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.