Evidence of meeting #62 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plans.
A video is available from Parliament.
6:20 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Ste-Marie.
We go now to MP Angus for the NDP for two and a half minutes.
6:20 p.m.
NDP
Charlie Angus NDP Timmins—James Bay, ON
Thank you very much.
Mr. Lapierre, my grandfather, Charlie Angus, was a steelworker. He died at the mine—he was almost 70 years old—because in those days, you worked until you died. I was underground recently at a gold mine in Timmins, and I met a 70-year-old man working the drills. You work the drills when you're young. He was working the drills because he said his pension had completely failed him.
We're told here by some of our witnesses and the business community that we need to wait longer and we need to think more about this because this might affect capital. What effect from this do you see on steelworkers, particularly those who are working in underfunded pensions?
6:20 p.m.
Area Coordinator, United Steelworkers
This will certainly reassure them. In my opinion, it will above all demonstrate the importance of the work of parliamentarians, who are elected in particular to defend the common good and the middle class and to strike a fair balance.
We want companies and workers to make money. We want workers to live well. That being said, when they are promised a pension through a defined benefit plan, we should try to honour that promise. At the very least, there should be a process in place to minimize the negative impact on workers.
I repeat that the future legislation obviously does not guarantee that workers will get back all the money promised. However, it does increase their chances.
I give you the example of Cliffs Natural Resources, a mining company that had a plant in Sept-Îles and declared bankruptcy. The City of Sept-Îles recovered $10 million in unpaid taxes. At the same time, the pension fund was $10 million short of 100% funding.
Citizens are all taxpayers, but a municipality can mutualize its losses. In this case, the city could very well have borrowed money and paid it back over a period of 20, 30 or 40 years. Thus, the consequences for citizens would have been minimal.
A city does not die, but a pensioner does. At 70, 80 or 90, the surviving spouse is alone at bat, alone in the face of adversity. We can't leave her alone. We can't leave people in distress and anxiety. We can't leave them in a state of incomprehension.
By passing this bill, parliamentarians from the opposition and ruling parties would send a message that they are capable of making a difference.
6:25 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Angus.
We go now to the Conservatives for five minutes.
MP Morantz, go ahead.
6:25 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you, Mr. Chair.
I've been listening intently. It's been a very interesting conversation.
I want to seek some clarification on a few things that have been said. I think I'll start with Mr. Powell.
One of the concerns I share with Mr. Gray and the business community is the idea that when you put a pension plan in priority to secured creditors, secured creditors are going to look at whatever the deal is that they have before them and they're going to assess the risk. They're going to want to know exactly what they're subordinate to. Just like property taxes or any other items that may be payable under the current legislation in priority to a lender, they will look at that and make that assessment.
One of the questions that have come up is what evidence the business community has to say that lenders are going to back off, that lenders are going to decide not to lend in a particular sector or, if they do lend in a particular sector, that they're going to have to charge more because of the perceived inherent risk.
I want to go back to your opening statement, because you said something that I wasn't quite following. You talked about something that happened in 2005, and I'm not aware of it. You said that if this was going to be an aftermarket effect on risk for lenders, where is the evidence? I'm wondering if you could explain that argument to me again, because I want to make sure that I understand it. Was that legislation you were talking about something that put pensions in some sort of position pari passu or in priority to secured creditors?
6:25 p.m.
President, Canadian Federation of Pensioners
I'm sorry. I had a lot to go through, so I was speaking quickly.
In 2005, the Wage Earner Protection Program Act was passed, and the wage earner protection program gave superpriority to unpaid wages, unpaid expenses and some other things. The issue is that.... If you make something a superpriority, what happens? The quote I had was from the Insolvency Institute of Canada, but you can find quotes from other similar organizations. Their quote was, “there could be a significant negative impact on Canadian productivity and employment since businesses...will have a tougher time getting financing, and their costs could rise dramatically.”
We've heard that today about Bill C-228, but nobody has provided any data that anything bad happened after WEPP. If it was that draconian, if the financial armageddon was going to occur, we should have data. These are things that people monitor.
6:25 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Was that federal legislation?
6:25 p.m.
President, Canadian Federation of Pensioners
Yes. It was Bill C‑55. It was debated in 2005 and passed. I don't have the date in front of me, but it was passed in 2005.
6:25 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
What did the Wage Earner Protection Program Act do that would be different from what this legislation is contemplating?
6:25 p.m.
President, Canadian Federation of Pensioners
It covered different things. Because it's about wage earners, and every company going through insolvency has employees, it has impacted every insolvency since its implementation.
When we look at this, we're talking about the 9%. You're only looking at those companies that become insolvent, have a defined benefit plan and haven't fully funded that plan. MP Blaikie was making that point on Monday, that the number keeps getting smaller.
6:30 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
I have limited time here, so I'll go on to Ms. Boctor for a moment.
