Mr. Speaker, the Standing Committee on Finance is travelling the country as part of the prebudget consultations. Therefore, I am pleased to rise on behalf of my colleague and seatmate, the Parliamentary Secretary to the Minister of Finance, to speak today to Bill C-226 which proposes to amend the Pension Benefits Standards Act, 1985 with respect to reporting to plan members.
The interest of the bill's sponsor, the hon. member for Drummond, in this issue is appreciate and duly noted. I thank my hon. colleague for bringing this matter to the floor of the House for debate.
Basically, the amendment in Bill C-226 would require the administrator of federally registered pension plans to prepare an annual report on the social, ethical and environmental factors that were taken into consideration during the previous fiscal year in the selection, retention and liquidation of investments.
Before directly addressing the amendment, I would like to provide some background that will help to put this matter in context. I will begin with a general overview of the pension plan system in Canada.
As hon. members know, the purpose of pension plans is to provide retirement benefits for plan beneficiaries. Our system includes both public pension plans and private pensions. The public pension plans include the Canada pension plan, the Quebec pension plan and old age security.
Private pension plans consist of occupational pension plans, otherwise called registered pension plans. They cover both defined benefit and defined contribution plans which are provided as part of an employment contract. The PBSA sets minimum standards for registered pension plans.
The federal and provincial governments also provide tax assistance to savings in registered pension plans and retirement savings plans or RRSPs to encourage and assist income replacement in retirement. It should be noted that private pension plans are voluntary but must be registered, either federally or provincially.
The bill before us today proposes to amend the Pension Benefits Standards Act, 1985. The PBSA, as the act is usually referred to, is the main federal statute that regulates private pension plans in federally chartered areas such as banking, interprovincial transportation and telecommunications. Over 1,100 pension plans fall under the purview of this Act. The Office of the Superintendent of Financial Institutions, otherwise known as OSFI, administers the PBSA.
I should mention, too, that other federal statutes like the Income Tax Act impact on private pension plans. In addition, it should be noted that most private pension plans are governed by pension standards legislation in the provinces, except for Prince Edward Island, which is the only province without its own pension legislation.
The PBSA has several goals. It sets minimum standards for funding, investments, membership eligibility, vesting, locking-in, portability of benefits, death benefits and members' rights to information.
In its role as administrator of the Pension Benefits Standards Act, OSFI makes every effort to protect the rights of pension plan members, having due regard for the voluntary nature of pension plan sponsorship. OSFI is committed to ensuring that losses to plan members are minimized.
Bill C-226 focuses on the duties of pension plan administrators under the PBSA. As we know, a pension plan administrator is the entity responsible for running a pension plan. Allow me briefly to review their role.
In many cases, the administrator is the employer who established the pension plan. However the administrator may also be a board of trustees if the plan is a multi-employer pension plan or a pension committee defined in the terms of the pension plan.
The administrator is charged with several responsibilities, including ensuring that the pension plan and its funding are administered in accordance with the law and the provisions of the plan. Among other things, an administrator is responsible for: registering the pension plan and plan amendments; providing information to members; responding to member questions about the plan; prudently managing the pension fund; and filing required documents with OSFI. These are serious responsibilities.
May I remind the House that, back in 1998, this House passed Bill S-3, which included various measures designed to enhance the supervision of federally regulated private pension plans.
One of the changes back then included a means to facilitate agreements between employers and plan beneficiaries on the distribution of pension plan surpluses.
Of direct interest to this debate were two other measures in that bill, both of which affected pension plan administrators. Those changes included: enhancing plan governance by placing more emphasis on the importance of the responsibilities of plan administrators; and requiring the administrator to provide more information to plan members and former members on the financial condition of the plan.
Honourable members should also know that pension plan administrators have a duty-of-care requirement. This means that they must take all relevant matters and issues into consideration when making decisions affecting plan assets.
It is the plan administrator's duty to act in the best interest of the employer and the plan's beneficiaries. They have a fiduciary duty to maximize the rate of return, while at the same time ensuring the solvency and security of the fund and its ability to pay out promised benefits.
Turning to Bill C-226, let me say at the outset that I agree that transparency of pension plan investment policy is a key priority.
In my remarks today, I have outlined several measures in our current system, which ensure that this goal is met. Let me expand further.
As I indicated, the Pension Benefits Standards Act already requires that a pension plan administrator act in the best interests of the employer and the plan's beneficiaries.
In addition, the administrator is required to provide a written statement of investment policies and procedures—often called an SIP&P—with respect to the plan's portfolio of investments and loans to a member or other beneficiary, if requested. The SIP&P must communicate the investment philosophy of the plan administrator and, among other things, provide details on all categories of investments and loans.
Further, pension plan administrators must reference all factors that may affect the funding, solvency and ability of the plan to meet its financial obligations. These rules are already on the books.
Another built-in check in the system is the fact that pension plan members have the right to establish a pension council and the council may ask the plan administrator to disclose any ethical, social and environmental concerns taken into consideration in making investment decisions.
In other words, the current statute already largely meets the purpose of Bill C-226. The government believes that the Pension Benefit Standards Act and its Regulations establish the right climate to ensure that pension administrators are responsive to the concerns and objectives of plan members and employers. Under the current system, pension plan members through their pension councils have the flexibility to decide on the appropriate reporting for the plan—and this reporting could include ethical, social and environmental factors.
At this point, the government does not believe that reporting on these factors should be a requirement as proposed by this bill. Ensuring sound secure pension systems is a priority for the government. Recent reforms to the Canada Pension Plan together with recent PBSA amendments and regulations demonstrate this commitment.
I can assure the House that the government will continue to make changes to the Pension Benefits Standards Act when, and if, required. However, given the built-in checks and balances and the existing duties and responsibilities of pension plan administrators under the PBSA, the amendment we are debating today is not necessary.
Therefore, I am unable to support Bill C-226 and would encourage my honourable colleagues to follow suit.