The bill is a divisive one, with the pension industry concerned about the future of corporate-sponsored defined benefit pension plans and an association representing plan members firmly in its favour.

Todd Saulnier, board president, the Association of Canadian Pension Management

While Bill C-228 on its own may not spell the end of all DB plans, the ACPM believes it will contribute materially to the decline of corporate-sponsored DB pension plans.

When Conservative member of parliament Marilyn Gladu introduced the private members’ bill in April 2022, she acknowledged that corporate-sponsored DB plans have been on the decline regardless of the bill. However, around 1.2 million Canadian private sector employees have access to a DB plan and recent reforms have increased the stability of funding requirements, making it easier for plan sponsors to retain these plans and even encouraging some defined contribution plan sponsors to convert back to DB. Bill C-228 will likely reverse that progress.

Read: Super-priority pension bill may hasten DB plan closures: expert

By placing volatile pension windup deficits ahead of secured creditors, the bill will affect the cost of operating and capital expansion borrowing. The situation is even more precarious for companies in financial difficulty — restructuring and access to debtor-in-possession financing would be even harder, if not impossible, to obtain.

Corporate board members’ primary fiduciary duty is to ensure the survival and success of the company. When they look abroad and realize their peers outside of Canada don’t have pension super-priority legislation, they’ll do what they must and eliminate the DB plans they sponsor. Our best guess is the bill will eliminate most corporate sponsorship of DB plans within 10 years.

While public sector pension plans are likely safe, in theory, the bill could threaten municipal and provincial public sector plans if it materially increases borrowing costs for those sponsoring entities. Even if the federal cabinet moves to protect those plans from the application of the bill, public sentiment may someday turn against the government on what they may view as an unattainable luxury they’ll never be able to enjoy.

Mike Powell, president, the Canadian Federation of Pensioners

Extending super-priority to the unfunded pension liability in insolvency as proposed in Bill C-228 won’t spell the end of DB pension plans.

Here’s why: First, the pension sector predicts nationwide financial consequences if the bill is put into law. It’s surprisingly similar to the objections raised in opposition to the Wage Earner Protection Program, which parliament passed in 2005. To date, there’s no data showing Canadian productivity and employment lag that of competitor nations due to the WEPP.

Read: Lack of viable alternatives to pension super-priority bill likely to ensure its passage, says pensioner association

Second, today’s DB plans are very well-funded. Plan sponsors can choose to de-risk their plans and reduce or eliminate the financial risk associated with a pension deficit.

Third, the bill is clearly focused on a small subset of Canadian DB plans: those whose members stand to experience a pension loss in insolvency. Groups for and against Bill C-228 have recognized this focus, citing examples such as Nortel Networks Corp., Sears Canada Inc. and Stelco Inc. — all of which were private single-employer DB plans.

Some 70 to 80 per cent of Canadian DB plan members are public employees, where there’s no risk of insolvency and therefore no impact on them. Single-employer DB plan membership makes up a portion of the remaining 30 per cent. This group has been declining for decades and the rate of decline is increasing, despite eliminating or reducing solvency requirements to reduce pension costs and preserve these plans.

Finally, single-employer DB plans are disappearing. This is because they aren’t an effective tool to attract talent. Today’s employees don’t see themselves working for the same company for the 30-plus years required to get the benefit of a single-employer plan.

Extending super-priority won’t spell the end of DB pension plans. Bill C-228 provides pensioners with protection that’s long overdue.

Read: Pension super-priority bill likely to pass Senate vote this week