Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.
I call to order the 46th meeting of the Standing Committee on Finance.
Pursuant to the order of reference of Wednesday, February 1, 2012, we are doing clause-by-clause consideration of Bill C-25, an act relating to pooled registered pension plans and making related amendments to other acts.
We have a two-hour session here for consideration of this bill clause-by-clause. You should all have the clauses in front of you. Pursuant to Standing Order 75(1), consideration of clause 1 is postponed. Therefore, I shall move to clause 2.
My understanding is there is not an amendment until clause 21. Perhaps for simplicity, and members can just stop me at any time, I will ask if there is any discussion with respect to clauses 2 to 20. We will deal with the clauses for which I have no amendments.
Clause 6(2) covers the multilateral agreement. I'd like some clarification on the federal labour law. Does this mean that the provincial labour law will prevail over the federal labour law? Labour laws generally give the union a right, an obligation for representation.
My understanding is that clause 6 is simply to authorize the minister to enter into those multilateral agreements. It doesn't deal with the issue of jurisdiction. In fact, it also requires a minister to table any multilateral agreements. I don't understand why it would be of issue here, because it simply authorizes him to do so.
Mr. Jean's question is very interesting. Under the Canada Labour Code and the Quebec Labour Code, the union has a representation obligation. At both the federal and the provincial level, the union therefore has a legal obligation to represent its members. But in this case, an essential element of compensation, specifically the pension plan, does not come under the union's jurisdiction.
I'd like to know how the labour code sets out the obligation of the union to represent its members in this type of situation. Will the union have to work in parallel with the superintendent of financial institutions to defend its members? If there is a transfer of authority to the province, are we also transferring the authority set out in the Canada Labour Code to the province?
I just don't see why it would apply in these circumstances. The clause simply authorizes the minister to enter into an agreement with the other provinces or territories. It doesn't supersede any jurisdictional issue, any labour code, or anything else. So that would be between the unions and the provincial government that would apply, and they would have to abide by those rules, regulations, and laws in setting up any agreement with the federal government. I don't see what it has to do with it.
If you tell me that your answer is final, I'm willing to accept it. If you tell me that, when the provinces discuss this, it will be under provincial jurisdiction and that it will be up to them to give us an answer, I'll accept that, as well.
I'm Carol Taraschuk. I'm with the legal services with the Office of the Superintendent of Financial Institutions.
The Chair: Welcome back to the committee.
Ms. Carol Taraschuk: Thank you.
There's a similar provision in the Pension Benefits Standards Act. What it does is recognize that there are different jurisdictions respecting pension plans, and there will be respecting PRPPs.
There will be provincial legislation, we hope, that will address situations where a PRPP is established by an employer who is subject to provincial labour laws. This act governs PRPPs established by employers who are subject to federal labour laws.
This will enable jurisdictions to coordinate or try to aim at harmonious legislation and requirements that will apply to PRPPs across the country. So it's recognizing federal cooperation.
I should point out that we have officials here from the Department of Finance, the Department of Justice, and the Office of the Superintendent of Financial Institutions. If any of you wish to comment on any questions that are being raised by members, please do come forward to the table. I should have mentioned that at the outset.
Authorities are being granted, but the word "can" is being used, not the word "must". Mr. Brian Jean will be able to correct me on this, but I think there's a major distinction between those two words. The problem is that we are referring to this information that will be necessary later. But how can we use these documents if the superintendent of financial institutions isn't required to produce them?
Perhaps it would be a good idea for the departmental representatives to join us at this table.
(a) conduct studies, surveys and research programs and compile statistical and other information…
The word "may" is used here. The problem is that further on, it says that we must obtain the lowest price possible. So how can we obtain that information, namely, what the lowest possible price is, if the word "must", which would require the superintendent to provide it, isn't used? The word "may" indicates that it's optional.
The superintendent has a mandate to ensure that the act is being complied with. This is another tool that the superintendent may use to ensure that the act is being complied with. The superintendent also has authority to require administrators to produce information and to examine those administrators. These are all part of the tools.
