moved that Bill C-405, An Act to amend the Pension Benefits Standards Act, 1985 and the Companies’ Creditors Arrangement Act (pension plans), be read the second time and referred to a committee.
Madam Speaker, I would like to thank my colleagues on the government side. The fact that we can see the clock as 5:30, when it is 5:15, shows we can work together on policy and items from time to time.
Perhaps securing the retirement and pension security of Canadians is another time that we should work together on all sides of this House to bring certainty to hundreds of thousands of Canadians in their retirement. I am proposing, with Bill C-405, a modest proposal, harkening back to Mr. Swift, where we can actually make progress while also respecting other initiatives. Some of my friends in the NDP and other parties have ideas with respect to securing and safeguarding the pensions of Canadians' defined benefit pension plans in circumstances of insolvency. However, we should not just wait for a magic bullet; let us make progress today on an important public policy issue, and that brings us to this bill.
All politicians, whether we have been here generations, like it seems the deputy House leader of the Liberal Party has been, or are new to this Parliament, know the headlines: Nortel Networks, insolvency and liquidations, the leading stock-market company for a time is no longer with us. People are still annuitizing that pension plan and the stranded pensioners. There are Collins & Aikman and Livent. Sears has been in the headlines, where pensioners across the country are going to be facing less in retirement. They thought they had worked hard for that secured defined benefit pension, and they are finding that, in the circumstances of insolvency, they are not.
We have also seen some circumstances where there has been success in the restructuring of companies in bankruptcy or in insolvency proceedings, and they restructure outside the other end with a variety of degrees of success. We have seen it in multiple instances in Ontario with many companies. They include Stelco, of course; and Algoma, which is emerging from CCAA protection in the coming weeks. That has appeared to preserve 2,700 jobs. We saw that with Abitibi, which is now Resolute Forest Products and doing very well.
I worked on that first-hand, as a brand new articling student and lawyer in the CCAA restructuring of Air Canada. Thousands of jobs and an important service for our country were preserved because the insolvency procedure worked and the pension plan that was at risk is healthy now. People retained their jobs.
Therefore, the goal for anyone, in politics and in advocacy outside of here, should always be to maintain these businesses as a going concern. That helps the employees now; that helps the retirees now and in the future; and it is by working together to make sure it is restructured. We do not see thousands of people laid off and pensioners left stranded.
This is an area where one of the elements of Bill C-405 will make us work more collaboratively with the provinces and territories, and highlight this issue with Canadians and regulators like security commissions because there is a lot they can do. We have seen that in the Sears case, where special dividends squandered goodwill and capital that could have been used to make up shortfalls in the pension. This should be an all-hands-on-deck approach, not an approach where I am not going to support any bill unless it is my bill. Bill C-405 would make progress for Canadian pensioners, and that is why we should support it.
Many Canadians may not be familiar with many of the cases I cited. I worked on some insolvencies, as a lawyer. This is also a good time to publicly educate on what restructuring is meant to do. Large companies, greater than $5 million in revenues, will generally proceed with the Companies' Creditors Arrangement Act, CCAA, where they will have a plan of arrangement and all creditors will have to have a court-monitored plan to restructure the company. Sometimes there is debtor-in-possession financing, meaning that a new company coming in to try to help the restructuring will take precedence on receiving some of the capital back if the restructuring is not successful.
However, as I said, the goal should always be restructuring. We should have a goal of the Air Canada scenario that I saw as a young lawyer: a successful restructuring, a strong company now, no massive layoffs of employees, secured benefits and a pension that is healthy now. The going concern of the company should be our goal, because then we still have an employer contributing to a pension, and any shortfalls can be made up.
With the Bankruptcy and Insolvency Act, that is for smaller companies not eligible for CCAA, where they will make a proposal in bankruptcy.
The issue that brought me to bring my first private member's bill, Bill C-405 relates to one of the earliest concerns I had as a brand new member of Parliament in Durham. General Motors salaried employees in a group called GENMO, Mike Powell and Brian Rutherford, came in to see me, and I saw the distress caused. The near insolvency of General Motors led many pensioners to see that their pension was only funded to an amount in the 70% range, due to changes made in the Ontario government years before. They were facing many decades, potentially, in retirement, likely receiving 20% to 30% less.
Right now, pension administrators, when there is an insolvency that is not successful, have to annuitize the pension. What they do is they take what is left, and they have to then use a large amount of those resources to buy an annuity to provide a steady stream of payments to those stranded pensioners. If they already have 75% of their value, in an underfunded pension, and they have to annuitize and lose another 10% or 15%, they are then going to be in a circumstance where they could be receiving 60% of what they thought they would have from their defined benefit pension in retirement. That should not be acceptable.
I am happy to say the key thrust of Bill C-405 is we should modernize legislation to make sure that pensions, as much as possible, can be kept as a going concern, so that they can still be growing, so that they can have the benefit of the pooling of resources and large numbers of people within the plan. That is the aggregating benefit. That is the first principle of this bill that would be changed, the ability for pension administrators to preserve and enhance that fund.
There are other successful pensions that would perhaps like to have assets transferred over, so that they would have a fund within a successful, well-managed fund, and they would have the benefit of pooling of resources, pooling of numbers and a potential upside.
