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Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:27
[Technical difficulty—Editor] changes to the law in 2019 as a function of significant consultation. It did make changes to the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Canada Business Corporations Act, amongst others. Those projects of law are actually in their infancy. They've only been implemented for a short period of time. They included a duty of good faith in insolvency proceedings. They required for boards of directors and officers to contemplate and have the capacity to consider additional issues of well-being and the financial value vitality of their organizations, including that of their pension plans. It specifically indicated that companies will have an obligation to comply or explain, with a requirement to bring before their shareholders, the measures by which they are contemplating and considering the well-being of their workers and pensioners in their ongoing operations.
There have been a number of shifts in the law, but we do, obviously, continue to look back to those consultations and continue to hear and meet with intervenors and stakeholders to make sure we are canvassing for any and all good ideas that would improve the overall state of retirement income security and the well-being of pensioners and workers.
View Helena Jaczek Profile
Lib. (ON)
Thank you, Madam Chair.
View Sherry Romanado Profile
Lib. (QC)
Thank you very much.
Mr. Lemire, I see that you have raised your hand as well.
View Sébastien Lemire Profile
BQ (QC)
The goal of my remarks, Madam Chair, is similar to the purpose of Mr. Duvall's remarks. Out of respect for workers and retirees, and perhaps even for the tens of thousands of people who have sent emails that you received, as I did, in support of this project, we must complete our process. To that end, today's meeting is essential.
I would sincerely urge the witness, whose objectivity was called into question by Ms. Jaczek's preamble, to give shorter answers so that we can get to the end of the agenda.
Thank you, Madam Chair.
View Sherry Romanado Profile
Lib. (QC)
Thank you for your comments. It isn't really a point of order. All members should have the opportunity to speak and to ask the witnesses questions.
Do any other members have questions about clause 2?
Seeing none, I will turn it over to the clerk for a recorded division.
(Clause 2 agreed to: yeas 6; nays 5)
(Clauses 3 to 5 inclusive agreed to: yeas 6; nays 5)
View Sherry Romanado Profile
Lib. (QC)
We have a new clause 6 in the amendment by MP Poilievre.
With that, I'd like to open the floor for any questions or comments with respect to that. I believe it was circulated by MP Poilievre at the last meeting, so we all have it in front of us.
Mr. Poilievre, would you like to speak to it?
View Pierre Poilievre Profile
CPC (ON)
Yes, it just gives a grace period of three years for its coming into force. This will allow companies that might be in a difficult financial position to ready themselves, to bolster their balance sheets and to properly fund their pension fund plans in order to stay solvent.
My worry is that if we go ahead with the bill without any coming into force delay, you will have some companies that are on the verge of bankruptcy that will no longer be able to borrow money, because lenders of lower-grade debt will say that the risk is too high, given that the pension obligations would come before the loans. If that happens, what might occur is that the company would just go bankrupt now. Ironically, the pensioners would be in a worse position than at present.
If a company has an underfunded pension and it goes bankrupt because it can't secure lower-grade debt to stay a going concern, then not only would the workers all lose their jobs but there would be no time for the company to recover its financial position and bolster the pension. You could lose jobs and pensions if the change in this law is too abrupt.
Some of the witnesses agreed this was the best solution, including witnesses who supported the overall bill. This is just to have it coming into force in about three years, so that businesses can focus aggressively on bolstering their pension plans, perhaps buying an insurance product, a large-scale strategic insurance product that will back up the pension, thus reassuring lending markets that their loans are in safe hands.
I think this is a good amendment. It would make the bill more successful. It makes the bill stronger, not weaker, and it's good for pensioners. I encourage everyone to support it.
View Sherry Romanado Profile
Lib. (QC)
We'll open up the floor for debate on the amendment.
Are there any questions or comments with respect to that?
Go ahead, MP Jaczek.
View Helena Jaczek Profile
Lib. (ON)
Thank you very much, Madam Chair.