Okay. I have a ruling. I will just remind members that rulings of the chair are not debatable. If there is a challenge.... The committee can challenge the chair, but I will inform you of this beforehand.
The ruling is as follows.
Bill C-25 creates a legal framework for the establishment and administration of pooled registered pension plans for employees and self-employed persons. A position of superintendent is created to be responsible for the control and supervision of the administration of this act. The superintendent issues licences to corporations to act as administrators of pooled registered pension plans.
Bill C-25 also contains provisions for the superintendent to oversee the actions of the administrators, with the power to transfer a plan's assets to another entity or even to revoke the registration and cancel the certificate of registration of the plan in question. These remedies are clearly defined, as is the system of objection and appeals.
This amendment attempts to transfer the administrative responsibilities and duties associated with the role of the administrator of a registered plan directly to the superintendent through means of trusteeship. As House of Commons Procedure and Practice, second edition, states on page 766:
An amendment to a bill that was referred to committee after second reading is out of order if it is beyond the scope and principle of the bill.
In the opinion of the chair, the introduction of this scheme is a new concept that is beyond the scope of Bill C-25, and the amendment is therefore inadmissible.
That is my ruling. It applies to NDP-1 as well as to NDP-4. NDP 4 is on page 6 of the documents I have. It relates to clause 34.
…an administrator must not give, offer or agree to give or offer to an employer an inducement to enter into a contract with the administrator in respect of a pooled registered pension plan.
This is the anti-corruption clause. Basically we need to ensure that the employer, who is obligated to accept this plan, will not be tempted, based on a lateral commercial agreement that does not affect employees, to lock them into an agreement they are not participating in.
I'll give you a very simple example. An employer does business with a bank. The bank suggests to the employer that it will increase the employer's line of credit by $50,000 if the employer gives the bank the contract for the employees' voluntary pension plan. Obviously, the employees will gain nothing from this deal the bank is offering. It involves only the bank and the employer.
The clause 24 amendment is there just to strengthen the existing anti-corruption clause.
This amendment is actually admissible. My ruling on this is that the vote on this applies to NDP-7, which is page 9, clause 76, so how the vote goes on this amendment determines the fate of the second amendment, NDP-7, page 9, clause 76, just for members' information.
I actually recall having this discussion about this clause during committee witness hearings. I must say that I thought it was addressed at that point.
Clause 24 does, clearly, in our opinion, address the concern that Monsieur Giguère has about an employer trying to receive inducements in the way he described. There was another clause within the bill that addresses any inducements that would benefit all of the people who are involved in the pooled registered pension plan, which Monsieur Giguère brought up during witness hearings, and actually when the officials were here the last time.
I'd like to ask the officials to explain why the clauses that are already in the bill address the concerns Monsieur Giguère has and demonstrate that there is no need to alter them at this time.
The intention of the clause is indeed to prohibit inducements for the reasons you cite, but recognizing that there are circumstances where you wouldn't want to prohibit employers from achieving lower costs to members for entering into such an agreement. Those cases are, for example, where, by bundling services that are beneficial to all employees, the offering of both the PRPP and that other service, they can get a lower rate overall. So that's beneficial to all.
Also, in the circumstance, for example, where an employer wants to switch to another PRPP provider, if that PRPP provider, for example, wants to pay the switching fee, that's advantageous to all and promotes competition. So it should be, in our view, considered in the regulatory scope, subject to the regulations in exception to this overall restriction.
The duties of the employer, furthermore, are supported by clause 33, where it does explicitly put an onus on them to say “Subject to the regulations, an employer must not demand, accept”. So we have the administrator not being able to offer, but the employer's responsibility is very clear here, that they are not to accept. So they are not immune from the other provisions of this bill, and indeed are targeted at inducements as well.
I understood clauses 24 and 33 very well. They reflect each other. One deals with the administrator and the other deals with the employer. I was told—and I heard this correctly—that other provisions guarantee that, should the employer or the administrator provide an inducement, the inducement must be favourable exclusively to contributing employees. I don't see this provision anywhere. Can you tell me which clause in the bill indicates that those inducements must be favourable for the contributors?
