else clear in my mind. Let's say, for example, that a bank has an existing loan with a federally regulated business that has a federally regulated pension fund. If this act were to come into force, would that loan—which was advanced before the act came into force—and that company be under the rules that would have then come into force under Bill C-228?

[The Chair, Liberal, Peter Fonseca]

Give a short final answer, please.

[Mark Schaan]

If that company enters into either a restructuring or an insolvency policy, regardless of whether it's federally or provincially regulated, it will be subject to the rules of Bill C-228. It all comes from insolvency.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz.

Now we'll hear from the Liberals. I have MP Baker for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair, and thank you to our officials for joining us here today.

I asked a question of MP Gladu when she was presenting to us, and I want to ask this question to you. I think this is a question for the representative from Industry, but if anyone else wants to answer, that's fine.

My question is this: How many bankruptcies or CCAA proceedings with defined benefit plans have happened over the years that have led to the loss of pensions?

[Mark Schaan]

I don't have those that would be under the BIA, but, by and large, most of them would have occurred under the Companies' Creditors Arrangement Act. From 2009 to 2022, there were 10 restructurings that resulted in pension reductions.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Do you have any idea how many pensioners were impacted by that?

[Mark Schaan]

It was roughly 50,000 pensioners.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay. Why are there deficits in defined benefit pension plans?

[Kathleen Wrye]

Would you like me to take that, Mark?

[Mark Schaan]

Yes, go ahead.

[Kathleen Wrye]

In general, there can be deficits from plans for a variety of reasons. It's not necessarily that employers are not putting funding into them. Solvency is highly dependent on interest rates and discount rates, because you're discounting the future pension liabilities as if you had to pay them out immediately.

The very low long-term interest rate environment has caused the liabilities of pension plans to be quite large, which is also why our plans are now 109% funded, because of the reversal in interest rates over the last year and a half, and also investment returns. Right now I think plans are probably taking a bit of a beating on the markets, but that's being weighed out by changes in interest rates. It's predominantly market returns and changes to the discount rate that they have to use for their liabilities that can cause plan deficits.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

In other words, what I hear you saying is that when interest rates are low, the expected return over time on the money that's being invested today is lower than it would be if interest rates were higher, and therefore companies have to put in more money now to make sure the money is there to pay the pensioners what they are eligible for in the future. Is that accurate?

[Kathleen Wrye]

It's a little bit the inverse—

[The Chair, Liberal, Peter Fonseca]

I'm just going to interject, MP Baker. I've just been informed that we actually have to end with a hard stop at 5:45, so you have another 30 seconds. Then I'm going to the Bloc and the NDP for two minutes each. Thanks.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay.

[Kathleen Wrye]

I think I can quickly say that the impact of interest rates is predominantly on plan liabilities. The lower the interest rate, the higher the liabilities that they have to fund, so that's what can lead to deficits.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Is it fair to say that companies simply aren't putting enough money aside, though? Whether there are high interest rates or low interest rates, ultimately the company has to make sure that there's enough money for there not to be a deficit.

[Kathleen Wrye]

They do, and pension standards legislation sets minimum requirements for what those payments should be. Under our legislation, when there is a deficit, we provide five years to make those payments, so that if a large deficit emerges—if interest rates go down, for example—it does not lead to an insolvency.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we're going to go to the Bloc and MP Ste-Marie for two minutes, and then to the NDP for two minutes.

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

Thank you, Mr. Chair.

Of course we want to see Mr. Chambers' motion passed at the end of this meeting. In this round, I requested exactly the same thing as Mr. Morantz, that we be told how many pension funds are currently underfunded.

Perhaps Ms. Wrye or Mr. Schaan could answer my last question. If Bill C‑228 passes, possibly with minor amendments, do you believe that businesses will continue to fund their pension plans?