We certainly did hear some testimony talking about a three-year transition period. Could Mr. Schaan give us his opinion in relation to this as a possibility?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:38
An unfunded pension liability, as we've noted, particularly depending on the jurisdiction, could be quite large. Three years is not a lot of time, depending on the nature of the markets at the time.
There are a few things that should be considered.
One is, obviously, that employers that are already in financial difficulty could have difficulty reducing their unfunded pension liabilities during that transition period. Lenders who face the risk of nonpayment from borrowers with a large unfunded pension liability, when the superpriority comes into force, may use the transition period not to actually put pressure on employers and the plan sponsors to make pension payments but instead [Technical difficulty—Editor] reducing that unfunded pension liability, so that when the transition period ends, they are essentially made whole rather than the pension fund.
The other is that employers may actually decide to discontinue defined benefit pension plans or group insurance plans during the transition period to avoid the impact of higher insolvency priorities on credit availability by either winding things up or closing health insurance, dental or other plans, because that would impact their bottom line. Lenders with exposure or employers with unfunded pension liabilities or group insurance plans may pressure employers to take such action before an insolvency.
It is also worth noting that one of the things.... There are three categories that are of superpriority within this bill. There are unfunded pension liabilities. There's also the claim for terminated group insurance plans, but there's also severance pay and, obviously, severance pay can include many things, including the potential for severance for significant executives.
One thought is also that, if this is ultimately going to lead to a liquidation, you may actually see some gaming behaviour wherein people increase their overall severance payments, particularly for a particular cadre of their employees, because they're recognizing that they potentially might be heading toward a liquidation and their severance pay would have a superpriority above all secured and unsecured creditors.
View Helena Jaczek Profile
Lib. (ON)
If I could just follow up, would it be possible for an employer to shift from a defined benefit plan during that time period? How does that work? Can an employer do that in just the normal course of events?
Surely it's part of union negotiations that there is a defined benefit plan. Could you elaborate on that piece?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:41
It's going to vary on a case-by-case basis, and it's going to vary based on the pension regulations they are being held to. Plan sponsors can ultimately make a determination, dependent on their unique circumstances, to terminate and close a plan or potentially to propose to their workforce to convert a plan from a defined benefit to a defined contribution, or to some other retirement scheme.
They are obviously on the hook for the pension payments that have been made to date to those individuals. The reality is that active workers within one of those organizations may potentially find themselves no longer having access to a defined benefit pension plan but a defined contribution plan, so that the employer can essentially minimize the risk of the unfunded liability that's been accrued to date for those workers.
On health benefits, it really depends on the nature of the negotiation between the workers and the employer. There are often changes that can be made to planned sponsorship in those regards, so the employer could simply say—as a function of these ongoing liabilities and the risks that they pose—they've chosen to scale back benefits or, potentially, to change the nature of the insurance plans that are on offer.
Those can be made as a function of a collective bargaining agreement, but depending on the employer sometimes that may not be required.
View Helena Jaczek Profile
Lib. (ON)
It's possible they can do it arbitrarily in some instances.
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:42
In some instances it is possible. It is obviously dependent on the nature of the situation. If it's deemed to be extraordinary they may very well find other mechanisms to justify it, but in the case of collective bargaining, it may also be used as a negotiating tool to say, “This is my approach, now articulate the best potential outcome,” knowing that the plan may potentially die and wind up or potentially be converted, either in the case of insurance or in the case of a pension.
View Helena Jaczek Profile
Lib. (ON)
In other words, this three-year transition period poses all sorts of risks to the workers and to the pensioners possibly.
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:43
My colleagues at the Department of Finance would be far better placed to comment on some of this, but I know there has been contemplation from time to time, for instance, about shortening the time period for special payments—whether special payments should go from a five-year payback period to a three-year payback period. There has been a strong push from plan sponsors that five years for special payments are required because one needs enough runway to have [Technical difficulty—Editor] kinds of folks who are aiming to continue the ongoing operation.
If one knows that a superpriority is coming, as I say, it may very well reward particular types of economic actions to maximize one's return, either as a lender, as an executive or potentially as a sponsor.