The point is that the amendment Monsieur Giguère is trying to make is to take out the words "subject to the regulations", which the officials have clearly said will cover important measures in here. What I referred to was paragraph 76(1)(i), which Monsieur Giguère mentioned during officials' presentation here earlier. It specifies inducements that can be offered by an administrator that will benefit all of the people involved in a pension plan. This is just to make sure Monsieur Giguère understands the difference. This is why we would oppose the removal of "subject to the regulations". These are two different things.
That's not the purpose of the regulations that are going to be presented. They will be subject to the normal regulatory process. The public will have the opportunity to comment on the regulations and see what the actual content is before they are adopted in their final form. Everyone will be able to do so.
I think it's a very normal process in most of the bills that I've seen before other committees, but to suggest that there shouldn't be allowed to be some exemptions relating to the better purpose of the act—to allow exemptions and particular purposes that would help the employees more and so protect them, even more so in particular circumstances that were brought up earlier—would go against what we're trying to do as legislators.
But also, to go against the very spirit and purpose of the act would not be allowed under regulation anyway. So I think this is quite normal.
I'll move the amendment. This will incur costs, most probably, and I have a suspicion as to the result of the response from the chair. However, I'll point out a lack of rigour in drafting this; the board should have been thought of before. We think that's an important part of it, but I'll await your ruling.
Bill C-25, in clause 26, provides that any administrator of a pooled registered pension plan must provide those services at a low cost. The amendment attempts to establish a board that would seek to determine the criteria to be used to decide what an acceptable low cost for such services would be by examining the range of other investment options available to Canadians and their associated fees.
As the House of Commons Procedure and Practice, second edition, states on page 766:
An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.
In the opinion of the chair, the creation of this board is a new concept that is beyond the scope of Bill C-25, and the amendment is therefore inadmissible. Additionally, the creation of the board may also infringe on the financial initiative of the crown, as the power to appoint persons to a board also includes the power to pay.
(2) For greater certainty, an administrator must not charge the members of the pooled registered pension plan management fees that are more than twice the prescribed rate of the management fees reported by the Canada Pension Plan Investment Board.
I think you're well aware of the concerns we have. I think we all are concerned about the same thing, the whole issue of management fees and keeping those fees low. Australia's example made a lot of money for insurance companies, etc., but the Australians didn't quite benefit as much as the insurance companies and banks did. So this is a way of trying to protect the intent of what I believe the PRPPs are trying to do, but it's another way of protecting Canadians and protecting their savings.
I want to welcome Ms. Sgro back to our committee. I know she takes this very much to heart.
I was actually excited when Ms. Sgro mentioned another clause, earlier on, about competition, and that would be why this side would not want to see this clause and this amendment to this clause contain anything that resembles some kind of a cap. It would be very important in an effort to keep the costs low that there be competition and that there not be any fee caps. We strongly believe that any time there is such an amendment or such a provision that the fees actually start to very much lean towards what the cap is. For that purpose, it would go directly contrary to what we're trying to accomplish, which is low cost because competition exists.
For those reasons, we will be against this amendment proposed by the Liberal Party.
I was just going to reiterate what she said. We actually heard evidence to that degree. They suggested a cap was not in order because naturally the fees would actually go right to that cap, and they would feel they were priced accordingly. So we did hear evidence to that.
I just want to say we'll be supporting the amendment because we believe there needs to be a cap. We disagree with the testimony. I'm sure the government side disagrees with some of the other testimony that they've heard as well here. Just because somebody gave a particular testimony doesn't guarantee that this will be the outcome. In fact, we think it's important to have a cap on fees. That's one of the reasons you heard us raise the AustralianSuper fund as many times as we did. That was one of the things lacking. The government side said they learned from the Australian example, so we were hoping there would be a movement on this.
This is just a question to those who are more intimately familiar with the bill. Are there any protections in the bill at all that will monitor fees? Or is it going to be left wide open to the provinces to establish whatever they want?
