Evidence of meeting #65 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chair.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Clerk of the Committee  Mr. Philippe Méla
Neil Mackinnon  Senior Advisor, Financial Sector Policy Branch, Department of Finance

4:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

MP Baker.

4:15 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

Chair, based on what we've heard from our officials today, they've reiterated basically what we heard the last time, which are two key points, for me, at least.

The first one is that this requirement is redundant, given that OSFI already publishes the report on their website. The report's already public and published.

The second one is that it doesn't appear that it would have a tangible impact in helping workers or any other folks who need to have this information, given that the provincial officials who would receive this report, as proposed, don't have jurisdiction over federally regulated pensions.

Why create a redundant process that doesn't meaningfully impact the people we're trying to help, which are the workers?

I'd be curious to hear the thoughts of other members on this, but that's my perspective on it.

4:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, MP Baker.

I have MP Chambers and then MP Blaikie.

4:15 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Mr. Chair, I totally get the government's position on this. From my perspective, and I speak only for myself, if much of the work has already been done, then it should be relatively easy to table that information in Parliament.

The second point would be that often government departments do a lot of good work and sometimes reports that are supposed to be done annually end up not being done annually. We go multiple years having reports, which have usually been done, not done. If it is required to be presented to Parliament, I think that ensures we will continue to get this information.

4:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, MP Chambers.

MP Blaikie.

4:15 p.m.

NDP

Daniel Blaikie NDP Elmwood—Transcona, MB

Mr. Chair, I have two quick thoughts.

First, I think the most compelling argument against this reporting requirement before the digital age would have been the cost of postage, but that's no longer on the table, so I think the strongest argument against this clause falls apart.

Second, I would say that part of the point of this clause, among other things, is to raise awareness about insolvent funds. The work is already being done. We're not compelling anyone to do any more work than is already being done.

What we're doing is compelling the information to be disclosed in more public fora so more people will see it. There will be more awareness about insolvent funds, which may therefore create more pressure for those things to be resolved before a company finds itself in a case of bankruptcy or insolvency. That would be better for the very creditors that Mr. Fillmore has come here to advocate for so eloquently today.

I actually think that of all the aspects of the bill, this is the one the Liberals would be most likely to support.

4:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, MP Blaikie.

(Clause 8 agreed to on division)

(On clause 9)

4:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Members, we are now moving to clause 9. I have a note here just before we get into G-6. If G-6 is adopted, NPD-2 and CPC-1 cannot be moved due to a line conflict.

Maybe our legislative clerk, Mr. Méla, can help us out by explaining.

4:15 p.m.

The Clerk

Sure, Mr. Chair.

G-6 replaces lines 15 to 28 on page 5. NDP-2 and CPC-1, which are identical, replace line 20 on page 5 and line 26 on page 5 as well.

One line can only be amended once, so if G-6 is adopted, that line would be already amended, and it cannot be amended a second time. That's why, if G-6 is adopted, NDP-2 and CPC-1 cannot be moved.

4:20 p.m.

Liberal

The Chair Liberal Peter Fonseca

Just so members are aware, we are at G-6.

I have PS Fillmore.

October 31st, 2022 / 4:20 p.m.

Liberal

Andy Fillmore Liberal Halifax, NS

Chair, this is about the coming into force timeline. The current count is five years, but the bill proposes to reduce that down to three. Of course, as we heard from much of the testimony, the shorter transition period can have these unintended consequences as well. I might have called the pension priority the pension priority problem, but this is the short runway problem that we have here. The short runway increases the risk of loss to pensioners and active employee members of a defined benefit pension plan. The shorter period will exacerbate the negative economic consequences of Bill C-228 and in fact may have other unintended consequences that increase the risk of loss to pensioners and active employee members of defined-benefit pension plans.

Employers already in financial difficulty may be unable to reduce large pension deficits during the transition period. Pension legislation typically provides for at least five years of payments to reduce deficits, but lenders who face the risk of non-payment from borrowers with pension deficits when the superpriority comes into force may use the transition period to require employers to pay back debts instead of reducing deficits, increasing the risk of insolvency for some employers.

Employers may decide to discontinue defined benefit pension plans or group insurance plans during the transition period to avoid the impact of higher insolvency priorities on credit availability. Lenders with exposure to employers with pension deficits may pressure employers to take such action before insolvency.

