A controversial law giving super-priority to defined benefit pension plan members during plan windups and insolvencies is coming into effect after receiving royal assent from Governor General Mary Simon.
While Bill C-228 received royal assent at the end of April, most of its measures won’t come into force for another four years. However, the requirement that all federally regulated pension plans produce annual reports on plan solvency is now in effect.
Marilyn Gladu, Conservative Member of Parliament for Sarnia-Lambton in Southwestern Ontario and sponsor of the private members bill, is celebrating its passage. “I’m very proud to have succeeded after 20 years and several other attempts to get similar bills passed. Past efforts have included things everyone liked and things not everyone could get behind — I cherry-picked the things we could all get behind.”
Gladu’s original draft — written in the fall of 2021 — included several measures that didn’t survive its review by the Standing Committee on Finance. “I had what I thought was a brilliant idea — to get third-party insurance for the pension funds so that, in the case of bankruptcy, they’d be able pay out to pensioners. No one else seemed to agree. The Canadian Labour Congress and some other unions wanted a mechanism that didn’t rely on third-party insurance — and then there was the fact that no one actually offers that insurance.”
Other recent efforts to provide DB pension plan members with super-priority during plan windups received cooler receptions. Bill C-253, a private members bill sponsored by Bloc Quebequois MP Marilène Gill, failed to pass before parliament was dissolved.
“It died on the vine, but I have to thank Marilène Gill for all of her work,” says Gladu. “I should also thank Daniel Blaikie [the New Democratic Party MP for Elmwood-Transcona], who worked closely with me to secure the support of other parties, [Conservative senator] David Wells for shepherding it in the Senate and everyone else who contributed to it.”
The bill faced opposition from several financial sector groups, including the Association of Canadian Pension Management and the Pension Investment Association of Canada. In open letters and briefings to parliamentary subcommittees, both associations suggested providing super-priority to DB plan members could make it difficult for corporate plan sponsors to access sources of credit.
Gladu says parliamentarians weren’t convinced these concerns should override the needs of Canadian DB plan members. “The banks made $44 billion in profits last year — they’re better able to withstand a single company’s bankruptcy than an individual pensioner. During the [coronavirus] pandemic, banks have shown how creative [they can be] about finding ways to provide credit. I’m sure we’ll see that again in the future.”
In the meantime, she’s eager to continue working to reform Canada’s pension sector by providing more Canadians with access to pension plans. “I’d also like to see the super-priority measures expanded to cover severance and termination pay. That had been proposed by Daniel Blaikie, but it was struck out by the subcommittee chair [Liberal MP Peter Fonseca]. . . . When it was [later] raised in the House, the Liberals voted against it and it was excluded from the final bill.”