View Helena Jaczek Profile
Lib. (ON)
View Sherry Romanado Profile
Lib. (QC)
We have MP Lambropoulos and MP Ehsassi.
Go ahead, MP Lambropoulos.
View Emmanuella Lambropoulos Profile
Lib. (QC)
Thanks, Madam Chair.
Mr. Schaan, thank you for your responses.
One of the questions I have had since the last meeting, but did not ask until now, is what the major difference is between smaller and bigger businesses. Is there actually a difference when it comes to this bill? How would they be impacted differently, or does it impact everyone pretty much the same?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:45
There are probably two contemplations of that. One is the small employers that are plan sponsors. Those are increasingly infrequent. Then there are large employers for which we see the vast majority of defined benefit pension plans being the norm. Those, obviously, are on offer for all.
It's worth noting that there are two considerations for a small and medium-sized enterprise that are different from a large employer. Obviously, if a small or medium-sized enterprise was a provider of a service or other economic transaction that was not paid at the time of a restructuring or a liquidation, this would see them moved to become an unsecured creditor and would be behind the superpriority. If there's nothing left by the time we get to unsecured creditors as a function of superpriority, we might see small and medium-sized enterprises significantly asymmetrically impacted as a function of the role that might play within their overall well-being.
The second is that severance, which is the third component of this, is a superpriority regardless of enterprise size. While we might not see small and medium-sized enterprises have a pension, they may have either benefit plans or severance pay. That would now have superpriority over all other unsecured creditors and potentially secured creditors.
That severance or the benefit plans.... If people were being very worrisome, they might say that a small or medium-sized enterprise that was offering something like a health or dental plan, now potentially, knowing that's a superpriority, may see increased cost of credit because lenders will now need to factor that into the considerations they have when lending. There's similar things on the severance side.
In terms of size of firm and the potential impacts, it would vary based on the three categories, which are unfunded pension liabilities, group insurance plans and severance pay. We'd have to think about it from both their role as sponsor and also, potentially, as creditor.
View Emmanuella Lambropoulos Profile
Lib. (QC)
With regard to severance pay, [Technical difficulty—Editor] priority. Obviously, pension plans are different because that has to do with interest. People do receive a severance regardless and this is already being done.
Can you correct me if I'm wrong or if you have anything to say about that?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:47
Unpaid wages are currently a superpriority. Unpaid wages that go essentially up to a maximum are automatically provided a superpriority in both a restructuring and a liquidation context. As I indicated last week, for unfunded wages, in the case of a liquidation or a restructuring, the federal government actually takes the spot of the employee to be able to pay them out immediately and then allow for the restructuring or liquidation to continue. Ultimately, the government would be recouped the portion that's currently a superpriority, which is $2,000.
I'm looking at Mr. Morrison to make sure that I'm correct on that. He's nodding yes. That's excellent.
Under the wage earner protection program, the employee is able to get paid severance up to $7,200. As I said, it's a superpriority.
This would essentially take severance more generally and apply a superpriority to it. Severance goes well beyond unpaid wages. It also includes potential severance payments and things like separation payments. In some cases, as we've indicated, that may actually be subject to that of executives. If the severance is actually a very large portion of the employee pay packet in terms of a separation piece, that would now be subject to a superpriority.
There's no delineation in this piece of legislation between the two. There's no cap on it. There's no discussion of that in severance pay.
View Emmanuella Lambropoulos Profile
Lib. (QC)
Thank you very much.
I see there are several other hands up. I may be back, but I leave the floor to someone else.
View Sherry Romanado Profile
Lib. (QC)
On the speaking list we have MP Ehsassi, MP Lemire, MP Badawey and MP Poilievre.
MP Ehsassi.
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:49
Thank you, Madam Chair.
What I heard from Mr. Schaan was very helpful. I have no doubt that the intention behind this amendment is a good one, but again I'm very much concerned about the unintended consequences. The unintended consequences, as we heard from Mr. Schaan, are several.