Under the current pension funding regime, employers with pension deficits are required to make special payments to reduce them over time, typically three to five years, although pension regulators have discretion in some cases to change these timelines. However, employers with special payment obligations, particularly those with large pension deficits, that are also facing financial headwinds often have difficulty making the special payments, particularly if there have been severe market fluctuations or investment losses beyond the employer's control that have significantly increased the pension deficit.

We heard from witnesses at this committee representing retiree groups and unions that they prefer that the Bill C-228 superpriority take effect immediately upon royal assent. However, they also testified that they would accept a shorter transition period, asserting that a pension deficit superpriority would incentivize employers to reduce their pension deficits.

This is not a filibuster; it's almost over, I assure you.

4:20 p.m.

Some hon. members

Oh, oh!

4:20 p.m.

Liberal

Andy Fillmore Liberal Halifax, NS

They also stated that lenders would react to a superpriority that could take priority over existing loans by requiring employers to pay down their pension deficits. However, a transition period may not incentivize lenders and creditors to require employers to reduce pension deficits. It's also that lenders and creditors may use a transition period to reduce their exposure to potential loss by calling in loans and requiring the employer to pay down their debts ahead of the superpriority effective date. It's more likely that lenders would take such action with employers with large unfunded pension liabilities that are also at higher risk of insolvency as a result of business conditions or other financial distress, like high debt loads.

In such cases, debt repayment triggered by concerns over a pension superpriority would divert funds from potential investment by such employers, reducing their competitiveness and counterproductively increasing risks of insolvency for employers with pension deficits.

During FINA's study of the bill, pension experts and plan sponsors stated that a longer transition period, ideally seven to 10 years, could reduce the risk of these unintended consequences. It was also predicted that 40% of private pension plan sponsors could terminate their pension plans during the transition period if Bill C-228 were to pass. Private pension plans in Canada currently have 1.2 million active employee members still accruing pension entitlements.

We're reasonable on this side of the committee room. We've listened carefully to the testimony of witnesses who have different opinions and we've listened carefully to what our colleagues have said. Today, as you can refer to it in G-6 and G-7, we are looking to meet our esteemed colleagues halfway on the three to five, and propose a four-year transition period in the belief that this extra year will allow companies to reduce their deficits, renegotiate their loans with banks and reduce the risks of bankruptcies.

There we have it. The offer is four.

4:25 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, PS Fillmore.

MP Chambers.

4:25 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Mr. Chair, I appreciate the government's offer, at least on this point.

I'll now yield the floor to my good friend, Mr. Lawrence.

4:25 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

I'm wondering if we could have a five-minute break to have a brief offline discussion, Mr. Chair, if that's possible.

4:25 p.m.

Liberal

The Chair Liberal Peter Fonseca

We'll suspend briefly.

4:25 p.m.

Liberal

The Chair Liberal Peter Fonseca

We are on G‑6.

We had MP Lawrence and PS Fillmore. Who has the floor right now?

Go ahead, PS Fillmore.

4:25 p.m.

Liberal

Andy Fillmore Liberal Halifax, NS

Mr. Chair, I think perhaps we can simplify this one, if opposition members are amenable.

I would withdraw our proposed amendments G‑4 and G‑5 and replace them with an offer to simply amend MP Blaikie's amendment, striking the number three and replacing it with the number four.

4:30 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, PS Fillmore.

MP Blaikie, do you have something to say on this?

4:30 p.m.

NDP

Daniel Blaikie NDP Elmwood—Transcona, MB

I'm okay with that. I believe that Mr. Fillmore may have meant to say G‑6 and G‑7, but otherwise I have no objections.

4:30 p.m.

Liberal

Andy Fillmore Liberal Halifax, NS

I'm on the wrong page. Thank you very much.

4:30 p.m.

Liberal

The Chair Liberal Peter Fonseca

We are on G‑6.

PS Fillmore, you would need unanimous consent to remove it. Do we have unanimous consent to remove it?

(Amendment withdrawn [See Minutes of Proceedings])

Go ahead, MP Lawrence.

4:30 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Just so we're clear, NDP‑2 and CPC‑1 are the same. I'm just wondering, because the NDP have been so gracious to us, if we could use CPC‑1 and then just amend that and do the subamendment. Make that four years and remove G‑6 and G‑7.

Should I put that on the floor all at the same time? That's the plan.

4:30 p.m.

Liberal

The Chair Liberal Peter Fonseca

MP Lawrence would be asking MP Blaikie not to move NDP‑2. That's what you would be requesting. We have unanimous consent to remove G‑6, and NDP‑2 would not be moved, so we are now moving to CPC‑1. Is that correct?