A bill that would give super-priority to defined benefit pension plan members during plan windups and insolvencies is likely to be passed by the senate because the pension sector hasn’t provided viable alternatives, says Mike Powell, president of the Canadian Federation of Pensioners.
On Feb. 8, 2023, Powell delivered a presentation in support of Bill C-228 to the standing senate committee on banking, commerce and the economy. “My read was the majority of the committee members were in favour of it. The leaders of the different senate groups were in favour of protecting pensioners and they accepted the premise that pensions are deferred wages that must be paid in full.
“There’s only one serious solution on the table,” he adds. “[The pension sector hasn’t] come up with an alternative. That tells me super-priority is the solution, but they just don’t like it.”
Read: ACPM’s top priority for 2023 is amending, blocking passage of pension super-priority bill
In the past month, both the Association of Canadian Pension Management and the Pension Investment Association of Canada described efforts to convince the senate to scrap or amend the bill as top priorities for their associations.
In a joint statement released in September 2022, which was also co-signed by the Canadian Bankers Association, the Canadian Chamber of Commerce and the Canadian Manufacturers and Exporters, the ACPM and the PIAC said the bill would have broad systemic implications for companies offering DB plans. The letter also argued that insolvency protocols used in some Canadian provinces offer protection to plan members that have been tested, unlike those included in Bill C-228.
Read: Amendments to bankruptcy, insolvency legislation could disincentivize DB pension plan sponsors, say ACPM, PIAC
Powell, who almost saw his own pension from General Motors of Canada Co. trimmed in the wake of the 2008/09 financial crisis, says he isn’t prepared to accept the status quo. “You can’t have a solution that just transfers risk to pensioners. . . . That meets the definition of elder abuse.”
In past statements on the bill, both the ACPM and the PIAC have cited the 2007 bankruptcy of Stelco Holdings Inc. in which pension solvency funding requirements forced the Ontario company to declare bankruptcy. By working with stakeholders, the company was restructured and the pensions were recovered. “Recognizing this, most pension jurisdictions in Canada changed their funding rules to emphasize going-concern funding of plans over solvency funding,” wrote the associations in their September statement.
The ACPM also cited the Stelco situation in own presentation to the subcommittee last week. According to Powell, the associations misrepresented the facts about the recovery. “The new owners identified several revenue streams that worked out and provided some limited funding to the plans. If that hadn’t worked out, those plans would have gone down. . . . It was an innovative application of schmuck insurance.”
Read: Stelco workers, retirees learn fate of benefits plans as restructuring finalized
He also suggests the benefits of providing super-priority to plan members aren’t as untested as the pension industry has implied. In his presentation to the senate subcommittee, Powell referred to a different case in which the federal government provided a de facto super-priority to Air Canada’s pension plan members. In 2013, the airline agreed to accept a bailout conditional on accepting severe restrictions on share buybacks, dividends and executive compensation until its pension plans’ $4.3 billion deficit was repaid. In 2015, the deficit was eliminated.
If Bill C-228 is passed by the senate without amendments, its provisions wouldn’t come into force for another four years. During that time, Powell says his organization would be happy to provide the pension sector with assistance to help come up with mutually agreeable alternatives. “[The CFP] is solutions agnostic. We don’t care how the problem’s fixed, we just want to make sure it is.”
The ACPM declined to comment for this story.
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