We will have detailed regulations in this respect that will set up the criteria for determining low cost, and these will be monitored regularly—by the Superintendent of Financial Institutions, in this case, who is the supervisor. It is also a condition of their licensing requirements. The licensing provisions are under development, as they are subject to regulation, but will again require a demonstration of how the administrator plans to achieve low cost. Over the course of that plan, this will be regularly monitored.
I should have mentioned that the vote on this amendment applies to amendment L-2, because it amends clause 76 in the same manner. That is amendment L-2, which is on page 10 of our amendments document, relating to clause 76.
We will take the vote on the amendment.
(Amendment negatived) [see Minutes of Proceedings]
(Clause 26 agreed to on division)
The Chair: The next amendment I have is on clause 34. Are there any issues--
The question I was asking was whether there are any issues with respect to any clauses from 27 until 33, because I do not have any amendments. I'm happy to entertain any discussion on any one of those clauses. Which clause would you like to—
Clause 30 makes the employer not liable. We just adopted a provision where the employer and the administrator can exchange certain favours. Should a contributor feel hard done by and want to sue, the contributor must generally prove three things: that there was fault, that there was damage, and that there is a causal link between the two. But now you are adding the obligation to request that the corporate veil be lifted. Isn't that a bit excessive? There is already protection under the customary provisions of civil law, but you are requiring contributors who feel they have been wronged, robbed, to ask that the corporate veil be lifted under clause 30.
The purpose of this amendment is.... Just by way of background, in the initial defined benefit or defined contribution context, it's the employer who is the sponsor of these plans. In the PRPP context, we're taking that responsibility away from the employer and putting it on the administrator. This is a key element in terms of what we hope to find is the attractiveness of these plans for employers: that they have a lot less liability and have less administrative cost to deliver them. That is our expectation: that these will be attractive to small businesses.
Without such a provision, making them responsible for the acts of the administrator—things such as investment returns, their fiduciary obligation about how they invest their funds—would create a real risk that employers.... It's not actually their role and responsibility to provide those services, yet they would ultimately be responsible.
This is a bit of a safe harbour for them, in terms of those responsibilities that are directly for the administrator. There are many responsibilities on the employer, as enumerated in this act, which still stand, such as the one we were explaining earlier vis-à-vis inducement. So this is not a blanket exemption from any responsibility; they have clear responsibilities, which are elaborated.
It only makes sense. No employers would allow their employees to sign up to the contract, if this weren't included, because it excludes civil liability in relation to things that are not any doings by them. If the employers are not responsible for deciding where to administer the funds or where to invest them, they need to be exempted from any liability respecting those matters, because they would be lumped together in a lawsuit.
If, for instance, 10,000 employees wanted to sue the administrator of the fund, they would be part of that lawsuit, if they're not excluded. Why should they be part of a lawsuit in relation to decisions they had nothing to do with? They're just there as part and parcel to help facilitate the employee and the administrator of the fund.
My dear colleague, basically your point of view is acceptable insofar as previously you recognized that, first, the employer exclusively decided on the administrator and that, second, that employer could receive inducements from an administrator without it necessarily being to the advantage of the contributors. So, with respect to those two points, these contributors find themselves facing fault: there would be fault on the employer's part for choosing a bad administrator. The contributors would have lost their money. There would be causality, which must be proven legally. A judge will not accept a fishing expedition, that an employer is being sued just because you want to. There has to be an element of proof.
In this case, we're saying that, even if these three things are established, these people are going to come up against a clause that exonerates liability. That's what I have a problem with.
If there is a situation in which members are at risk, likely this wouldn't be the route that the superintendent would take; rather, he would replace the administrator and transfer all the assets out of their control.
The use of this power is very severe, because the revocation of registration actually terminates the whole pension plan. Members' further participation in a PRPP would cease, and it would have to be wound up, unless the superintendent replaces the administrator for the wind-up purposes. But if there is a risk to members, there is no requirement for a length of time that the superintendent has to notify about replacing the administrator, and that would be the action more likely taken.
