Industry Committee on Nov. 23rd, 2010

[Ian Markham]

The percentage has been going down. If you go back maybe ten years or so, everything was some 5% higher than the numbers I've just given you. It went from, say, 35% down to 28% in total. These are ratios. It's something divided by something else; any ratio is that.

The actual number of workers has throughout the whole of the last five to ten years remained roughly stable in these plans. But the number of workers who are working was increasing; therefore the ratio of people covered by these plans has been dropping.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I see. Okay.

What about the decisions by plan sponsors, though, to choose defined benefit or defined contribution plans or to transition from a defined benefit to a defined contribution plan? That's a trend that we're seeing increasing, isn't that correct?

[Ian Markham]

Yes, it is.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Please go ahead and explain why. Then I have a final question for Madame Bastien.

[Ian Markham]

It used to be that defined benefit plans and all pension plans were really seen as an element of human resource management, of attraction and retention. Because of the size of defined benefit plans and because of the solvency funding rules that came in during the late eighties and early nineties, the impact of the market and the growing size of these plans has meant that finance has effectively been making many of the decisions on the future of these plans.

Finance sees these plans significantly as a financial subsidiary that has to be managed along with all the other financial subsidiaries they're dealing with. This financial subsidiary invests in all sorts of assets, including equities. It's highly volatile, and when it's a very large sum of money that we're looking at, these swings are driving the fortunes of the organization up and down. At some point they can't stand it any more, and whether it's finance or the board, they're saying you have to do something.

Look at the U.K.; look at the U.S. They have frozen many of their defined benefit plans, not just putting new entrants into defined contribution plans but also saying to all the current workers: from now on, you're in defined contribution. That may be the trend, and our worry is that this bill could accelerate it.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

A final question for Madam Bastien.... For those remaining defined benefit plans, we have talked about risks to employers in terms of access to credit, increases in interest rates, impacts on markets. What about the relationship between the plan provider, the pension provider, and the plan sponsor?

If Bill C-501 is passed, will that create risk for the plan provider that they will want to cost and pass on to the plan sponsor?

[Leigh Ann Bastien]

It's hard to answer, because the terms “plan sponsor” and “plan provider” usually mean the same person.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay, let's say “insurer”. I'm including, as the provider, the insurer. So the insurer is perhaps recognizing an increased risk. Will they pass that cost along to the owner of the plan?

[Leigh Ann Bastien]

In a defined benefit context, there isn't really a plan insurer. Generally, you have the funds in trust, and it's the employer of the employees who is responsible for underwriting the liability. So you're really talking about the employer.

And yes, the employer will have more stress on its business and that will have its effect on the employees, as would any other financial stress on a business.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

[The Chair, Conservative, David Sweet]

Mr. Braid, you're correct, you came careening in at 15 seconds less. Thank you very much.

I have been advised in advance of a point of order. I will dismiss the witnesses.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

This will be really quick, actually.

At the copyright committee we had earlier today, the legislative committee on copyright, one of the few things it seemed there might be some agreement on was Mr. McTeague's suggestion that we might suspend our industry committee meetings to allow us to focus on copyright and potentially have more meetings on copyright. He expressed that somehow he had heard there was some reluctance on our side to do that. I guess what I want to do, because it would need to be discussed at the beginning of the next meeting, is explore whether there's willingness on the part of all parties to accommodate that sentiment.

[The Chair, Conservative, David Sweet]

Is this after Bill C-501?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

This would be after Bill C-501, yes, for sure, so not including Thursday's meeting. It would be starting next week.

[The Chair, Conservative, David Sweet]

We will put that briefly at the beginning of the agenda, before the clause-by-clause--unless, of course, there is spontaneous unanimous consent.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

There's no spontaneity again.

[The Chair, Conservative, David Sweet]

Okay, then we will consider that we will deal with that for the first couple of minutes before clause-by-clause on Thursday.

We are adjourned.