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View Sherry Romanado Profile
Lib. (QC)
Good morning, everyone. I now call this meeting to order.
Welcome to meeting number 45 of the House of Commons Standing Committee on Industry, Science and Technology. Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website. So you are aware, the webcast will always show the person speaking, rather than the entirety of the committee.
The first hour will be spent on clause-by-clause consideration of Bill C-253, and then we will move in camera for the second hour to review our report.
To ensure an orderly meeting, I would like to outline a few rules to follow. Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting; you have the choice at the bottom of your screen of floor, English or French audio. I'll remind you that all comments by members and witnesses should be addressed through the chair. Before speaking, please wait until I recognize you by name. When you are not speaking, your microphone should be on mute.
Pursuant to the order of reference of Wednesday, May 12, 2021, the committee is meeting to begin clause-by-clause of Bill C-253, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.
I'd like to now welcome our witnesses. Here to assist us today from the Department of Industry, we have Mr. Mark Schaan, associate assistant deputy minister, strategy and innovation policy sector; and Mr. Paul Morrison, manager, corporate, insolvency and competition directorate.
As this is the first time that INDU is doing clause-by-clause of a bill, I'd like to explain how today will go. I will introduce each clause and ask if any members have any questions or comments. If you do, please raise your hand, and we will keep track of the speaking order. I know that MP Lemire is in the room, so we'll try to make sure we can see him when he has his hand up.
Mr. Lemire, if I don't see your hand raised, please send me a message.
Thank you.
We will take care of the speaking order, and once we've finished any debate on a specific clause, I'll then turn it over to the clerk for the vote.
With that, I wanted to also introduce the legislative clerk who is with us in the room today, Monsieur Jacques Maziade.
Welcome to INDU.
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Jacques Maziade
View Jacques Maziade Profile
Jacques Maziade
2021-06-10 11:06
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It's nice to be here. Thank you.
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View Sherry Romanado Profile
Lib. (QC)
With that, we're going to start.
(On clause 1)
The Chair: You'll have in front of you your bill. Does anyone have any questions or comments with respect to clause 1?
MP—
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View Pierre Poilievre Profile
CPC (ON)
View Pierre Poilievre Profile
2021-06-10 11:07
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On a point of order, Madam Chair, I just wanted to make sure you got my amendment. We submitted it about an hour ago, I think. Some of the other members didn't get it circulated to them, which might be a function of the lateness with which I sent it, but I want to make sure it's there and that you have it, so that when the appropriate clause arises it can be discussed.
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View Sherry Romanado Profile
Lib. (QC)
I have not received it, but the clerk has, and it will be distributed shortly. It's on its way. I'll give you a confirmation when we get it, so that you know it's been received, okay?
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View Pierre Poilievre Profile
CPC (ON)
View Pierre Poilievre Profile
2021-06-10 11:08
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Excellent, thanks so much.
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View Sherry Romanado Profile
Lib. (QC)
With that, we'll go to MP Jowhari.
You have the floor.
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View Majid Jowhari Profile
Lib. (ON)
View Majid Jowhari Profile
2021-06-10 11:08
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Thank you, Madam Chair.
Thank you to the witnesses, although I was hoping to hear testimony from them or an intervention from them giving a sense of, in their opinion, how big the issue is or whether they have any concerns.
Let me start by asking some questions, at least for me, for those who may have joined us for the very first time in our committee, and for those who are monitoring the committee.
The question is for either of our two witnesses. My understanding is that as of December 2019, we had about 1.23 million corporations in Canada. Of those, about 1.2 million were small businesses, which is about 97.9%. Another 1.9%, or 22,905 of them, were medium-sized businesses. Only about 2,978, which is 0.2%, were large businesses. The issue we are dealing with relates to the unfunded pension. How large is it? Who are the key stakeholders? What is the amount? How many people does it impact?
Either of you, Mr. Schaan or Mr. Morrison, can comment on that first, before I get to questions regarding the pension liability.
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Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-10 11:09
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You bet. I'm happy to start, and then I may have some supplemental information from my colleague, Mr. Morrison.