I'd basically like to go back to the definition of "full time" and "part time". Clause 39(2), on lines 24 and 25, ends with "…normally scheduled hours of work established for persons in that class of employees." So, that means that there are fewer than 40 hours of work per week. It's basically a provision—
With that, I'm basically saying is that, here, "full time" isn't necessarily 40 hours a week. It could be 20 hours a week. There's an overlap between full time and part time. I'm also wondering what category an on-call worker would be under or, quite simply, in this case, someone who replaces someone else for a long period, such as for a maternity leave.
The difference between "full time" and "part time" doesn't seem clear to me. Could you please clarify that for me? That's all I'm asking.
What's really key is the class of employees. If you're considered in the same class of employee and a PRPP is available to members of that class, you're entitled to also become a member. So you become a member of a PRPP. The hours are essentially not that relevant, if the PRPP is available to the same class.
When you say that you can have a permanent employee who has part-time hours, they're still permanent to the company. Then you can have a contingency worker who could work the same hours, but at some point their job ends and they're gone. That is the point I was making.
I asked Ms. Glover and Mr. Jean, but here is a question that I ask for myself.
My understanding is that this language is being used to enable as many employees as possible to qualify for the pooled registered pension plan. It's to be a broad enough definition so that as many employers as possible who work for a company can access this pension plan.
Just as a quick comment, if it helps to explain this, I as a police officer might work 60 hours a week and then take four days off, which is not the same as someone who works nine to five—a 40-hour week—and is considered full-time. So there are classes that are indicated. This is important in order to include as many people as possible who can take advantage of this.
For those reasons, I would say let's proceed and call the question, if you choose to do so, Mr. Chair.
Yes, I have a couple of points. One is that in every circumstance when an employee is giving notice, they have 60 days in which to opt out of the plan. There is a provision—and Lynn might be able to help me out with exactly which one it is—that sets out that, subject to the regulations, a member may set its contribution rate to zero for a time.
We are elaborating that regulation, but it is in keeping with the concept of hardship. So there are two instances: either up front...and then there is contemplated this setting of the contribution rate to zero in the future for that reason.
To clarify that, they're automatically part of it, but is it going to be as simple as their indicating to the employer that for personal reasons or whatever they do not want to be part of it and their having the option to put zero down?
I was just going to say that clause 46 also anticipates that they won't be charged anything and that they would have the option of opting out by the 61st day. This is consistent with what the officials are saying.
Mr. Chair, I greatly appreciate this attention. But if we allow one person to opt out of a plan for religious reasons, which is perfectly acceptable, we should be able to apply the same justification in the case of someone who doesn't have much income and must choose between paying the rent or contributing to the plan. If we allow someone to opt out of the plan from the start for religious reasons, we should allow someone who doesn't make enough to deal with an economic situation to do the same.
I truly want to believe that we are giving religious justifications an important status, but economic status is the essential element in this matter. If someone wants to refuse, for his or her specific economic reasons or for any reason he or she provides, that person has the right to say no. You said that this was a choice, so why deny that person the choice right from the start?
In clause 41, you allow someone to opt out of the plan for religious reasons, at least 30 days before entering into a contract. Why not also allow anyone to opt out for economic reasons? If it's their choice, why not give it to them?
Subclause 41(5) is the provision with respect to opting out. Within that same section, whether it be for economic reasons or for whatever reason the employee may have, they have the right to opt out within 60 days.
Monsieur Giguère, I don't know whether you'll accept the answer, but the answer the officials are giving is that they believe that what you want is accomplished in either other parts of the clause or other parts of the bill. Again, that's a matter of debate.
56. The sex of a member or of their spouse, former spouse, common-law partner or former common-law partner must not be taken into account in determining the amount of any contribution required to be paid by the member under a pooled registered pension plan.
When you say that their sex must not be taken into account, is "their sex" to be interpreted in a very broad sense or in a very limited sense? In other words, before we had women and men; now, people can be transgendered, transsexual. Is "their sex" being interpreted broadly?
