Mr. Speaker, the hon. member raised some interesting ideas, but I cannot support the motion. I will give the main reason I cannot support the motion first, then give some background and come back in more detail on why I cannot support it.
The basic reason is that the member's motion is a good example of what might be called the law of unintended consequences. The intent is to benefit workers in pension plans over employers, but the effect would be otherwise because the critical point that the motion fails to recognize is that pension plans are voluntary.
If this motion were to succeed and become the law of the land, the primary impact would be that we would have far fewer companies willing to set up or continue with pension plans and workers would be forced to make their own contributions to RRSPs or defined contribution plans. That is more or less what the Alliance was arguing for when we had the debate some time ago dealing with Canada pension plan reform.
We would have a retreat from the stability and the security arising from defined benefit plans which currently exist today. We would go to the much less secure world of employee directed plans where the security of the employees would be reduced. The unintended consequence of this motion would be to reduce the security for employees in their older years rather than to increase their wealth which is the intent of the motion.
I will give a bit of the background provided by the department on how the current system works. One would not want all the department's work to be of no avail. The Pension Benefits Standards Act, PBSA, is the main federal act that regulates pension plans in federally chartered enterprises. This includes banking, interprovincial transportation and telecommunications. Other private pensions are regulated by the province.
The PBSA is administered on behalf of the government by the Office of the Superintendent of Financial Institutions, or OSFI, and covers some 1,100 pension plans. OSFI clearly makes every effort to protect the rights of pension plan members having due regard for the voluntary nature of pension plan sponsorship. If we ignore the fact that pension plans are voluntary we do so at our extreme peril, which is the critical deficiency of the motion.
Bill S-3 which was introduced in 1998 is another bill that is relevant to this debate. Major changes in the bill included enhancing planned governance measures by placing more emphasis on the importance of the responsibilities of plan administrators. It required administrators to provide more information to plan members and former members on the financial condition of the plan and a means to facilitate agreements between employers and plan beneficiaries on the distribution of surpluses.
The bill specified the manner in which employers who sponsor pension plans with surpluses could withdraw a portion of the surplus. That should be of particular interest in today's debate. In June the government announced specific regulations which relate to the mechanisms for an employer to establish claims to a surplus.
The measures in Bill S-3 and the subsequent regulations provided for an explicit process for the determination of surplus ownership of pension plans. These changes created an environment where employers and employees have the opportunity to work together in dealing with pension plan surpluses.
So much for the status quo and the system under which we work today. I will now return to the law of unintended consequences. The hon. member's motion would have precisely the contrary effect to what he intends. To illustrate and explain that point more clearly we should make the key distinction between defined benefit pension plans and defined contribution pension plans.
Under defined benefit pension plans the employer guarantees to the employee a certain fixed sum of money when that employee retires and therefore is required to build up the capital to fund that future contribution. The risk is borne by the employer and that is the setting in which surpluses arise. There may be excess surpluses and the debate is about who will control them.
Under defined contribution pension plans there are really no surpluses because each employee makes a defined contribution every month or every year. The stock market and the bond market would determine the amount of money that an employee would receive in retirement.
When everybody thought that the stock market never went anywhere but up, until recently that is, defined contribution plans were becoming more popular. A lot of companies are shifting away from defined benefit where the employee has the security of knowing what his or her future pension would be and the risk is borne by the company to define contribution and where the employee gets whatever the market delivers on his or her investment.
It is too early to tell but I suspect this enthusiasm for defined contribution waned a bit in the last several months. People have learned that the stock market does not go exclusively up but sometimes goes down. The risk for the individual whose life savings are in the stock market is now perceived to be greater than it used to be.
This comes back to the Alliance's love affair with defined contribution self-directed pension plans when we were dealing with Canada pension plan reform. Thankfully we did not do this and we preserved the security of the pensions of Canadians through the Canada pension plan rather than subjecting each individual to the whims of the market. It might have looked good back then but it looks a lot less favourable and more risky today.
If companies were sole contributors and were required to say that the surplus belonged to the workers entirely, even if it were the company that put in 100% of the contributions, we can bet our bottom dollar that companies would not want that. Companies would not agree to it if this motion were to pass. Pension plans are voluntary and they would get out of it.
The trend that we have been observing from defined benefit toward defined contribution would accelerate. The unintended consequence of the member's motion would accelerate the shift away from defined benefit pension plans and toward defined contribution. The net effect would reduce the security and the income of today's employees rather than increase their wealth. That is a more than adequate reason to oppose the motion.