Thank you.

We've submitted the specific changes we believe need to be made to Bill C-228, so I won't discuss those here.

I will be talking about some of the points included in the submission that we made supported by CFP and five other leading Canadians seniors' advocacy organizations.

The fundamental challenge for this committee is to choose between the status quo and extending superpriority in insolvency to the unfunded pension liability. We know the status quo, the intended consequences. We've heard of the personal stories and tragedies of those impacted. CFP estimates that since 1982, 250,000 vulnerable Canadian seniors have had their income reduced for the rest of their lives.

We've all heard the unintended consequences. Here is a quote that I have: “there could be a significant negative impact on Canadian productivity and employment since businesses...will have a tougher time getting financing, and their costs could rise dramatically.” If true, those consequences would have a significant impact on the Canadian economy, a measurable impact. That's why I don't understand why we're having this discussion. That quote is from the 2005 committee review of Bill C-55, the Wage Earner Protection Program Act.

WEPP extended superpriority to unpaid wages and other items in insolvency and was passed in 2005. Note that WEPP impacts every insolvency; extending superpriority to the unfunded pension liability would only impact the relatively small and declining number of companies with defined benefit pensions. Where are the binders of evidence of Canada's poor economic performance versus competitors since 2005? If these charges were true, we should be towards the bottom in GDP growth, at the top in unemployment, at the top in companies filing for insolvency, and at the top in liquidations. Where is the data?

The reality is that superpriority would simply put a price on abandoning pensions in insolvency. Today, the minute a company files, the pension deficit disappears like a puff of smoke.

Be honest: Knowing there's no penalty for underfunding a pension and no obligation that survives insolvency, what CEO is going to fully fund their pension? Allocating funds to the pension instead of, for example, dividends, when not legally required, would get you fired. As Mr. Schaan said on Monday, companies only do what is required. Another comment from Monday said that federally regulated pensions are not required to be 100% solvency funded, at least not as I understand the term “required”.

Statistics support this. From 2012 to 2020, on average, 73% of federally regulated plans were under 100% solvency; that's not required. As mentioned on Monday, the 2021 median funding was 109%, which means today is the time to act, because when that gap is small to get to full funding and many plans are fully funded, then companies can de-risk their pension and pose no threat to lenders going in the future.

We also know that companies are going to regulators and looking for contribution holidays, looking to reduce those solvency levels. Now is the time to step in and stop that. If you change the rules, corporate behaviour will change.

This was the case with Air Canada. At the time of its insolvency in 2003, Air Canada had a $1.3-billion pension deficit. Under ministry monitoring, by 2013 that deficit ballooned to $4.2 billion. In 2013, the finance minister at the time, Jim Flaherty, agreed to further relief, subject to restrictions until the pension was fully funded. Executive compensation increases, special bonuses, and other incentive plans were curtailed. The airline was prevented from paying dividends and buying back stock. With those restrictions in place, that pension was fully funded by May 2015. Monitor, and companies do what is required; change the rules, and behaviour will change.

In Canada, we have two levels of legislation, and pensions get whipsawed between them. We have insolvency legislation, and underneath it 11 different pension benefit acts.

ACPM—they're not unique, but they're here so I'm going to use them as an example—argue that pensions shouldn't be protected in insolvency, that insolvency is not the place, yet they advocate for the removal of solvency requirements in pension regulations. The most recent one I know of was in Saskatchewan a couple of years ago. It's online and you can find it. We know that anything less than 100% solvency funding increases the risk to pensioners. It leaves pensioners as acceptable collateral damage in insolvency.

Since 2005, proposed solutions from governments and the greater pension industry have all been based on shifting risk from the companies that willingly accepted the obligation to the pensioners without obtaining the pensioners' informed consent. This is the very definition of elder financial abuse.

Superpriority would at least partly address the power imbalance in insolvency.

This committee will determine whether to continue the status quo or to protect vulnerable Canadian seniors.

Thank you.

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