Mr. Speaker, I will take a little time to go over the bill since we have not had the opportunity to discuss it fully as a result of the process that has been taken.
Bill S-3 was passed by the Senate on November 20, 1997. The legislation governs private pension plans set up for employees working in businesses under federal jurisdiction, including banking and interprovincial transportation and telecommunications. The pensions of parliamentarians and those of federal public servants are not covered by this legislation.
What is Bill S-3 intended to do? It would introduce to the Pension Benefits Standards Act the same philosophy that governs the changes to the legislation governing federally chartered financial institutions in Canada.
The overall intention of the bill is to set clear ground rules for housekeeping, to codify the rules on how to handle the controversial issue of the treatment of surplus assets in a pension plan, to restore better balance between the employer and those who benefit from the plan, to enhance the ability of the minister to enter into agreements with provinces to apply and enforce the provinces' pension legislation. There is a mandate for the administrator of the fund to invest the assets of the fund in a manner that a reasonable and prudent person would apply in respect of a portfolio.
Why are we opposed to this? All of these are good intentions and the roads to hell are paved with good intentions.
There are three major reasons we oppose Bill S-3. It entrenches regulations which unnecessarily bypass parliament. S-3 promotes an obsession with surplus withdrawal rather than a focus on ways to improve the existing pension system. S-3 emanates from the Senate and is part of a sloppy process that abandons the role of parliament.
First, the regulations which unnecessarily bypass parliament. Section 10.1(2)(b) of Bill S-3 allows for the imposition of rigid arbitrary rules without consultation, truly a Henry VIII clause. There is no evidence that such arbitrary carte blanche is needed. The provision confers tremendous powers to unaccountable bureaucrats.
Section 10.1(2)(b) stipulates that there shall be no improvements in pension plans if the solvency ratio of the plan falls below a specified level. The solvency ratio is defined by regulations. We have a major problem with this concept.
According to the testimony of an Office of the Superintendent of Financial Institutions official before the Senate banking committee, the prescribed level would initially be set at 105%. This would have had a very serious impact on the take home pay of plan members and on the ability of trustees to improve benefits.
It is our understanding that following a discussion with the Canadian Labour Congress and the Office of the Superintendent of Financial Institutions, the OSFI now intends to use a less stringent ratio. Section 10.1(2)(b) allows OSFI to do this through order in council without having to go back to parliament. There is no guarantee that an unaccountable bureaucrat at some point will not impose a harmful solvency ratio at some time in the future.
What happens if a stringent solvency ratio is imposed? A too stringent solvency test such as the 105% ratio threatens to stop the development of any new benefit programs in a pension plan and even discourages improvements to existing defined benefit plans. It will be virtually impossible for some private plans to become more attractive because this may cause short term fluctuations in their solvency ratio. If similar rules were to apply to the purchase of homes, very few consumers could purchase a home unless they could use existing liquid assets to fully purchase the home or fully pay for any home improvements.
If these rules had been in place 30 years ago, it is hardly exaggerating to say that we would have had no defined plan in Canada. Every time an employer based plan improved benefits, it had to incur a temporary solvency deficiency, which was paid up later.
At a time when the federal government is encouraging privately funded fully defined benefit plans, a 105% solvency ratio will also discourage employers to set up new plans. The Canadian Institute of Actuaries concurs. We are also concerned that the solvency test becomes in principle a model for pension legislation, which the provinces will adopt.
Why a shotgun approach when the OSFI has ample powers to place restrictions on poorly funded plans or on plans deemed at risk?
OSFI may be looking for the easy way out; a lot of arbitrary authority but not enough staff for a fine tuned regulation. Hence, it is much easier for the OSFI to end its examination function and strap all defined private pension plans into a solvency ratio straitjacket, even if it freezes initiative and may end up killing certain plans. At the very least, it shows a lack of understanding of the historical modus operandi of private pension plans.
We are uncertain as to which problem this government is trying to resolve.
There is no solvency crisis in the private pension system. Since the Pension Benefits Standards Act came into force in 1987, 392 plans terminated. The assets were wound up and distributed. Of these only nine terminated in less than fully funded status. In most of the nine the loss of benefits to the members was minimal and the plans had very small membership. In one plan only the members received less than 95% of the pension benefits credit. In that case the members received approximately 80%. The source for that figure is the Public Benefits Standards Act annual report.
It is inappropriate to undermine the ability of all plans to enhance pension benefits and become more attractive because of the exaggerated importance given by the OSFI to short term market fluctuations. It is the view that prescribing any solvency ratio test for plan investment is probably not the right approach to making sure plans do not terminate in an underfunded situation.
Bill S-3 already gives OSFI wide reaching powers to force poorly funded plans to take whatever action is necessary to bring assets and liabilities in line. There is no need for a Henry VIII clause that removes parliament from the equation.
