The stated goal of C-228 is laudable, however, the proposed means to accomplish that goal are flawed and will have serious and undesirable unintended consequences – including to the stakeholders that Parliamentarians are intending to help
TORONTO, Oct. 18, 2022 (GLOBE NEWSWIRE) -- In a letter submitted to the House of Commons Standing Committee on Finance (FINA), the Association of Canadian Pension Management (ACPM) commented on Bill C-228, noting serious, undesirable and unintended consequences if the Bill should pass into law and outlining alternative approaches to secure retiree pensions, to achieve the same goal without the potential to harm the retirement income system.
Among the negative unintended consequences, ACPM notes that ordinary course borrowing will become more difficult, expensive or impossible for some Defined Benefit (DB) plan sponsors, noting that the “priority for pension deficits created by C-228 would fundamentally alter the risk profile that is assessed by creditors”. Moreover, the letter notes that nearly every country in the world does not use a super-priority approach to the insolvency issue, including the United States, and such an approach would make it even more difficult for Canada to attract business investment.
Another negative potential consequence from C-228 in its current form, is that many DB pension plans will be terminated due to increased costs and the burden of borrowing faced by plan sponsors. These actions would have broader consequences for the Canadian retirement system, result in further erosion of DB coverage and entail outcomes less favourable for employees and unionized workers. Indeed, it is stated this could “virtually eliminate DB plans for active private sector employees who still accrue a DB pension.”
To avoid the negative outcomes, ACPM proposes several policy approaches to securing pensions. First, allowing pension plans to continue to operate despite the insolvency of the sponsoring employer by amending the CCAA and BIA such that an insolvency trustee could wind down the pension plan of an insolvent employer, potentially improving the plan’s funded position before benefits are settled. ACPM also suggests the use of a Variable Payment Life Annuity (VPLA) or Advanced Life Deferred Annuity (ALDA), thus maximizing retirement dollars available to the retirees. Finally, the appointment of a federal pension asset manager could enable insolvent company pension funds to deliver on the pension promise.
Given such serious issues, ACPM urges that Bill C-228 in its current form be abandoned in favour of pursuing responsive, innovative policy that does not have the potential for collateral damage to the retirement system and the economy.
ACPM is the leading advocacy organization for a balanced, effective and sustainable retirement income system in Canada. Our private and public sector retirement plan sponsors and administrators manage retirement plans for millions of plan members, including both active plan members and retirees.
For further information or to schedule an interview, please contact:
Lorianne Weston, Manager of Advocacy and Communications, ACPM;
Lorianne.weston@acpm.com | 416-964-1260 x225 | www.acpm.com