Essentially, the issue we're talking about with respect to unfunded pension liabilities relates to corporations that have defined benefit pension plans. Just by way of quick reference, there are a number of ways in which companies provide additional retirement benefits to their employees, or future promises of income in retirement. Sometimes they're as simple as supporting individual employees in making their own contributions through things like RRSPs or other savings plans—a defined contribution mechanism.
What a defined contribution mechanism means is that in a pension plan that essentially says that the employee, perhaps, but often the employer, will make a contribution into a pension plan, the contribution is what is defined; that is, the employer will make a set contribution on every pay, which will then go into a fund. That fund will be invested with some sort of investment scheme, and whatever that investment scheme is able to ultimately provide is what will be made available to the individual at the time of their retirement.
A defined benefit pension plan, however, is one where the benefit is that which is defined, which is to say that a promise is made that upon retirement an employee will receive a percentage, usually, of their pre-retirement income, often with some sort of formula based on best years, which indicates that it will be paid in perpetuity until such time as their death.
What we're talking about is companies that offer this type of pension plan. That number has largely been going down. I don't have the exact figures in front of me, but when I'm done explaining I'll see if Mr. Morrison has information. Essentially, that number is relatively small, because it is a higher-risk mechanism of providing retirement income. Ultimately, the employer is hoping that investment returns will allow them to be able to continue to offer that benefit based on the full lifespan of their employee base.
Where we have an unfunded pension liability is essentially the differential between that which was promised and that which is required. That, we calculate in two ways. One is on a going-concern basis. In a defined benefit that means, are you actually earning enough from your investment returns and your ongoing cash requirements to be able to provide for the requirements of your pensioners at the time of their retirement? Right now, if I have 10 employees and I have five retirees, am I actually earning enough on the basis of what I have in my pension fund to be able to provide that?
Then there's also a wind-up basis, essentially. Is there enough, should the company actually go insolvent, to be able to meet the promises it made to all of its employees? That wind-up basis is a much bigger number, obviously, because you need to have enough in your account that if you were to go insolvent you would be able to pay out those promises.
The vast majority of defined benefit pension plans that are currently available in Canada are actually provincially regulated, because they are provincially regulated industries. The requirements for plan sponsors as to the amount they need to have in place vary enormously, everything from the Quebec government, which actually does not require a solvency basis accounting—so they do not require pension plans to account for what would be required if they went to insolvency—all the way through to the federal government, where we actually require plans to be 100% funded on a wind-up basis or on a solvency basis—
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View Majid Jowhari Profile
Lib. (ON)
View Majid Jowhari Profile
2021-06-10 11:13
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Thank you, Mr. Schaan, but can you give me an understanding of how much this package is, how much of it is unfunded and how much is at risk? Are we in a position to be able to get a sense of that?
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Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-10 11:13
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My information is that as of 2019 there were 4.3 million workers in total that were members of defined benefit pension plans. For federally regulated plans, those are, as I said, held at 100% solvency requirements. They then have to make up the difference between that which they have and that which would be required on a solvency or wind-up basis over five years—
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View Majid Jowhari Profile
Lib. (ON)
View Majid Jowhari Profile
2021-06-10 11:14
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I apologize for interrupting.
I'm hoping that the translators also won't mind.
Okay. Now we know from a numbers point of view that there are 4.3 million people—
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Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-10 11:14
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Yes, of whom 1.2 million, Mr. Jowhari, are in the private sector. The vast majority of those are actually in the public sector. In the private sector, 1.2 million have access to a defined benefit pension plan.
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View Majid Jowhari Profile
Lib. (ON)
View Majid Jowhari Profile
2021-06-10 11:14
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There are 1.2 million in the private sector, which I assume is part of that 2,978, roughly, which is 0.2%.
Also, of the 1.2 million Canadian individuals who are impacted, how big is this from a dollar point of view?
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Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-10 11:15
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That I would not have at the ready, because, obviously, those plans vary enormously in size.
To your earlier point, it is mostly larger employers that have defined benefit pension plans, although there are some organizations that offer only defined benefit pension plans, for instance, for their senior executives, so that—
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