First of all, as it relates to employers who already are in difficulty because of their large unfunded pensions, it's not good for them. It obviously doesn't change anything for lenders, who face the risk of nonpayment.
I believe the third point Mr. Schaan made, and this is a true concern, is that employers may very well decide to discontinue with defined pension plans, which obviously is not a good thing, and I don't think anyone on this committee would look forward to it.
In addition to that, if memory serves me well I do recall that among the witnesses we heard from during the course of our deliberations, some of whom were representing retiree groups, some had indicated that there were a number of concerns as well that providing this potential transition period could reduce some of the consequences, whether it was with respect to credit, or making restructuring very difficult.
Given all of those concerns, which are obviously unintended, I was wondering, as Mr. Schaan did suggest, if we could go to the Department of Finance and ask them for some clarification as well as to what the consequences of providing a three-year transition period would be.
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:52
Madam Chair, I'm not sure if that was directed at me. I would simply offer that, yes, the Department of Finance is the policy authority and in fact the regulator, as it relates to the Pension Benefits Standards Act. Given their role in the PBSA and obviously being responsible for the overall macroeconomy, as opposed to the Department of Innovation, Science and Economic Development with responsibilities for the microeconomy, there are macroeconomic considerations that I wouldn't be able to offer an opinion on in terms of the degree to which this may impact things like credit markets or lending.
We've spoken earlier about cost of credit. That's based on analysis that we've been able to do in concert with respect to the superpriority, but in terms of a three-year transition period or others, as I've said, they have considered and contemplated that in their role of pension regulator in the past as it relates to special payments. However, I wouldn't be in a position to provide any clarity or granularity as to the potential implications of that.
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:53
Madam Chair, I'm sorry. Is Mr. Morrison not here from the Department of Finance?
View Sherry Romanado Profile
Lib. (QC)
Mr. Morrison is here.
Mr. Morrison, would you like to respond to MP Ehsassi?
Paul Morrison
View Paul Morrison Profile
Paul Morrison
2021-06-15 12:54
Thank you very much. I'm actually here as a representative of the Department of Innovation, Science and Economic Development in support of Mr. Schaan. I'm not with the Department of Finance.
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:54
Okay, my bad.
Mr. Maziade...?
View Sherry Romanado Profile
Lib. (QC)
MP Ehsassi, he's the law clerk, but if you're looking for—
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:54
It was my understanding that we had a witness from the Department of Finance as well. You have my apologies.
View Sherry Romanado Profile
Lib. (QC)
Mr. Ehsassi, if you're looking for additional answers with respect to the Department of Finance, perhaps we could communicate with them through the clerk to see if there's something specific that we could...or if there is something outstanding.
I'm just going to turn to the clerk.
Is there a possibility of getting that question to finance officials to answer?
Michael MacPherson
View Michael MacPherson Profile
Michael MacPherson
2021-06-15 12:54
Yes, the committee is always free to ask for information from the departments if we have a letter from the chair or even an adopted motion here in committee. It wouldn't, obviously, be today, so there's that consideration.
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:55
Madam Chair, things being what they are and given that Mr. Morrison has graciously appeared before our committee, I wonder if he would have anything to add to what we heard from Mr. Schaan.
Paul Morrison
View Paul Morrison Profile
Paul Morrison
2021-06-15 12:55
Thank you, Mr. Ehsassi. I take it that your question is in respect of the transition period that is before us in the amendment.
As Mr. Schaan points out, there is the potential for unintended consequences as a result of the transition period. I would also note that in addition to what Mr. Schaan pointed out, I'm not a legislative drafter, but there does appear to be a discrepancy in the drafting of the bill with respect to the treatment on royal assent and the treatment on coming into force.
There is not a specific coming-into-force clause in the bill, so there is some discrepancy that might require some additional drafting or correction.
View Ali Ehsassi Profile
Lib. (ON)
View Ali Ehsassi Profile
2021-06-15 12:56
Thank you.
