Essentially, if there's an unfunded pension liability—for instance, in Ontario, it goes up to $18,000, but it's on a percentage basis, so it essentially makes up the difference. On the first thousand dollars, for instance, it guarantees all of the difference up to that, and then it has a trailing amount that goes on to a cap of $18,000.
It's worth noting a couple of things about pension benefit guarantee funds, just in general terms. One is that because defined benefit pension plans are relatively uncommon these days—they are less and less common—you have a decreasing pool of people able to insure them. If you are using additional contributions from plan sponsors to make up that pool, that pool is increasingly small, which is why when you have a very large insolvency, you have the potential to use up the entirety of the pool.
That actually happened in the Nortel situation, for both the U.S. Pension Benefit Guaranty Corporation and the U.K. Pension Protection Fund, such that essentially the fund was broke. It had insufficient funds to be able to pay out its requirements, and it needed recapitalization. The problem, of course, with recapitalization is that it then requires you to go back to those same plan sponsors that are having difficulty making their pension obligations, to provide additional funds to make up for that pool.
I would note that one of the considerations of a pension benefit guarantee fund in a federal context is that the vast majority of defined benefit pension plans are regulated by provincial pension regulators, so if there were a federal fund that essentially said it would make up for part of this gap, we could potentially have a federal government with obligations to make up for gaps while not controlling the actual requirements of plan solvency, for instance. In provinces where you have very low solvency requirements and where funds are essentially allowed to grow very large unfunded pension liabilities, we potentially would have this backstop mechanism but no “frontstop” mechanism to ensure pension health, so that is one of the challenges.
It should be very clear that pension benefit guarantee funds are not superpriorities. They are additional means by which to make up for pension gaps and unfunded pension liabilities where a plan sponsor has insufficient funds, but they are in some ways separate from the insolvency system and separate in the consideration of the rank or the priority order in which creditors are dealt with in an insolvency.