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.