Rather than, right away, knowing, in an insolvency situation, they are going to annuitize and everyone is going to get less than what they are already going to get under an underfunded plan, this would allow for a potential upside. If the pension plan it transfers into has success, these pensioners would have success. It will secure and enhance.
The second thing it will do is it will bring more fairness to this. We have seen the headlines that drive pensioners crazy, where they see massive executive contracts to retain executives in the restructuring. We just have to look at the headlines to see this. We have seen it with Sears, Target and others. These contracts for executives are often massively larger than all the employees. It is squandering the funds in what are called key employee retention plans.
This bill will provide much more ability for pensioners and the court to restrict those excessive key executive retention plan payments, bringing more fairness to the process for the average worker, to try to bring back some confidence in the process for these Canadians.
The third thing it will establish is a national reporting mechanism, working with the chief actuary of Canada, the provinces, the territories and security regulators, making sure that more Canadians know how many pension plans are in an underfunded situation and what risks there are to thousands of Canadians in their retirement.
This is a particularly acute issue in southern Ontario where there is a number of older defined benefit plans of companies reaching financial distress. It is not just losing the jobs of the employees, it is often much larger numbers of retirees within the greater Toronto and Hamilton area in particular. This will educate and get collaboration. This will preserve their funds. This will bring fairness to executive retention programs.
As I said, we want some of the key people to restructure that company, because the goal should be to maintain that company as a going concern, where the employees are safeguarded, creditors will agree to working with them to get more in the long run and pensions will be secured because the pension plan will continue to be paid into. There can even be a plan to put it back into a balanced state.
Therefore, there is nothing in Bill C-405 that would conflict with the super-priority demands of unions and other groups. There is nothing in Bill C-405 that would be a step back. It is steady progress down the field. Let us make progress for tens of thousands of Canadians while advancing other bills that some people might want, but that might require a Hail Mary pass that I do not think will come.
Why is it important to educate Canadians? Only 40% of Canadians have a pension. The good thing is that despite the real risks to a lot of the old traditionally defined benefit pension plans after the global recession in 2008-09, things are getting better. According to last year's report from the Financial Services Commission of Ontario, there has been a decrease in the number of underfunded defined benefit plans, mainly in Ontario. In one year alone, from 2016 to 2017, the percentage of underfunded plans went from 30% to just 22%. Even better, the projected mean solvency of the average plan in Ontario went up from 91% to 96%.
I remind people that the time and strategy of these plans and making sure that employees are more a part of it are all critical. As one expert reminded me, the year before Nortel's insolvency, their pension plan was almost fully funded, in the high nineties in percentage wise. However, market conditions and the plan's inability to change quickly, as well as the lack of the success of the restructuring, left pensioners holding the bag. That is why we are here with Bill C-405. As one expert told me repeatedly, “You don't wind up a plan at the worst possible time”. In fact, many families in the Ottawa region where we sit would know that they are still providing an annuity for the Nortel pension plan. They are still annuitizing that plan. They are now locking in a lower rate for those people for good. Bill C-405 would allow the administrators more options for preserving the resources and for upside growth.
Thus, if there is the potential for people to have better retirement outcomes and they are facing these risks from a defined benefit plan, why would we not all agree on it? We can all agree that we 15 minutes ahead of time in the House here now. We are just coming up to 5:30. Why can we not agree to make steady progress on an issue that we are all receiving emails about now?
When the former Conservative government enhanced the wage earner protection plan, protecting more of the earnings of current employees in the context of an insolvency, the Senate committee that was used largely to consult on insolvency and bankruptcy stated directly that the better approach was not to go to super priority. That is why the former Conservative government did not succeed. That is why the Liberal government is not going to do it. People are going to wait for a magic bullet that is never coming, so Bill C-405 will make progress.
Here is what the Senate committee report said about super priority in the case of an insolvent defined benefit plan. It stated:
The Committee believes that granting the pension protection sought by some of the witnesses would be sufficiently unfair to other stakeholders that we cannot recommend the changes suggested. For example, we feel that super priority status could unnecessarily reduce the moneys available for distribution to creditors. In turn, credit availability and the cost of credit could be negatively affected, and all those seeking credit in Canada would be disadvantaged.
We are in Small Business Week. Higher credit costs impact every business, whether or not they have a pension for their employees or are the small or medium-sized businesses we are celebrating today. With higher costs of credit and fewer companies able to restructure, that is not sound public policy.
As I said, Bill C-405 does not preclude our having a debate on super priority. When it was looked at carefully 10 years ago, it was clear that if it were kept as a benchmark and a person wanted to keep that company as a going concern for the employees for its economic activity and for the safety and security of the pension, restructuring then has to be the option. Allowing companies to get debtor and possession financing and allowing them to restructure under CCAA is good for job protection.
I want to thank the many people I consulted in respect of Bill C-405, because I learned, as a parliamentarian, a lot about this issue. I am very proud to have worked with my friend Andrea Boctor, at Stikeman Elliott. I met her when we were working on the insolvency of Air Canada. She is one of the leaders in the field. I already mentioned Mike Powell and Brian Rutherford—