View Sherry Romanado Profile
Lib. (QC)
Okay. We'll now go to MP Lemire.
You have the floor.
View Sébastien Lemire Profile
BQ (QC)
Thank you, Madam Chair.
I would like to ask that we finish the testimony so that we can vote on clause 6.
View Sherry Romanado Profile
Lib. (QC)
We can't do that.
As long as members want to ask questions, we can't end a debate. Members still have their hands raised and they have the right to speak.
Do you have a question, Mr. Lemire?
View Sébastien Lemire Profile
BQ (QC)
I have a point of order.
Why can we do this for ordinary witnesses, but not for government witnesses whose credibility is being called into question by a government official?
View Sherry Romanado Profile
Lib. (QC)
If I were to end the debate, I wouldn't prevent the witnesses from speaking. Instead, I would stop the members who still want to ask questions. Some members still have questions. Asking questions is part of their privilege and I can't prevent them from doing so. I must give the floor to the members who still have questions.
Do you have a question, Mr. Lemire? If not, I'll turn the floor over to Mr. Badawey.
View Sherry Romanado Profile
Lib. (QC)
Mr. Badawey, you have the floor.
There is a point of order on the floor. Mr. Duvall.
View Scott Duvall Profile
NDP (ON)
Madam Chair, on a point of order, thank you for what you've just explained to us. We don't mind the questions, but they're repeating themselves and we're getting repeat answers. It's just going over and over to run out time. I think that's very unfair to the Canadians who are looking for us to do the proper work and protect their pensions.
If they have anything that's relevant to ask, that's fine, but why are we getting the same questions and the same answers, over and over?
View Sherry Romanado Profile
Lib. (QC)
MP Duvall, I appreciate it, but this is a new amendment that was circulated and just moved in committee about 20 minutes ago by a member of Parliament.
It's the right of all members of this committee to ask questions and debate the amendment that has been put. I completely understand the time constraints, but we also have to be mindful of the fact that it is the right of members of Parliament to debate the amendment that is before the committee. Thus, I have to rule that out of order.
I will turn it back over to MP Badawey, who has the floor on this amendment.
Go ahead, MP Badawey.
View Vance Badawey Profile
Lib. (ON)
Thank you, Madam Chair.
I have to confess that this is my first time dealing with this issue, this bill, on this committee, but I do appreciate the opportunity to weigh in. It is, in fact, something that I've been working on for quite some time, since being elected to the House in 2015, dealing with organizations such as CARP and others that have a great concern with respect to protecting their pensions.
I have to ask a question to Mr. Schaan that begs to be asked with respect to some of the dialogue that has been undertaken already at this meeting, albeit he's probably the most professed in this area of the dialogue and I appreciate his involvement and the—for lack of a better word—definitions today that he's provided the committee.
In budget 2019, the government introduced amendments to the Pension Benefits Standards Act. It prohibits a pension plan from providing that benefits and members' entitlement to benefits be affected by the termination of said plan.
How does that approach differ from the approach offered here, which we're discussing overall with a broader, holistic view but also specifically with this amendment?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 13:00
I would defer to my colleague, Mr. Morrison, to discuss the changes to the Pension Benefits Standards Act that were part of the 2019 package related to retirement income security. I would invite Mr. Morrison to indicate what those changes included.
Paul Morrison
View Paul Morrison Profile
Paul Morrison
2021-06-15 13:00
I believe the amendments that you're speaking of are the clarifications in the Pension Benefits Standards Act that confirm that upon the wind-up or termination of a pension plan, the benefits that will be paid out under that plan will not be amended. It confirms the rights of [Technical difficulty—Editor] on termination to entitlements that they would be on a wind-up or a termination. They clarified what some people saw as a legislative gap that could have allowed for such an interpretation and potentially acted to the detriment of pensioners.
There were also I believe some other amendments that related to the ability, under the regulations, to have employers convert pension liabilities and have them assumed by insurance companies, which would allow them to remove it from their balance sheet and, with the pension regulator's approval, have the ability to have greater security for the pensioners and not be at the same risk of employer insolvency because it was backed by the assets of a highly regulated insurance firm.