The Chair: Clause 57 had an amendment, NDP-6, but the ruling I made on NDP-3 applied to this one, as I mentioned, because it was beyond the scope of the bill, and therefore we will not be discussing that amendment.
(Clause 57 agreed to on division)
The Chair: I do not have any amendments until clause 76. Are there any questions, concerns, items between clauses 58 and 75? I can group them all together, if there are no issues. I'm sensing that I can.
Mr. Chair, please allow me to catch up. You're moving through the votes faster than my pencil can follow.
Clause 67 reads as follows:
67. (1) If an administrator, employer or other person has omitted to do anything under this Act that is required to be done by them or on their part or contravenes a provision of this Act or the regulations, the Superintendent may, in addition to any other action that the Superintendent may take, apply to the Federal Court for an order requiring the administrator, employer or other person to cease the contravention or to do anything that is required to be done, and on such an application the Federal Court may make that order and make any other order that it thinks fit.
I would like some clarification. With certain measures where the speed of execution is essential to protect the inheritance of the contributors, isn't it too much to ask the superintendent to go through this process? It basically gives someone with dishonest intentions ample time to carry out those dishonest operations.
This is the same as for any other relief that you would seek, including an order of mandamus or certiorari, or compelling them to do anything. The Federal Court has jurisdiction to do so on an emergency basis.
The Chair: I'll let Mr. Giguère's pencil catch up to my voice.
(Clauses 68 to 75 inclusive agreed to on division)
(On clause 76—Governor in Council)
The Chair: I will just address clause 76. We had two amendments here, but the vote on amendment NDP-2 applies to NDP-7, and the vote on amendment Liberal-1 applies to Liberal-2. We therefore don't have to deal with those two amendments.
I had an indication from Mr. Mai that he wishes to address an issue here that he has talked about with Ms. Glover. We'll hear Mr. Mai on clause 76 on this issue.
As discussed, in its brief, the Canadian Bar raised a unintentional consequence of applying this bill, especially with respect to aboriginals. The brief says:
If an aboriginal person earns exempt income, …
And exempt income is defined as a tax exemption under section 87 of the Indian Act.
…no RRSP contribution room is created with respect to that income. Contributions to a PRPP for that individual will generate penalties under Part X.1 of the Income Tax Act. An aboriginal person earning only exempt income could not participate in a PRPP, but can participate in registered pension plans.
The Canadian Bar Association's recommendation was to amend this section of the Income Tax Act. After discussion, we realized that we could not do it here. However, I want to raise the importance of taking this into consideration when there are regulations. We need to make sure that the intention, which was not to exclude aboriginals from the PRPP, will really be protected in that respect.
I do want to thank my colleague for taking an interest in ensuring that aboriginal peoples do have the same ability to take advantage of some of these measures that are put forward by our committee and by our government, essentially.
Having discussed this with Mr. Mai, I did notify Mr. Mai that the government does have some plans to address some different amendments in the future. We will be considering what has been said here today with regard to aboriginal peoples in that context.
But I would ask the officials, as you've done, Mr. Chair, to address the question of whether or not the Bar Association's determination is accurate. My understanding is that there's a difference between whether or not they apply if you consider it a pension versus a savings plan. With your permission, Mr. Chair, I'll turn it over to them.
The tax rules for PRPPs were released in mid-December. There was a 60-day consultation period, which just recently closed, so the tax policy branch is currently reviewing all the submissions we received.
I'd like to point out that in the existing tax rules for pension plans, the definition of compensation would include any employment income that a native Canadian would receive, even if not taxable. But admittedly, the original round of tax rules has a hybrid between RRSP rules and RPP rules, and that point needs to be clarified. I don't know whether we're going to go to the earned income rule of RRSPs or the pension plan rule.
I believe the Canadian Bar Association did send a submission to us, but I don't recall that this particular issue was in their submission, so it probably should come forward to the tax policy branch of the Department of Finance, and we will include it in our current assessment for future recommendations for final adjustments to the tax rules.