Ms. Boctor, when it comes to putting pension plans in superpriority, wouldn't it be fair to say that one of the reasons there is no evidence that lenders might factor in the extra credit risk or refuse to lend is that currently pension plans don't have superpriority, so there's no ability to test that theory?
6:30 p.m.
Partner, Chair, Pensions and Benefits, Osler LLP, Association of Canadian Pension Management
I think there is the ability to test that theory based on the prior restructurings that have occurred. For example, we can see in a case in Sault Ste. Marie, Ontario, which I assume Mr. Lapierre knows quite well, that the legislation that was passed in order for the lenders to lend into the company once it restructured included an exemption from the deemed trust provisions in the Ontario act. Lenders refused to lend unless the Pension Benefits Act in Ontario was amended to eliminate the deemed trust. The unionized members of that steel company agreed to that change. It was the only condition under which that company was going to get financing—
6:30 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
I'm sorry. I have only 15 seconds left, and I want to ask you one more quick question.
Your survey said that 40% of your members said that they would close down their defined benefit pension plans. Of the 9% that still exist, how many Canadians would be adversely affected, if your survey is accurate?
6:30 p.m.
Partner, Chair, Pensions and Benefits, Osler LLP, Association of Canadian Pension Management
The 9% represents 1.2 million working Canadians accruing a defined benefit pension. Assuming that's equally distributed, that's 40% of them.
6:30 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Morantz.
We will now move to the Liberals for questions.
MP Chatel, you have five minutes.
6:30 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you, Mr. Chair.
We almost all agree that pension funds and pensions need to be protected. We feel very strongly about that. The government is there to ensure that the rights of workers and pensioners are respected.
In my view, we have a problem, not with all pensions, but rather with defined benefit pension plans. I note that there is already a decline in these kinds of schemes, except for the civil service, and I think that this decline is inevitable because of the risks that these schemes pose. However, that is another topic.
Mr. Lapierre, as you said, a pension is a negotiated and deferred salary. It is therefore important for the government to take the necessary measures to support the pension funds.
However, it is equally important not to accidentally create a situation that could be worse for workers and pensioners. I don't think anyone around the table wants that. I am concerned about one element of this bill. It could prevent the restructuring of certain companies. A company that is heading for bankruptcy can choose to restructure and thereby save current jobs and the pension fund. However, I have heard from witnesses this week that the bill could be problematic in that regard.
Mr. Lapierre, I think you have provided a solution and I want to make sure I understand it. I'm very concerned about the obstacles that might prevent a restructuring from going ahead. You are proposing to keep bank loans in the order of priority, just ahead of the pension funds. In this way, not only would the pensioners move up in the order of priority, but it would also ensure the continued survival of the companies, while also giving priority to the banks. Have I got that right?
6:30 p.m.
Area Coordinator, United Steelworkers
You have understood very well, Ms. Chatel.
6:30 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you, that is reassuring.
Ms. Vipond, my next question is for you.
That the banks should have priority over pensions and allow the restructuring and save jobs and save pensions, would you agree with that priority?
6:30 p.m.
Executive Vice-President, Canadian Labour Congress
Obviously, saving jobs is a really important factor, and that needs to happen, but we don't think the superpriority or the discussion we're having is going to have as big of an impact as is being put on the table.
Chris can add more detail.
6:35 p.m.
Director, Social and Economic Policy, Canadian Labour Congress
It's important to remember that in CCAA proceedings, the creditors and the sponsors could use the fear of losing everything in liquidation to extract devastating cuts for plan members. Pensioners and other plan members, to the extent that they even know this is happening, are in a very difficult position. They have no bargaining power. We saw this in Laurentian University, which is a great example. The fear of being at the end of the queue in a bankruptcy and liquidation situation gives them no ability to resist truly draconian cuts to their pension benefits.
What we're asking here is to give plan members a bit of bargaining power in the restructuring process so that, yes, companies can restructure as a growing concern, but not solely or primarily on the backs of plan members.
6:35 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
To be clear, you do agree with Mr. Lapierre that this would be a way to save the ability of businesses to restructure.
October 19th, 2022 / 6:35 p.m.
Director, Social and Economic Policy, Canadian Labour Congress
I just said the opposite. If the plan members are still behind the secured creditors in the bankruptcy act priority of claims, then they won't have the bargaining clout or position in restructuring to have better outcomes.
It's easy to talk about a good restructuring process, but there are enormous costs in that process as well. To give plan members and workers and pensioners a bit more of a position in the restructuring process, they should go ahead of secured creditors.
6:35 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Ms. Boctor, I would like to hear about your position. Is there a way to give banks priority over pensions to allow companies to restructure and save jobs? Would that be a solution?
6:35 p.m.
Partner, Chair, Pensions and Benefits, Osler LLP, Association of Canadian Pension Management
To give banks a priority over pensions...? I'm not sure I understand the question.