The current five year funding solvency constraint in the PBSA is already sufficient to limit a situation in which contributions and plan assets could fall short of termination liabilities. The five year funding framework also provides ample guarantee that termination liabilities are funded over a short period. OSFI is taking a major policy position without any broad discussion. Even the U.S. has much more relaxed rules.
The government should instead make the plan sponsor liable for all the unfunded liabilities should the plan be terminated. In the province of Ontario, for instance, an employer that terminates a plan has to make up for the unfunded liability and not just be on schedule with amortization payments as is currently the case at the federal level.
This creates a self-regulatory incentive for the employer to follow the prudent per cent approach in making improvements to the plan. The system works well. Why not pursue this avenue at the federal level?
The Canadian Labour Congress has said that it may be more important for OSFI to take action against individuals who have acted imprudently than to try to create a general rule governing plan improvements.
An obsession with the surplus withdrawals rather than a focus on ways to improve the existing pension system is our second concern. Bill S-3 proposes a mechanism for employees and employers to take the surplus out of a private pension plan rather than offer incentives to improve pension plans.
The Liberal assault on the Canada pension plan, old age security and its gutting of universality on the backs of the working poor are followed by this assault on the middle class, the main beneficiary of the private pension system. This lack of legislated incentive to make things better is a hallmark of a mediocre management vision of the public interest. It condemns an increasing number of workers and retirees to poverty.
Bill S-3 should impose an outright ban on the removal of surpluses from ongoing plans and require the consent of plan members to remove surpluses in plans being wound up. It is especially annoying to see the feeble position of the government on the surplus issue when it is proposing nothing in regard to inflation protection.
There is today an urgent need for public policy to strengthen our public and private retirement systems. While CN and VIA Rail retirees have seen their pensions lose value because of poor inflation protection, the CN and VIA Rail pension plans are approaching a surplus or are in a surplus position. Rather than focusing on surplus refund, would it not be better instead to focus on ways to enhance the CN and VIA Rail pension plans?
The government has failed to move away from its obsession with short term bureaucratic efficiency. It should endeavour to work with employers and provinces to improve pension plans rather than focus on ways to take the money out.
Bill S-3 emanates from the Senate and is part of a sloppy process which undermines the role of parliament.
It is worth taking some time to talk seriously about the one sided and dysfunctional legislative process that bills like Bill S-3 are symptomatic of. We saw it earlier this morning and we are seeing it again.
Canadians want to believe in the House of Commons. They want to believe that what goes on here is a process steeped in trust, openness and mutual respect. They want a process that allows all voices to be heard, a process that is respectful of not only the will of the majority but the rights of the minority, and a process that is conducted in good faith, recognizing that there are people whose voices are too often excluded from the most critical legislative stages.
I could not help but listen to the minister speak on this matter and indicate that he had heard from the Senate and from industry. Nowhere did he mention that the House of Commons had a chance to be heard from. Nowhere did he mention that Canadians as individuals had a chance to be heard from.
The problem is that the government has made us all so captive to the process that there is no quarter for those indispensable principles of democracy. We give up on democracy to deal with mountains of legislation. While the government is sure to say it is a legitimate function of the Senate to deal with such a bill, I would hasten to say that there is no legitimacy in having an unelected body drafting bills that would affect the pensions of thousands of workers.
The government has no legislative vision. It is so obsessed with pushing forward bill after bill that it loses sight of the delicate interrelations that exist between one program and the next. We saw this with the changes to CPP.
The New Democratic Party kept calling on the government to table the changes to old age security as well. We can hardly change one without knowing what is going to happen to the other. Yet the government failed to act. Five months later while seniors fret about their security the government is still tinkering with the old age security.
There is a lack of consultation. Instead of inviting Canadians to share their voices with us the government marginalizes people by consulting with polling firms rather than with Canadians. Bill S-3 may have gone to the Senate banking committee but I would be overly charitable if I were to call that consultation.
Only two groups appeared before the committee. More shocking than that, the government wants us to accept fundamental changes to these pensions in the absence of broad based consultation. Even though this bill affects only 10% of total pensions in Canada it introduces to the private sector a paradigm that may threaten other plans including those run by the provinces. Would a government that believed in consultation not have sought out the voices of the people?
Members on the opposite side of the House are very comfortable with their slim majority. Canadians see them forcing through legislation. They see them stopping legitimate debate in the House and making major policy statements for the cameras rather than for their colleagues. This sort of arrogance and disrespect for parliament is a symptom for bad legislation such as Bill S-3.
In conclusion, I was honoured to stand today on behalf of the member for Qu'Appelle who is our critic and who is in Sault Ste. Marie listening to what Canadians have to say about bank mergers. The government has refused to allow parliament to do its job and called for an all party parliamentary committee to review the merger. On behalf of that member I present his words.