View Sherry Romanado Profile
Lib. (QC)
Thank you so much, Mr. Morrison.
I apologize to Mr. Badawey. I'm jumping in because I'm getting the signal from the clerk that we have to stop as we can't continue with translation services.
We are on the amendment by MP Poilievre. I'm going to take note of the list. Right now, we still have Mr. Badawey on the list, Mr. Poilievre, MP Jaczek, MP Jowhari and MP Lambropoulos. I believe MP Ehsassi has his hand up as well.
I'm going to take note of that so that when we come back again next meeting, we can continue where we left off.
I want to thank everyone for being here and thank you for your patience. We're trying our best to get everything done. I will work with the clerk to see when we can get this brought back to INDU, and we can go from there.
With that, I want to thank everyone.
I want to thank the witnesses for their testimony and the interpreters for their ongoing hard work, as well as the two clerks and the technicians.
With that, I will call the meeting adjourned.
View Judy A. Sgro Profile
Lib. (ON)
Welcome to this meeting number 37 of the Standing Committee on International Trade. I'm thrilled to be able to call the meeting to order.
This meeting is being held pursuant to the order of reference of January 25, and the order of reference sent to the committee on March 10.
The committee is resuming its study of Bill C-216, an act to amend the Department of Foreign Affairs, Trade and Development Act (supply management).
With us today we again have the officials from the Department of Agriculture and Agri-Food and Global Affairs Canada, and, of course, our House of Commons legislative clerk to assist us during clause-by-clause consideration of the bill.
We will start to deal with Bill C-216 now.
Therefore, I will call clause 1.
Shall clause 1 carry? Is there any debate on this clause?
Mr. Savard-Tremblay, did you want to speak to this or were you raising your hand to vote?
View Simon-Pierre Savard-Tremblay Profile
BQ (QC)
I was raising my hand to vote, Madam Chair.
View Judy A. Sgro Profile
Lib. (ON)
Thank you.
Ms. Gray.
View Judy A. Sgro Profile
Lib. (ON)
All right. Thank you very much.
Madam Clerk, would you please take a recorded vote on clause 1?
(Clause 1 agreed to: yeas 9; nays 2)
The Chair: Shall the title carry?
Some hon. members: Agreed.
Some hon. members: On division.
The Chair: Shall the bill carry?
(Bill C-216 agreed to: yeas 9; nays 2)
The Chair: Shall the chair report the bill to the House?
Some hon. members: Agreed.
Some hon. members: On division.
The Chair: Shall the committee order a reprint of the bill for the use of the House at report stage?
Émilie Thivierge
View Émilie Thivierge Profile
Émilie Thivierge
2021-06-14 11:11
Madam Chair, I'm sorry to interrupt.
Since there were no amendments adopted, the committee doesn't need to order a reprint of the bill.
View Judy A. Sgro Profile
Lib. (ON)
Thank you very much, Émilie. I really appreciate that.
That completes the required votes on Bill C-216.
Madam Clerk, is there anything else on Bill C-216 that we need to do?
Émilie Thivierge
View Émilie Thivierge Profile
Émilie Thivierge
2021-06-14 11:11
No, Madam Chair.
We just need to suspend to go to the in camera part of the meeting.
View Judy A. Sgro Profile
Lib. (ON)
I want to thank the witnesses for taking the time to come out this morning.
In particular, I want to thank the analysts, the interpreters and our clerks for getting us through every one of these meetings. We are now finished with Bill C-216.
We are now going to suspend and rejoin via an in camera session.
[Proceedings continue in camera]
View Scott Simms Profile
Lib. (NL)
Welcome, everybody, back to the Standing Committee on Canadian Heritage. Of course, today we are doing some committee business. That is true. However, I think in the first part we want to deal with any of the motions we have out there that we'd like to discuss at this point.
I see a hand up. Monsieur Champoux.
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