The Association of Canadian Pension Management is urging parliamentarians to vote down a bill that would provide super-priority to defined benefit pension plan members in the event of a plan sponsor’s insolvency.

In an open letter to the House of Commons standing committee on finance, the ACPM said Bill C-228 could make it expensive or impossible for some DB plan sponsors to borrow because the rules prioritizing plan members in cases of plan windups would alter a plan’s risk profile. It also noted no country currently offers super-priority to plan members.

In addition, the letter said the bill could lead to creditors taking a variety of measures to adjust for the increased risk that a loan wouldn’t be repaid, including refusing to lend to non-investment grade companies operating DB pension plans, requiring borrowers to avoid launching new DB plans and charging higher interest rates to those that do. It also noted the bill could lead rating agencies to lower the credit scores of companies operating DB plans.

Read: PIAC warns of ‘unintended consequences’ of pension super-priority bill

The ACPM also argued the bill would radically alter one of the three pillars of Canada’s pension system, which includes government pensions, employer-provided pensions and personal savings. “If Bill C-228 is passed . . . it is a near certainty that many of the remaining DB plan sponsors in Canada will wind up their plans and that the liabilities will be annuitized or otherwise offloaded from the corporate balance sheet, thus gutting the second pillar.”

The ACPM went on to urge politicians to abandon the existing bill and advised pursuing a policy that doesn’t risk damaging the existing retirement system. “Reductions to pension benefits are the result of the forced crystallization of deficits at a windup date triggered by the employer sponsor’s insolvency. Eliminating this crystallization event and allowing the plan to continue operating in some form rather than winding it up will, in many cases, allow for funding to recover over time and [benefit] reductions to be eliminated or minimized.”

The private members’ bill was introduced by Conservative member of parliament Marilyn Gladu in April. During its second reading in June, it garnered the support of all but one parliamentarian — Liberal MP Parm Bains. A third reading is likely to be scheduled later this month.

However, a similar bill proposed during the previous parliamentary session faltered before its final reading due to the lack of support it received from Liberal MPs.

Read: Bankruptcy and insolvency bill will negatively affect struggling DB pensions, says ACPM president